Republic of the Philippines construction of the building.
Upon the failure of the mortgagor to pay the amount of the
SUPREME COURT
Manila
EN BANC
G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-
appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning
machinery company from the defendant machinery company, and executed a chattel
mortgage thereon to secure payment of the purchase price. It included in the mortgage
deed the building of strong materials in which the machinery was installed, without any
reference to the land on which it stood. The indebtedness secured by this instrument not
having been paid when it fell due, the mortgaged property was sold by the sheriff, in
pursuance of the terms of the mortgage instrument, and was bought in by the machinery
company. The mortgage was registered in the chattel mortgage registry, and the sale of
the property to the machinery company in satisfaction of the mortgage was annotated in
the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola
Filipina" executed a deed of sale of the land upon which the building stood to the
machinery company, but this deed of sale, although executed in a public document, was
not registered. This deed makes no reference to the building erected on the land and
would appear to have been executed for the purpose of curing any defects which might
be found to exist in the machinery company's title to the building under the sheriff's
certificate of sale. The machinery company went into possession of the building at or
about the time when this sale took place, that is to say, the month of December, 1913,
and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery
company, the mortgagor, the "Compaia Agricola Filipina" executed another mortgage to
the plaintiff upon the building, separate and apart from the land on which it stood, to
secure payment of the balance of its indebtedness to the plaintiff under a contract for the
indebtedness secured by the mortgage, the plaintiff secured judgment for that amount,
levied execution upon the building, bought it in at the sheriff's sale on or about the 18th of
December, 1914, and had the sheriff's certificate of the sale duly registered in the land
registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery
company, which was in possession, filed with the sheriff a sworn statement setting up its
claim of title and demanding the release of the property from the levy. Thereafter, upon
demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in
the sum of P12,000, in reliance upon which the sheriff sold the property at public auction
to the plaintiff, who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from the
machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in
favor of the machinery company, on the ground that the company had its title to the
building registered prior to the date of registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the ownership shall
be transfer to the person who may have the first taken possession thereof in
good faith, if it should be personal property.
Should it be real property, it shall belong to the person acquiring it who first
recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took
possession of it in good faith, and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith.
The registry her referred to is of course the registry of real property, and it must be
apparent that the annotation or inscription of a deed of sale of real property in a chattel
mortgage registry cannot be given the legal effect of an inscription in the registry of real
property. By its express terms, the Chattel Mortgage Law contemplates and makes
provision for mortgages of personal property; and the sole purpose and object of the
chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to
say, mortgages of personal property executed in the manner and form prescribed in the
statute. The building of strong materials in which the rice-cleaning machinery was
installed by the "Compaia Agricola Filipina" was real property, and the mere fact that the
parties seem to have dealt with it separate and apart from the land on which it stood in
no wise changed its character as real property. It follows that neither the original registry
in the chattel mortgage of the building and the machinery installed therein, not the
annotation in that registry of the sale of the mortgaged property, had any effect whatever
so far as the building was concerned.
We conclude that the ruling in favor of the machinery company cannot be sustained on
the ground assigned by the trial judge. We are of opinion, however, that the judgment
must be sustained on the ground that the agreed statement of facts in the court below
discloses that neither the purchase of the building by the plaintiff nor his inscription of the
sheriff's certificate of sale in his favor was made in good faith, and that the machinery
company must be held to be the owner of the property under the third paragraph of the
above cited article of the code, it appearing that the company first took possession of the
property; and further, that the building and the land were sold to the machinery company
long prior to the date of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil Code require
"good faith," in express terms, in relation to "possession" and "title," but contain no
express requirement as to "good faith" in relation to the "inscription" of the property on
the registry, it must be presumed that good faith is not an essential requisite of
registration in order that it may have the effect contemplated in this article. We cannot
agree with this contention. It could not have been the intention of the legislator to base
the preferential right secured under this article of the code upon an inscription of title in
bad faith. Such an interpretation placed upon the language of this section would open
wide the door to fraud and collusion. The public records cannot be converted into
instruments of fraud and oppression by one who secures an inscription therein in bad
faith. The force and effect given by law to an inscription in a public record presupposes
the good faith of him who enters such inscription; and rights created by statute, which are
predicated upon an inscription in a public registry, do not and cannot accrue under an
inscription "in bad faith," to the benefit of the person who thus makes the inscription.
Construing the second paragraph of this article of the code, the supreme court of Spain
held in its sentencia of the 13th of May, 1908, that:
This rule is always to be understood on the basis of the good faith mentioned in
the first paragraph; therefore, it having been found that the second purchasers
who record their purchase had knowledge of the previous sale, the question is to
be decided in accordance with the following paragraph. (Note 2, art. 1473, Civ.
Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title of
conveyance of ownership of the real property that is first recorded in the registry
shall have preference, this provision must always be understood on the basis of
the good faith mentioned in the first paragraph; the legislator could not have
wished to strike it out and to sanction bad faith, just to comply with a mere
formality which, in given cases, does not obtain even in real disputes between
third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of the La
Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he bought the
building at the sheriff's sale and inscribed his title in the land registry, was duly notified
that the machinery company had bought the building from plaintiff's judgment debtor; that
it had gone into possession long prior to the sheriff's sale; and that it was in possession
at the time when the sheriff executed his levy. The execution of an indemnity bond by the
plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of
ownership, leaves no room for doubt in this regard. Having bought in the building at the
sheriff's sale with full knowledge that at the time of the levy and sale the building had
already been sold to the machinery company by the judgment debtor, the plaintiff cannot
be said to have been a purchaser in good faith; and of course, the subsequent inscription
of the sheriff's certificate of title must be held to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the sheriff's
certificate of sale to the plaintiff was not made in good faith, we should not be understood
as questioning, in any way, the good faith and genuineness of the plaintiff's claim against
the "Compaia Agricola Filipina." The truth is that both the plaintiff and the defendant
company appear to have had just and righteous claims against their common debtor. No
criticism can properly be made of the exercise of the utmost diligence by the plaintiff in
asserting and exercising his right to recover the amount of his claim from the estate of
the common debtor. We are strongly inclined to believe that in procuring the levy of
execution upon the factory building and in buying it at the sheriff's sale, he considered
that he was doing no more than he had a right to do under all the circumstances, and it is
highly possible and even probable that he thought at that time that he would be able to
maintain his position in a contest with the machinery company. There was no collusion
on his part with the common debtor, and no thought of the perpetration of a fraud upon
the rights of another, in the ordinary sense of the word. He may have hoped, and
doubtless he did hope, that the title of the machinery company would not stand the test
of an action in a court of law; and if later developments had confirmed his unfounded
hopes, no one could question the legality of the propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery company's claim of
ownership when he executed the indemnity bond and bought in the property at the
sheriff's sale, and it appearing further that the machinery company's claim of ownership
was well founded, he cannot be said to have been an innocent purchaser for value. He
took the risk and must stand by the consequences; and it is in this sense that we find that
he was not a purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in his vendor
cannot claim that he has acquired title thereto in good faith as against the true owner of
the land or of an interest therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and investigation as
might be necessary to acquaint him with the defects in the title of his vendor. A
purchaser cannot close his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief that there was no
defect in the title of the vendor. His mere refusal to believe that such defect exists, or his
willful closing of his eyes to the possibility of the existence of a defect in his vendor's title,
will not make him an innocent purchaser for value, if afterwards develops that the title
was in fact defective, and it appears that he had such notice of the defects as would
have led to its discovery had he acted with that measure of precaution which may
reasonably be acquired of a prudent man in a like situation. Good faith, or lack of it, is in
its analysis a question of intention; but in ascertaining the intention by which one is
actuated on a given occasion, we are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may, with safety, be
determined. So it is that "the honesty of intention," "the honest lawful intent," which
constitutes good faith implies a "freedom from knowledge and circumstances which
ought to put a person on inquiry," and so it is that proof of such knowledge overcomes
the presumption of good faith in which the courts always indulge in the absence of proof
to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be
seen or touched, but rather a state or condition of mind which can only be judged of by
actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas
Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119
Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of the decision
and judgment entered in the court below should be affirmed with costs of this instance
against the appellant. So ordered.
Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.
Torres, Avancea and Fisher, JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-40411 August 7, 1935
DAVAO SAW MILL CO., INC., plaintiff-appellant,
vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-
appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial
court and as set forth by counsel for the parties on appeal, involves the determination of
the nature of the properties described in the complaint. The trial judge found that those
properties were personal in nature, and as a consequence absolved the defendants from
the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government
of the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu,
municipality of Davao, Province of Davao. However, the land upon which the business
was conducted belonged to another person. On the land the sawmill company erected a
building which housed the machinery used by it. Some of the implements thus used were
clearly personal property, the conflict concerning machines which were placed and
mounted on foundations of cement. In the contract of lease between the sawmill
company and the owner of the land there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and
buildings introduced and erected by the party of the second part shall pass to the
exclusive ownership of the party of the first part without any obligation on its part
to pay any amount for said improvements and buildings; also, in the event the
party of the second part should leave or abandon the land leased before the time
herein stipulated, the improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time agreed upon had
expired: Provided, however, That the machineries and accessories are not
included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the
Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the
plaintiff in that action against the defendant in that action; a writ of execution issued
thereon, and the properties now in question were levied upon as personalty by the
sheriff. No third party claim was filed for such properties at the time of the sales thereof
as is borne out by the record made by the plaintiff herein. Indeed the bidder, which was
the plaintiff in that action, and the defendant herein having consummated the sale,
proceeded to take possession of the machinery and other properties described in the
corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill
Co., Inc., has on a number of occasions treated the machinery as personal property by
executing chattel mortgages in favor of third persons. One of such persons is the
appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real
property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
5. Machinery, liquid containers, instruments or implements intended by the owner
of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of
such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph.
We entertain no doubt that the trial judge and appellees are right in their appreciation of
the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered
its protest before or at the time of the sale of this property. It must further be pointed out
that while not conclusive, the characterization of the property as chattels by the appellant
is indicative of intention and impresses upon the property the character determined by
the parties. In this connection the decision of this court in the case of Standard Oil Co. of
New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the
key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on
side issues. It is machinery which is involved; moreover, machinery not intended by the
owner of any building or land for use in connection therewith, but intended by a lessee
for use in a building erected on the land by the latter to be returned to the lessee on the
expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United States
Supreme Court, it was held that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant, but not when
so placed by a tenant, a usufructuary, or any person having only a temporary right,
unless such person acted as the agent of the owner. In the opinion written by Chief
Justice White, whose knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the
property from the point of view of the rights of Valdes and its nature and
character from the point of view of Nevers & Callaghan as a judgment creditor of
the Altagracia Company and the rights derived by them from the execution levied
on the machinery placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable (real) property, not only
land and buildings, but also attributes immovability in some cases to property of a
movable nature, that is, personal property, because of the destination to which it
is applied. "Things," says section 334 of the Porto Rican Code, "may be
immovable either by their own nature or by their destination or the object to which
they are applicable." Numerous illustrations are given in the fifth subdivision of
section 335, which is as follows: "Machinery, vessels, instruments or implements
intended by the owner of the tenements for the industrial or works that they may
carry on in any building or upon any land and which tend directly to meet the
needs of the said industry or works." (See also Code Nap., articles 516, 518 et
seq. to and inclusive of article 534, recapitulating the things which, though in
themselves movable, may be immobilized.) So far as the subject-matter with
which we are dealing machinery placed in the plant it is plain, both under
the provisions of the Porto Rican Law and of the Code Napoleon, that machinery
which is movable in its nature only becomes immobilized when placed in a plant
by the owner of the property or plant. Such result would not be accomplished,
therefore, by the placing of machinery in a plant by a tenant or a usufructuary or
any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et
Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in
Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction
rests, as pointed out by Demolombe, upon the fact that one only having a
temporary right to the possession or enjoyment of property is not presumed by
the law to have applied movable property belonging to him so as to deprive him
of it by causing it by an act of immobilization to become the property of another. It
follows that abstractly speaking the machinery put by the Altagracia Company in
the plant belonging to Sanchez did not lose its character of movable property and
become immovable by destination. But in the concrete immobilization took place
because of the express provisions of the lease under which the Altagracia held,
since the lease in substance required the putting in of improved machinery,
deprived the tenant of any right to charge against the lessor the cost such
machinery, and it was expressly stipulated that the machinery so put in should
become a part of the plant belonging to the owner without compensation to the
lessee. Under such conditions the tenant in putting in the machinery was acting
but as the agent of the owner in compliance with the obligations resting upon
him, and the immobilization of the machinery which resulted arose in legal effect
from the act of the owner in giving by contract a permanent destination to the
machinery.
xxx xxx xxx
The machinery levied upon by Nevers & Callaghan, that is, that which was
placed in the plant by the Altagracia Company, being, as regards Nevers &
 Callaghan, movable property, it follows that they had the right to levy on it under
the execution upon the judgment in their favor, and the exercise of that right did
not in a legal sense conflict with the claim of Valdes, since as to him the property
was a part of the realty which, as the result of his obligations under the lease, he
could not, for the purpose of collecting his debt, proceed separately against.
(Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the
costs of this instance to be paid by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17870 September 29, 1962
MINDANAO BUS COMPANY, petitioner,
vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of
Cagayan de Oro City,respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A.
Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the payment
of the realty tax on its maintenance and repair equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's
above-mentioned equipment. Petitioner appealed the assessment to the respondent
Board of Tax Appeals on the ground that the same are not realty. The Board of Tax
Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of
Tax Appeals a petition for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following
stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and
cargoes by motor trucks, over its authorized lines in the Island of Mindanao,
collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It
maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian,
Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real
properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached
photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked
Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph,
marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph,
marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph,
marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the attached
photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph,
marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be
seen in the attached photographs which form part of this agreed stipulation of
facts;
 5. That petitioner is the owner of the land where it maintains and operates a
garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops,
and with these machineries which are placed therein, its TPU trucks are made;
body constructed; and same are repaired in a condition to be serviceable in the
TPU land transportation business it operates;
6. That these machineries have never been or were never used as industrial
equipments to produce finished products for sale, nor to repair machineries, parts
and the like offered to the general public indiscriminately for business or
commercial purposes for which petitioner has never engaged in, to date. 1aw phl.nt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and
having denied a motion for reconsideration, petitioner brought the case to this Court
assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents'
contention that the questioned assessments are valid; and that said tools,
equipments or machineries are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the
New Civil Code, and holding that pursuant thereto the movable equipments are
taxable realties, by reason of their being intended or destined for use in an
industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the
respondent City Assessor's power to assess and levy real estate taxes on
machineries is further restricted by section 31, paragraph (c) of Republic Act No.
521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by
destination, in accordance with paragraph 5 of Article 415 of the New Civil Code which
provides:
Art. 415. The following are immovable properties:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of
the tenement for an industry or works which may be carried on in a building or on
a piece of land, and which tend directly to meet the needs of the said industry or
works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or
cement platforms. They can be moved around and about in petitioner's repair shop. In
the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of
real property to "machinery, liquid containers, instruments or implements
intended by the owner of any building or land for use in connection with any
industry or trade being carried on therein and which are expressly adapted to
meet the requirements of such trade or industry."
If the installation of the machinery and equipment in question in the central of the
Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for
its sugar and industry, converted them into real property by reason of their
purpose, it cannot be said that their incorporation therewith was not permanent in
character because, as essential and principle elements of a sugar central,
without them the sugar central would be unable to function or carry on the
industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for
carrying on the sugar industry for which it has been established must necessarily
be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must first be
"essential and principal elements" of an industry or works without which such industry or
works would be "unable to function or carry on the industrial purpose for which it was
established." We may here distinguish, therefore, those movable which become
immobilized by destination because they are essential and principal elements in the
industry for those which may not be so considered immobilized because they are merely
incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually
found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not
and should not be considered immobilized by destination, for these businesses can
continue or carry on their functions without these equity comments. Airline companies
use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals,
not essentials, and thus retain their movable nature. On the other hand, machineries of
breweries used in the manufacture of liquor and soft drinks, though movable in nature,
are immobilized because they are essential to said industries; but the delivery trucks and
adding machines which they usually own and use and are found within their industrial
compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature,
not essential and principle municipal elements of petitioner's business of transporting
passengers and cargoes by motor trucks. They are merely incidentals acquired as
movables and used only for expediency to facilitate and/or improve its service. Even
without such tools and equipments, its business may be carried on, as petitioner has
carried on, without such equipments, before the war. The transportation business could
be carried on without the repair or service shop if its rolling equipment is repaired or
serviced in another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of
the tenement for an industry or works which may be carried on in a building or on
a piece of land, and which tend directly to meet the needs of the said industry or
works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the
industry or works be carried on in a building or on a piece of land. Thus in the case
of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments
or implements" are found in a building constructed on the land. A sawmill would also be
installed in a building on land more or less permanently, and the sawing is conducted in
the land or building.
But in the case at bar the equipments in question are destined only to repair or service
the transportation business, which is not carried on in a building or permanently on a
piece of land, as demanded by the law. Said equipments may not, therefore, be deemed
real property.
Resuming what we have set forth above, we hold that the equipments in question are not
absolutely essential to the petitioner's transportation business, and petitioner's business
is not carried on in a building, tenement or on a specified land, so said equipment may
not be considered real estate within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the
equipment in question declared not subject to assessment as real estate for the
purposes of the real estate tax. Without costs.
So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal,
JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 137705 August 22, 2000
SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,
vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be considered
as personal or movable, a party is estopped from subsequently claiming otherwise.
Hence, such property is a proper subject of a writ of replevin obtained by the other
contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision1 of
the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its February 26, 1999
Resolution3 denying reconsideration. The decretal portion of the CA Decision reads as
follows:
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED.
The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED."4
In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City (Branch
218)6 issued a Writ of Seizure.7 The March 18, 1998 Resolution8 denied petitioners
Motion for Special Protective Order, praying that the deputy sheriff be enjoined "from
seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal and to
return to their original place whatever immobilized machineries or equipments he may
have removed."9
The Facts
The undisputed facts are summarized by the Court of Appeals as follows:10
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners
factory, seized one machinery with [the] word that he [would] return for the other
machineries.
"On March 25, 1998, petitioners filed a motion for special protective order (Annex C),
invoking the power of the court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff to defer enforcement of the
writ of replevin.
"This motion was opposed by PCI Leasing (Annex F), on the ground that the properties
[were] still personal and therefore still subject to seizure and a writ of replevin.
"In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject machines
were personal property, and that they had only been leased, not owned, by petitioners. It
also ruled that the "words of the contract are clear and leave no doubt upon the true
intention of the contracting parties." Observing that Petitioner Goquiolay was an
experienced businessman who was "not unfamiliar with the ways of the trade," it ruled
that he "should have realized the import of the document he signed." The CA further
held:
"Furthermore, to accord merit to this petition would be to preempt the trial court in ruling
upon the case below, since the merits of the whole matter are laid down before us via a
petition whose sole purpose is to inquire upon the existence of a grave abuse of
discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The
issues raised herein are proper subjects of a full-blown trial, necessitating presentation of
evidence by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other a matter x x x which respondent court is in the best position to
determine."
Hence, this Petition.11
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
"A. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease."12
In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a preliminary
matter, the Court will also address briefly the procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was being
filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition
erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is "Petition for Review on Certiorari."13
While Judge Laqui should not have been impleaded as a respondent,14 substantial
justice requires that such lapse by itself should not warrant the dismissal of the present
Petition. In this light, the Court deems it proper to remove, motu proprio, the name of
Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property. Serious
policy considerations, they argue, militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of
personal property only.15Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take such
property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or real property
as follows:
"ART. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works;
xxx xxx x x x"
In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although
each of them was movable or personal property on its own, all of them have become
"immobilized by destination because they are essential and principal elements in the
industry."16 In that sense, petitioners are correct in arguing that the said machines are
real, not personal, property pursuant to Article 415 (5) of the Civil Code.17
Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be
considered as personal.18After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled:
"x x x. Although there is no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills20 also held that the machinery used in a factory and essential to the industry, as in
the present case, was a proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Courts ruling are reproduced
hereunder:
"x x x. If a house of strong materials, like what was involved in the above Tumalad case,
may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in
its nature and becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped from denying
the existence of the chattel mortgage."
In the present case, the Lease Agreement clearly provides that the machines in question
are to be considered as personal property. Specifically, Section 12.1 of the Agreement
reads as follows:21
"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently resting
upon, real property or any building thereon, or attached in any manner to what is
permanent."
Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of the
Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed
personal property pursuant to the Lease Agreement is good only insofar as the
contracting parties are concerned.22 Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its stipulation
characterizing the subject machinery as personal.23 In any event, there is no showing that
any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement suffers from "intrinsic ambiguity
which places in serious doubt the intention of the parties and the validity of the lease
agreement itself."25 In their Reply to respondents Comment, they further allege that the
Agreement is invalid.26
These arguments are unconvincing. The validity and the nature of the contract are the lis
mota of the civil action pending before the RTC. A resolution of these questions,
therefore, is effectively a resolution of the merits of the case. Hence, they should be
threshed out in the trial, not in the proceedings involving the issuance of the Writ of
Seizure.
Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under Rule
60 was that questions involving title to the subject property questions which petitioners
are now raising -- should be determined in the trial. In that case, the Court noted that the
remedy of defendants under Rule 60 was either to post a counter-bond or to question the
sufficiency of the plaintiffs bond. They were not allowed, however, to invoke the title to
the subject property. The Court ruled:
"In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or of
the grounds relied upon therefor, as in proceedings on preliminary attachment or
injunction, and thereby put at issue the matter of the title or right of possession over the
specific chattel being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits."28
Besides, these questions require a determination of facts and a presentation of evidence,
both of which have no place in a petition for certiorari in the CA under Rule 65 or in a
petition for review in this Court under Rule 45.29
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease Agreement, for
nothing on record shows that it has been nullified or annulled. In fact, petitioners assailed
it first only in the RTC proceedings, which had ironically been instituted by respondent.
Accordingly, it must be presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation30 is also instructive on this point. In that case,
the Deed of Chattel Mortgage, which characterized the subject machinery as personal
property, was also assailed because respondent had allegedly been required "to sign a
printed form of chattel mortgage which was in a blank form at the time of signing." The
Court rejected the argument and relied on the Deed, ruling as follows:
"x x x. Moreover, even granting that the charge is true, such fact alone does not render a
contract void ab initio, but can only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court.
There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that "if the Court allows these machineries to be seized, then its
workers would be out of work and thrown into the streets."31 They also allege that the
seizure would nullify all efforts to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ. As earlier
1wphi1
discussed, law and jurisprudence support its propriety. Verily, the above-mentioned
consequences, if they come true, should not be blamed on this Court, but on the
petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which
allows the filing of a counter-bond. The provision states:
"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately require the
return of the property, but if he does not so object, he may, at any time before the
delivery of the property to the applicant, require the return thereof, by filing with the court
where the action is pending a bond executed to the applicant, in double the value of the
property as stated in the applicants affidavit for the delivery thereof to the applicant, if
such delivery be adjudged, and for the payment of such sum to him as may be recovered
against the adverse party, and by serving a copy bond on the applicant."
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
 EN BANC
G.R. No. L-15334 January 31, 1964
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF
QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.
Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following
appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized
the Municipal Board of Manila to grant a franchise to construct, maintain and operate an
electric street railway and electric light, heat and power system in the City of Manila and
its suburbs to the person or persons making the most favorable bid. Charles M. Swift
was awarded the said franchise on March 1903, the terms and conditions of which were
embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric
Co. (Meralco for short), became the transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls,
Laguna and is transmitted to the City of Manila by means of electric transmission wires,
running from the province of Laguna to the said City. These electric transmission wires
which carry high voltage current, are fastened to insulators attached on steel towers
constructed by respondent at intervals, from its hydro-electric plant in the province of
Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A photograph of one of these steel
towers is attached to the petition for review, marked Annex A. Three steel towers were
inspected by the lower court and parties and the following were the descriptions given
there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension, Quezon City.
The findings were as follows: the ground around one of the four posts was
excavated to a depth of about eight (8) feet, with an opening of about one (1)
meter in diameter, decreased to about a quarter of a meter as it we deeper until it
reached the bottom of the post; at the bottom of the post were two parallel steel
bars attached to the leg means of bolts; the tower proper was attached to the leg
three bolts; with two cross metals to prevent mobility; there was no concrete
foundation but there was adobe stone underneath; as the bottom of the
excavation was covered with water about three inches high, it could not be
determined with certainty to whether said adobe stone was placed purposely or
not, as the place abounds with this kind of stone; and the tower carried five high
voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City,
on land owned by the petitioner approximate more than one kilometer from the
first tower. As in the first tower, the ground around one of the four legs was
excavate from seven to eight (8) feet deep and one and a half (1-) meters wide.
There being very little water at the bottom, it was seen that there was no concrete
foundation, but there soft adobe beneath. The leg was likewise provided with two
parallel steel bars bolted to a square metal frame also bolted to each corner. Like
the first one, the second tower is made up of metal rods joined together by
means of bolts, so that by unscrewing the bolts, the tower could be dismantled
and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the
first two towers given above, the ground around the two legs of the third tower
was excavated to a depth about two or three inches beyond the outside level of
the steel bar foundation. It was found that there was no concrete foundation. Like
the two previous ones, the bottom arrangement of the legs thereof were found to
be resting on soft adobe, which, probably due to high humidity, looks like mud or
clay. It was also found that the square metal frame supporting the legs were not
attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid
steel towers for real property tax under Tax declaration Nos. 31992 and 15549. After
denying respondent's petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City, which required
respondent to pay the amount of P11,651.86 as real property tax on the said steel towers
for the years 1952 to 1956. Respondent paid the amount under protest, and filed a
petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision
on December 29, 1958, ordering the cancellation of the said tax declarations and the
petitioner City Treasurer of Quezon City to refund to the respondent the sum of
P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the
instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come
within the term "poles" which are declared exempt from taxes under part II paragraph 9
of respondent's franchise; (2) the steel towers are personal properties and are not
subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible
for the refund of the amount paid. These are assigned as errors by the petitioner in the
brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate,
buildings, plant (not including poles, wires, transformers, and insulators),
machinery and personal property as other persons are or may be hereafter
required by law to pay ... Said percentage shall be due and payable at the time
stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all
taxes and assessments of whatsoever nature and by whatsoever authority upon
the privileges, earnings, income, franchise, and poles, wires, transformers, and
insulators of the grantee from which taxes and assessments the grantee is
hereby expressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's
Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood
or timber, as typically the stem of a small tree stripped of its branches; also by extension,
a similar typically cylindrical piece or object of metal or the like". The term also refers to
"an upright standard to the top of which something is affixed or by which something is
supported; as a dovecote set on a pole; telegraph poles; a tent pole; sometimes,
specifically a vessel's master (Webster's New International Dictionary 2nd Ed., p. 1907.)
Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical
concrete poles, and poles of the PLDT Co. which are made of two steel bars joined
together by an interlacing metal rod. They are called "poles" notwithstanding the fact that
they are no made of wood. It must be noted from paragraph 9, above quoted, that the
concept of the "poles" for which exemption is granted, is not determined by their place or
location, nor by the character of the electric current it carries, nor the material or form of
which it is made, but the use to which they are dedicated. In accordance with the
definitions, pole is not restricted to a long cylindrical piece of wood or metal, but includes
"upright standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of a framework
of four steel bars or strips which are bound by steel cross-arms atop of which are cross-
arms supporting five high voltage transmission wires (See Annex A) and their sole
function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term
"poles" is not a novelty. Several courts of last resort in the United States have called
these steel supports "steel towers", and they denominated these supports or towers, as
electric poles. In their decisions the words "towers" and "poles" were used
interchangeably, and it is well understood in that jurisdiction that a transmission tower or
pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law
provided that wires shall be constructed upon suitable poles, this term was construed to
mean either wood or metal poles and in view of the land being subject to overflow, and
the necessary carrying of numerous wires and the distance between poles, the statute
was interpreted to include towers or poles. (Stemmons and Dallas Light Co. (Tex) 212
S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an
association used to convey its electric power furnished to subscribers and members,
constructed for the purpose of fastening high voltage and dangerous electric wires
alongside public highways. The steel supports or towers were made of iron or other
metals consisting of two pieces running from the ground up some thirty feet high, being
wider at the bottom than at the top, the said two metal pieces being connected with criss-
cross iron running from the bottom to the top, constructed like ladders and loaded with
high voltage electricity. In form and structure, they are like the steel towers in question.
(Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in
the generation of hydro-electric power generated from its plant to the Tower of Oxford
and City of Waterbury. These steel towers are about 15 feet square at the base and
extended to a height of about 35 feet to a point, and are embedded in the cement
foundations sunk in the earth, the top of which extends above the surface of the soil in
the tower of Oxford, and to the towers are attached insulators, arms, and other
equipment capable of carrying wires for the transmission of electric power (Connecticut
Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met his
death was built for the purpose of supporting a transmission wire used for carrying high-
tension electric power, but claimed that the steel towers on which it is carried were so
large that their wire took their structure out of the definition of a pole line. It was held that
in defining the word pole, one should not be governed by the wire or material of the
support used, but was considering the danger from any elevated wire carrying electric
current, and that regardless of the size or material wire of its individual members, any
continuous series of structures intended and used solely or primarily for the purpose of
supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper
Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in
the petitioner's franchise, should not be given a restrictive and narrow interpretation, as
to defeat the very object for which the franchise was granted. The poles as contemplated
thereon, should be understood and taken as a part of the electric power system of the
respondent Meralco, for the conveyance of electric current from the source thereof to its
consumers. If the respondent would be required to employ "wooden poles", or "rounded
poles" as it used to do fifty years back, then one should admit that the Philippines is one
century behind the age of space. It should also be conceded by now that steel towers,
like the ones in question, for obvious reasons, can better effectuate the purpose for
which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are
not embraced within the termpoles, the logical question posited is whether they
constitute real properties, so that they can be subject to a real property tax. The tax law
does not provide for a definition of real property; but Article 415 of the Civil Code does,
by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of
the object;
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of
the tenement for an industry or works which may be carried in a building or on a
piece of land, and which tends directly to meet the needs of the said industry or
works;
xxx xxx xxx
The steel towers or supports in question, do not come within the objects mentioned in
paragraph 1, because they do not constitute buildings or constructions adhered to the
soil. They are not construction analogous to buildings nor adhering to the soil. As per
description, given by the lower court, they are removable and merely attached to a
square metal frame by means of bolts, which when unscrewed could easily be
dismantled and moved from place to place. They can not be included under paragraph 3,
as they are not attached to an immovable in a fixed manner, and they can be separated
without breaking the material or causing deterioration upon the object to which they are
attached. Each of these steel towers or supports consists of steel bars or metal strips,
joined together by means of bolts, which can be disassembled by unscrewing the bolts
and reassembled by screwing the same. These steel towers or supports do not also fall
under paragraph 5, for they are not machineries, receptacles, instruments or implements,
and even if they were, they are not intended for industry or works on the land. Petitioner
is not engaged in an industry or works in the land in which the steel supports or towers
are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to
refund the sum of P11,651.86, despite the fact that Quezon City is not a party to the
case. It is argued that as the City Treasurer is not the real party in interest, but Quezon
City, which was not a party to the suit, notwithstanding its capacity to sue and be sued,
he should not be ordered to effect the refund. This question has not been raised in the
court below, and, therefore, it cannot be properly raised for the first time on appeal. The
herein petitioner is indulging in legal technicalities and niceties which do not help him
any; for factually, it was he (City Treasurer) whom had insisted that respondent herein
pay the real estate taxes, which respondent paid under protest. Having acted in his
official capacity as City Treasurer of Quezon City, he would surely know what to do,
under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the
petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera
and Regala, JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.
FIRST DIVISION
G.R. No. 166102, August 05, 2015
MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER
OF LUCENA CITY, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed
by Manila Electric Company (MERALCO), seeking the reversal of the Decision1 dated May 13,
2004 and Resolution2dated November 18, 2004 of the Court of Appeals in CA-G.R. SP No.
67027. The appellate court affirmed the Decision3 dated May 3, 2001 of the Central Board of
Assessment Appeals (CBAA) in CBAA Case No. L-20-98, which, in turn, affirmed with
modification the Decision4 dated June 17, 19985 of the Local Board of Assessment Appeals
(LBAA) of Lucena City, Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-
7394, ruling that MERALCO is liable for real property tax on its transformers, electric posts (or
poles), transmission lines, insulators, and electric meters, beginning 1992.
MERALCO is a private corporation organized and existing under Philippine laws to operate as a
public utility engaged in electric distribution. MERALCO has been successively granted franchises
to operate in Lucena City beginning 1922 until present time, particularly, by: (1) Resolution No.
366 dated May 15, 1922 of the Municipal Council of Lucena; (2) Resolution No. 1087 dated July
1, 1957 of the Municipal Council of Lucena; (3) Resolution No. 26798 dated June 13, 1972 of the
Municipal Board of Lucena City;9 (4) Certificate of Franchise10 dated October 28, 1993 issued by
the National Electrification Commission; and (5) Republic Act No. 920911 approved on June 9,
2003 by Congress.12 TAX ASSESSED COVERE TAX DUE PENALTY TOTAL
On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax DEC VALUE D
Declaration No. 019-650013 covering the following electric facilities, classified as capital .# PERIOD
investment, of the company: (a) transformer and electric post; (b) transmission line; (c)
insulator; and (d) electric meter, located in Quezon Ave. Ext., Brgy. Gulang-Gulang, Lucena
City. Under Tax Declaration No. 019-6500, these electric facilities had a market value of 019 P65,448,800. 1990-94 P3,272,440. P2,356,156. P5,628,596.8
P81,811,000.00 and an assessed value of P65,448,800.00, and were subjected to real property - 00 00 80 0
tax as of 1985.
650
MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of Lucena City, which was 0
docketed as LBAA-89-2. MERALCO claimed that its capital investment consisted only of its
substation facilities, the true and correct value of which was only P9,454,400.00; and that 019 78,538,560.0 1995 785,385.60 534,062.21 1,319,447.81
MERALCO was exempted from payment of real property tax on said substation facilities. - 0
The LBAA rendered a Decision14 in LBAA-89-2 on July 5, 1989, finding that under its franchise,
739
MERALCO was required to pay the City Government of Lucena a tax equal to 5% of its gross 4
earnings, and "[s]aid tax shall be due and payable quarterly and shall be in lieu of any and all 1996 785,385.60 345,569.66 1,130,955.26
taxes of any kind, nature, or description levied, established, or collected x x x, on its poles,
wires, insulators, transformers and structures, installations, conductors, and accessories, x x x, lst- 589,039.20 117,807.84 706,847.04
from which taxes the grantee (MERALCO) is hereby expressly exempted."15 As regards the issue 3rd/1997
of whether or not the poles, wires, insulators, transformers, and electric meters of MERALCO
were real properties, the LBAA cited the 1964 case of Board of Assessment Appeals v. Manila
4th 1997 196,346.40 (19,634.64) 176,711.76
Electric Company16 (1964 MERALCO case) in which the Court held that: (1) the steel towers fell BASIC---- P8,962,558.6
within the term "poles" expressly exempted from taxes under the franchise of MERALCO; and 7
(2) the steel towers were personal properties under the provisions of the Civil Code and, hence,
not subject to real property tax. The LBAA lastly ordered that Tax Declaration No. 019-6500 SEF---- 8,962,558.67
would remain and the poles, wires, insulators, transformers, and electric meters of MERALCO TOTAL TAX DELINQUENCY---- P17,925,117.
would be continuously assessed, but the City Assessor would stamp on the said Tax Declaration
the word "exempt." The LBAA decreed in the end: cra lawlawlib ra ry
34

WHEREFORE, from the evidence adduced by the parties, the Board overrules the claim of the
The City Treasurer of Lucena requested that MERALCO settle the payable amount soon to avoid
[City Assessor of Lucena] and sustain the claim of [MERALCO].
accumulation of penalties. Attached to the letter were the following documents: (a) Notice of
Assessment20 dated October 20, 1997 issued by the City Assessor of Lucena, pertaining to Tax
Further, the Appellant (Meralco) is hereby ordered to render an accounting to the City Treasurer
Declaration No. 019-7394, which increased the market value and assessed value of the
of Lucena and to pay the City Government of Lucena the amount corresponding to the Five
machinery; (b) Property Record Form;21 and (c) Tax Declaration No. 019-6500.22
(5%) per centum of the gross earnings in compliance with paragraph 13 both Resolutions 108
and 2679, respectively, retroactive from November 9, 1957 to date, if said tax has not yet been
MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 before the LBAA of Lucena
paid.17
City on December 23, 1997 and posted a surety bond23 dated December 10, 1997 to guarantee
chan roble slaw

The City Assessor of Lucena filed an appeal with the CBAA, which was docketed as CBAA Case
No. 248. In its Decision18 dated April 10, 1991, the CBAA affirmed the assailed LBAA judgment.
Apparently, the City Assessor of Lucena no longer appealed said CBAA Decision and it became
final and executory.
Six years later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997
from the City Treasurer of Lucena, which stated that the company was being assessed real
property tax delinquency on its machineries beginning 1990, in the total amount of
P17,925,117.34, computed as follows: chanRoble svirtual Lawli bra ry
payment of its real property tax delinquency. MERALCO asked the LBAA to cancel and nullify the
Notice of Assessment dated October 20, 1997 and declare the properties covered by Tax
Declaration Nos. 019-6500 and 019-7394 exempt from real property tax.
In its Decision dated June 17, 1998 regarding Tax Declaration Nos. 019-6500 and 019-7394,
the LBAA declared that Sections 234 and 534(f) of the Local Government Code repealed the
provisions in the franchise of MERALCO and Presidential Decree No. 55124 pertaining to the
exemption of MERALCO from payment of real property tax on its poles, wires, insulators,
transformers, and meters. The LBAA refused to apply as res judicata its earlier judgment in
LBAA-89-2, as affirmed by the CBAA, because it involved collection of taxes from 1985 to 1989,
while the present case concerned the collection of taxes from 1989 to 1997; and LBAA is only
an administrative body, not a court or quasi-judicial body. The LBAA though instructed that the
computation of the real property tax for the machineries should be based on the prevailing 1991
Schedule of Market Values, less the depreciation cost allowed by law. The LBAA ultimately
disposed:c ralawlawl ibra ry
WHEREFORE, in view of the foregoing, it is hereby ordered that:
1) MERALCO's appeal be dismissed for lack of merit; ChanRob les Virtualawl ibra ry
2) MERALCO be required to pay the realty tax on the questioned properties, because they are
not exempt by law, same to be based on the 1991 level of assessment, less depreciation cost
allowed by law.25 chan rob leslaw
MERALCO went before the CBAA on appeal, which was docketed as CBAA Case No. L-20-
98. The CBAA, in its Decision dated May 3, 2001, agreed with the LBAA that MERALCO could no
longer claim exemption from real property tax on its machineries with the enactment of
Republic Act No. 7160, otherwise known as the Local Government Code of 1991, thus:
Indeed, the Central Board of Assessment Appeals has had the opportunity of ruling in
[MERALCO's] favor in connection with this very same issue. The matter was settled on April 10,
1991 where this Authority ruled that "wires, insulators, transformers and electric meters which
are mounted on poles and can be separated from the poles and moved from place to place
without breaking the material or causing [the] deterioration of the object, are deemed movable
or personal property". The same position of MERALCO would have been tenable and that
decision may have stood firm prior to the enactment of R.A. 7160 but not anymore in this
jurisdiction. The Code provides and now sets a more stringent yet broadened concept of
machinery, x x x: chanRoblesvi rtual Lawli bra ry
xxxx
The pivotal point where the difference lie between the former and the current case is that by
the very wordings of [Section 199(0)], the ground being anchored upon by MERALCO
concerning the properties in question being personal in nature does not hold anymore for the
sole reason that these come now within the purview and new concept of Machineries. The new
law has treated these in an unequivocal manner as machineries in the sense that they are
instruments, mechanical contrivances or apparatus though not attached permanently to the real
properties of [MERALCO] are actually, directly and exclusively used to meet their business of
distributing electricity.
xxxx
Clearly, [Section 234 of the Local Government Code] lists down the instances of exemption in
real property taxation and very apparent is the fact that the enumeration is exclusive in
character in view of the wordings in the last paragraph. Applying the maxim "Expressio Unius
est Exclusio Alterius", we can say that "Where the statute enumerates those who can avail of
the exemption, it is construed as excluding all others not mentioned therein". Therefore, the
above-named company [had] lost its previous exemptions under its franchise because of non-
inclusion in the enumeration in Section 234. Furthermore, all tax exemptions being enjoyed by
all persons, whether natural or juridical, including all government-owned or controlled
corporations are expressly withdrawn, upon effectivity of R.A. 7160.
In the given facts, it has been manifested that the Municipal Board of Lucena passed Resolution
No. 108 on July 1, 1957 extending the franchise of MERALCO to operate in Lucena city an
electric light system for thirty-five years, which should have expired on November 9, 1992 and
under Resolution No. 2679 passed on June 13, 1972 by the City Council of Lucena City
awarding [MERALCO] a franchise to operate for twenty years an electric light, heat and power
chanRoblesvi rtua lLaw lib rary
system in Lucena City, also to expire in the year 1992. Under those franchises, they were only
bound to pay franchise taxes and nothing more.
Now, granting arguendo that there is no express revocation of the exemption under the
franchise of [MERALCO] since, unquestionably [MERALCO] is a recipient of another franchise
granted this time by the National Electrification Commission as evidenced by a certificate issued
on October 28, 1993, such conferment does not automatically include and/or award exemption
from taxes, nor does it impliedly give the franchisee the right to continue the privileges like
exemption granted under its previous franchise. It is just a plain and simple franchise. In
countless times, the Supreme Court has ruled that exemption must be clear in the language of
the law granting such exemption for it is strictly construed and favored against the person
invoking it. In addition, a franchise though in the form of a contract is also a privilege that must
cralawlawl ib rary
yield to the sublime yet inherent powers of the state, one of these is the power of taxation.
Looking into the law creating the National Electrification Administration (Commission), P.D. 269
as amended by P.D. 1645, nowhere in those laws can we find such authority to bestow upon the
grantee any tax exemption of whatever nature except those of cooperatives. This we believe is
basically in consonance with the provisions of the Local Government Code more particularly
Section 234.
Furthermore, Section 534(f) of R.A. 7160 which is taken in relation to Section 234 thereof
states that "All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations or part or parts thereof which are inconsistent
with any of the provisions of this Code are hereby repealed or modified accordingly". Anent this
unambiguous mandate, P.D. 551 is mandatorily repealed due to its contradictory and
irreconcilable provisions with R.A. 7160.26
chanrobles law
Yet, the CBAA modified the ruling of the LBAA by excluding from the real property tax deficiency
assessment the years 1990 to 1991, considering that: cralawlawl ibra ry
In the years 1990 and 1991, the exemption granted to MERALCO under its franchise which
incidentally expired upon the effectivity of the Local Government Code of 1991 was very much
in effect and the decision rendered by the Central Board of Assessment Appeals (CBAA)
classifying its poles, wires, insulators, transformers and electric meters as personal property
was still controlling as the law of the case. So, from 1990 to 1991, it would be inappropriate
and illegal to make the necessary assessment on those properties, much more to impose any
penalty for nonpayment of such.
But, assessments made beginning 1992 until 1997 by the City Government of Lucena is legal,
both procedurally and substantially. When R.A. 7160, which incorporated amended provisions of
the Real Property Tax Code, took effect on January 1, 1992, as already discussed, the nature of
the aforecited questioned properties considered formerly as personal metamorphosed to
machineries and the exemption being invoked by [MERALCO] was automatically withdrawn
pursuant to the letter and spirit of the law. x x x.27
chanro bles law
Resultantly, the decretal portion of said CBAA Decision reads:
cralawlawl ibra ry
WHEREFORE, in view of the foregoing, the Decision appealed from is hereby modified. The City
Assessor of Lucena City is hereby directed to make a new assessment on the subject properties
to retroact from the year 1992 and the City Treasurer to collect the tax liabilities in accordance
with the provisions of the cited Section 222 of the Local Government Code.28 chanrob leslaw
The CBAA denied the Motion for Reconsideration of MERALCO in a Resolution29 dated August 16,
2001.
Disgruntled, MERALCO sought recourse from the Court of Appeals by filing a Petition for Review
under Rule 43 of the Rules of Court, which was docketed as CA-G.R. SP No. 67027.
The Court of Appeals rendered a Decision on May 13, 2004 rejecting all arguments proffered by
MERALCO. The appellate court found no deficiency in the Notice of Assessment issued by the
City Assessor of Lucena: cralawlawlibra ry
It was not disputed that [MERALCO] failed to provide the [City Assessor and City Treasurer of
Lucena] with a sworn statement declaring the true value of each of the subject transformer and
electric post, transmission line, insulator and electric meter which should have been made the
basis of the fair and current market value of the aforesaid property and which would enable the
assessor to identify the same for assessment purposes. [MERALCO] merely claims that the
assessment made by the [City Assessor and City Treasurer of Lucena] was incorrect but did not
even mention in their pleading the true and correct assessment of the said properties. Absent
any sworn statement given by [MERALCO], [the City Assessor and City Treasurer of Lucena]
were constrained to make an assessment based on the materials within [their reach].30
chan roble slaw
The Court of Appeals further ruled that there was no more basis for the real property tax
exemption of MERALCO under the Local Government Code and that the withdrawal of said
exemption did not violate the non-impairment clause of the Constitution, thus: cralawlawli bra ry
Although it could not be denied that [MERALCO] was previously granted a Certificate of
Franchise by the National Electrification Commission on October 28, 1993 x x x, such
conferment does not automatically include an exemption from the payment of realty tax, nor
does it impliedly give the franchisee the right to continue the privileges granted under its
previous franchise considering that Sec. 534(f) of the Local Government Code of 1991 expressly
repealed those provisions which are inconsistent with the Code.
At the outset, the Supreme Court has held that "Section 193 of the LGC prescribes the general
rule, viz., tax exemptions or incentives granted to or presently enjoyed by natural or juridical
persons are withdrawn upon the effectivity of the LGC except with respect to those entities
expressly enumerated. In the same vein, We must hold that the express withdrawal upon
effectivity of the LGC of all exemptions except only as provided therein, can no longer be
invoked by MERALCO to disclaim liability for the local tax." (City Government of San Pablo,
Laguna vs. Reyes, 305 SCRA 353, 362-363)
In fine, [MERALCO's] invocation of the non-impairment clause of the Constitution is accordingly
unavailing. The LGC was enacted in pursuance of the constitutional policy to ensure autonomy
to local governments and to enable them to attain fullest development as self-reliant
communities. The power to tax is primarily vested in Congress. However, in our jurisdiction, it
may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as
before, but pursuant to [a] direct authority conferred by Section 5, Article X of the Constitution.
The important legal effect of Section 5 is that henceforth, in interpreting statutory provisions on
municipal fiscal powers, doubts will be resolved in favor of the municipal corporations. (Ibid. pp.
363-365)31 cha nro bleslaw
MERALCO similarly failed to persuade the Court of Appeals that the transformers, transmission
lines, insulators, and electric meters mounted on the electric posts of MERALCO were not real
properties. The appellate court invoked the definition of "machinery" under Section 199(o) of
the Local Government Code and then wrote that: cralawlawli bra ry
We firmly believe and so hold that the wires, insulators, transformers and electric meters
mounted on the poles of [MERALCO] may nevertheless be considered as improvements on the
land, enhancing its utility and rendering it useful in distributing electricity. The said properties
are actually, directly and exclusively used to meet the needs of [MERALCO] in the distribution of
electricity.
In addition, "improvements on land are commonly taxed as realty even though for some
purposes they might be considered personalty. It is a familiar personalty phenomenon to see
things classed as real property for purposes of taxation which on general principle might be
considered personal property." (Caltex (Phil) Inc. vs. Central Board of Assessment Appeals, 114
SCRA 296, 301-302)32 chan robles law
Lastly, the Court of Appeals agreed with the CBAA that the new assessment of the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO
shall retroact to 1992.
Hence, the Court of Appeals adjudged: cra lawlawlib ra ry
WHEREFORE, premises considered, the assailed Decision [dated] May 3, 2001 and
Resolution dated August 16, 2001 are hereby AFFIRMED in toto and the present
petition is hereby DENIED DUE COURSE and accordingly DISMISSED for lack of
merit.33
chanrobles law
In a Resolution dated November 18, 2004, the Court of Appeals denied the Motion for
Reconsideration of MERALCO.
MERALCO is presently before the Court via the instant Petition for Review
on Certiorari grounded on the following lone assignment of error: c ralawlawl ibra ry
THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN AFFIRMING IN TOTO
THE DECISION OF THE CENTRAL BOARD OF ASSESSMENT APPEALS WHICH HELD THAT THE
SUBJECT PROPERTIES ARE REAL PROPERTIES SUBJECT TO REAL PROPERTY TAX; AND THAT
ASSESSMENT ON THE SUBJECT PROPERTIES SHOULD BE MADE TO TAKE EFFECT
RETROACTIVELY FROM 1992 UNTIL 1997, WITH PENALTIES; THE SAME BEING UNJUST,
WHIMSICAL AND NOT IN ACCORD WITH THE LOCAL GOVERNMENT CODE.34 chanrobles law
MERALCO argues that its transformers, electric posts, transmission lines, insulators, and electric
meters are not subject to real property tax, given that: (1) the definition of "machinery" under
Section 199(o) of the Local Government Code, on which real property tax is imposed, must still
be within the contemplation of real or immovable property under Article 415 of the Civil Code
because it is axiomatic that a statute should be construed to harmonize with other laws on the
same subject matter as to form a complete, coherent, and intelligible system; (2) the Decision
dated April 10, 1991 of the CBAA in CBAA Case No. 248, which affirmed the Decision dated July
5, 1989 of the LBAA in LBAA-89-2, ruling that the transformers, electric posts, transmission
lines, insulators, and electric meters of MERALCO are movable or personal properties, is
conclusive and binding; and (3) the electric poles are not exclusively used to meet the needs of
MERALCO alone since these are also being utilized by other entities such as cable and telephone
companies.
MERALCO further asserts that even if it is assumed for the sake of argument that the
transformers, electric posts, transmission lines, insulators, and electric meters are real
properties, the assessment of said properties by the City Assessor in 1997 is a patent nullity.
The collection letter dated October 16, 1997 of the City Treasurer of Lucena, Notice of
Assessment dated October 20, 1997 of the City Assessor of Lucena, the Property Record Form
dated October 20, 1997, and Tax Declaration No. 019-6500 simply state a lump sum market
value for all the transformers, electric posts, transmission lines, insulators, and electric meters
covered and did not provide an inventory/list showing the actual number of said properties, or a
schedule of values presenting the fair market value of each property or type of property, which
would have enabled MERALCO to verify the correctness and reasonableness of the valuation of
its properties. MERALCO was not furnished at all with a copy of Tax Declaration No. 019-7394,
and while it received a copy of Tax Declaration No. 019-6500, said tax declaration did not
contain the requisite information regarding the date of operation of MERALCO and the original
cost, depreciation, and market value for each property covered. For the foregoing reasons, the
assessment of the properties of MERALCO in 1997 was arbitrary, whimsical, and without factual
basis - in patent violation of the right to due process of MERALCO. MERALCO additionally
explains that it cannot be expected to make a declaration of its transformers, electric posts,
transmission lines, insulators, and electric meters, because all the while, it was of the
impression that the said properties were personal properties by virtue of the Decision dated July
5, 1989 of the LBAA in LBAA-89-2 and the Decision dated April 10, 1991 of the CBAA in CBAA
Case No. 248.
Granting that the assessment of its transformers, electric posts, transmission lines, insulators,
and electric meters by the City Assessor of Lucena in 1997 is valid, MERALCO alternatively
contends that: (1) under Sections 22135 and 22236 of the Local Government Code, the
assessment should take effect only on January 1, 1998 and not retroact to 1992; (2) MERALCO
should not be held liable for penalties and interests since its nonpayment of real property tax on
its properties was in good faith; and (3) if interest may be legally imposed on MERALCO, it
should only begin to run on the date it received the Notice of Assessment on October 29, 1997
and not all the way back to 1992.
At the end of its Petition, MERALCO prays: cralawlawlib rary
WHEREFORE, it is respectfully prayed of this Honorable Court that the appealed Decision dated
May 13, 2004 of the Court of Appeals, together with its Resolution dated November 18, 2004 be
reversed and set aside, and judgment be rendered x x x nullifying and cancel[l]ing the Notice of
Assessment, dated October 20, 1997, issued by respondent City Assessor, and the collection
letter dated October 16, 1997 of respondent City Treasurer.
Petitioner also prays for such other relief as may be deemed just and equitable in the
premises.37
chanrobles law
The City Assessor and City Treasurer of Lucena counter that: (1) MERALCO was obliged to pay
the real property tax due, instead of posting a surety bond, while its appeal was pending,
because Section 231 of the Local Government Code provides that the appeal of an assessment
shall not suspend the collection of the real property taxes; (2) the cases cited by MERALCO can
no longer be applied to the case at bar since they had been decided when Presidential Decree
No. 464, otherwise known as the Real Property Tax Code, was still in effect; (3) under the now
prevailing Local Government Code, which expressly repealed the Real Property Tax Code, the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO fall
within the new definition of "machineries," deemed as real properties subject to real property
tax; and (4) the Notice of Assessment dated October 20, 1997 covering the transformers,
electric posts, transmission lines, insulators, and electric meters of MERALCO only retroacts to
1992, which is less than 10 years prior to the date of initial assessment, so it is in compliance
with Section 222 of the Local Government Code, and since MERALCO has yet to pay the real
property taxes due on said assessment, then it is just right and appropriate that it also be held
liable to pay for penalties and interests from 1992 to present time. Ultimately, the City Assessor
and City Treasurer of Lucena seek judgment denying the instant Petition and ordering MERALCO
to pay the real property taxes due.
The Petition is partly meritorious.
The Court finds that the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO are no longer exempted from real property tax and may qualify as
"machinery" subject to real property tax under the Local Government Code. Nevertheless, the
Court declares null and void the appraisal and assessment of said properties of MERALCO by the
City Assessor in 1997 for failure to comply with the requirements of the Local Government Code
and, thus, violating the right of MERALCO to due process.
By posting a surety bond before
filing its appeal of the assessment with
the LBAA, MERALCO substantially complied
with the requirement of payment under
protest in Section 252 of the Local
Government Code.
Section 252 of the Local Government Code mandates that "[n]o protest shall be entertained
unless the taxpayer first pays the tax." It is settled that the requirement of "payment under
protest" is a condition sine qua non before an appeal may be entertained.38 Section 231 of the
same Code also dictates that "[a]ppeal on assessments of real property x x x shall, in no case,
suspend the collection of the corresponding realty taxes on the property involved as assessed
by the provincial or city assessor, without prejudice to subsequent adjustment depending upon
the final outcome of the appeal." Clearly, under the Local Government Code, even when the
assessment of the real property is appealed, the real property tax due on the basis thereof
should be paid to and/or collected by the local government unit concerned.
In the case at bar, the City Treasurer of Lucena, in his letter dated October 16, 1997, sought to
collect from MERALCO the amount of P17,925,l 17.34 as real property taxes on its machineries,
plus penalties, for the period of 1990 to 1997, based on Tax Declaration Nos. 019-6500 and
019-7394 issued by the City Assessor of Lucena. MERALCO appealed Tax Declaration Nos. 019-
6500 and 019-7394 with the LBAA, but instead of paying the real property taxes and penalties
due, it posted a surety bond in the amount of PI 7,925,117.34.
By posting the surety bond, MERALCO may be considered to have substantially complied with
Section 252 of the Local Government Code for the said bond already guarantees the payment to
the Office of the City Treasurer of Lucena of the total amount of real property taxes and
penalties due on Tax Declaration Nos. 019-6500 and 019-7394. This is not the first time that
the Court allowed a surety bond as an alternative to cash payment of the real property tax
before protest/appeal as required by Section 252 of the Local Government Code. In Camp John
Hay Development Corporation v. Central Board of Assessment Appeals39 the Court affirmed the
ruling of the CBAA and the Court of Tax Appeals en bane applying the "payment under protest"
requirement in Section 252 of the Local Government Code and remanding the case to the LBAA
for "further proceedings subject to a full and up-to-date payment, either in cash or surety, of
realty tax on the subject properties x x x."
Accordingly, the LBAA herein correctly took cognizance of and gave due course to the appeal of
Tax Declaration Nos. 019-6500 and 019-7394 filed by MERALCO.
Beginning January 1, 1992,
MERALCO can no longer claim
exemption from real property tax of
its transformers, electric posts,
transmission lines, insulators, and
electric meters based on its
franchise.
MERALCO relies heavily on the Decision dated April 10, 1991 of the CBAA in CBAA Case No.
248, which affirmed the Decision dated July 5, 1989 of the LBAA in LBAA-89-2. Said decisions of
the CBAA and the LBAA, in turn, cited Board of Assessment Appeals v. Manila Electric
Co.,40 which was decided by the Court way back in 1964 (1964 MERALCO case). The decisions
in CBAA Case No. 248 and the 1964 MERALCO case recognizing the exemption from real
property tax of the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO are no longer applicable because of subsequent developments that changed
the factual and legal milieu for MERALCO in the present case.
In the 1964 MERALCO case, the City Assessor of Quezon City considered the steel towers of
MERALCO as real property and required MERALCO to pay real property taxes for the said steel
towers for the years 1952 to 1956. MERALCO was operating pursuant to the franchise granted
under Ordinance No. 44 dated March 24, 1903 of the Municipal Board of Manila, which it
acquired from the original grantee, Charles M. Swift. Under its franchise, MERALCO was
expressly granted the following tax exemption privilege:
cra l awlawlibra ry
Par 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant
(not including poles, wires, transformers, and insulators), machinery and personal property as
other persons are or may be hereafter required by law to pay. x x x Said percentage shall be
due and payable at the times stated in paragraph nineteen of Part One hereof, x x x and shall
be in lieu of all taxes and assessments of whatsoever nature, and by whatsoever authority upon
the privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the
grantee from which taxes and assessments the grantee is hereby expressly exempted, x x x.41
chanroble slaw
Given the express exemption from taxes and assessments of the "poles, wires, transformers,
and insulators" of MERALCO in the aforequoted paragraph, the sole issue in the 1964 MERALCO
case was whether or not the steel towers of MERALCO qualified as "poles" which were exempted
from real property tax. The Court ruled in the affirmative, ratiocinating that:
cralawlawlib rary
Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete
poles, and poles of the PLDT Co. which are made of two steel bars joined together by an
interlacing metal rod. They are called "poles" notwithstanding the fact that they are not made of
wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" for
which exemption is granted, is not determined by their place or location, nor by the character of
the electric current it carries, nor the material or form of which it is made, but the use to which
they are dedicated. In accordance with the definitions, a pole is not restricted to a long
cylindrical piece of wood or metal, but includes "upright standards to the top of which
something is affixed or by which something is supported." As heretofore described,
respondent's steel supports consist of a framework of four steel bars or strips which are bound
by steel cross-arms atop of which are cross-arms supporting five high voltage transmission
wires (See Annex A) and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles"
is not a novelty. Several courts of last resort in the United States have called these steel
supports "steel towers", and they have denominated these supports or towers, as electric poles.
In their decisions the words "towers" and "poles" were used interchangeably, and it is well
understood in that jurisdiction that a transmission tower or pole means the same thing.
xxxx
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the
petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat
the very object for which the franchise was granted. The poles as contemplated thereon, should
be understood and taken as a part of the electric power system of the respondent Meralco, for
the conveyance of electric current from the source thereof to its consumers, x x x.42 chanro bleslaw
Similarly, it was clear that under the 20-year franchise granted to MERALCO by the Municipal
Board of Lucena City through Resolution No. 2679 dated June 13, 1972, the transformers,
electric posts, transmission lines, insulators, and electric meters of MERALCO were exempt from
real property tax. Paragraph 13 of Resolution No. 2679 is quoted in full below: cra lawlawlib ra ry
13. The grantee shall be liable to pay the same taxes upon its real estate, building, machinery,
and personal property (not including poles, wires, transformers, and insulators) as other
persons are now or may hereafter be required by law to pay. In consideration of the franchise
and rights hereby granted, the grantee shall pay into the City Treasury of Lucena a tax equal
to FIVE (5%) PER CENTUM of the gross earnings received from electric current sold or
supplied under this franchise. Said tax shall be due and payable quarterly and shall be in lieu
of any and all taxes of any kind, nature or description levied, established, or
collected by any authority whatsoever, municipal, provincial, or national, now or in the
future, on its poles, wires, insulators, switches, transformers and structures,
installations, conductors, and accessories, placed in and over and under all the private
and/or public property, including public streets and highways, provincial roads, bridges, and
public squares, and on its franchise rights, privileges, receipts, revenues and profits, from
which taxes the grantee is hereby expressly exempted. (Emphases supplied.)
chan robles law
In CBAA Case No. 248 (and LBAA-89-2), the City Assessor assessed the transformers, electric
posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City
beginning 1985 under Tax Declaration No. 019-6500. The CBAA in its Decision dated April 10,
1991 in CBAA Case No. 248 sustained the exemption of the said properties of MERALCO from
real property tax on the basis of paragraph 13 of Resolution No. 2679 and the 1964 MERALCO
case.
Just when the franchise of MERALCO in Lucena City was about to expire, the Local Government
Code took effect on January 1, 1992, Sections 193 and 234 of which provide:
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code,
tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and nonprofit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this Code.
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment
of the real property tax: chanRoble svirtual Lawli bra ry
(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; ChanRobles Vi rtualaw lib rary
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,
nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly,
and exclusively used for religious, charitable or educational purposes; ChanRobles Vi rtua lawlib rary
(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 environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted
to, or presently enjoyed by, all persons, whether natural or juridical, including all government-
owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.
The Local Government Code, in addition, contains a general repealing clause under Section
534(f) which states that "[a]ll general and special laws, acts, city charters, decrees, executive
orders, proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly."
Taking into account the above-mentioned provisions, the evident intent of the Local
Government Code is to withdraw/repeal all exemptions from local taxes, unless otherwise
provided by the Code. The limited and restrictive nature of the tax exemption privileges under
the Local Government Code is consistent with the State policy to ensure autonomy of local
governments and the objective of the Local Government Code to grant genuine and meaningful
autonomy to enable local government units to attain their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals. The obvious
intention of the law is to broaden the tax base of local government units to assure them of
substantial sources of revenue.43
Section 234 of the Local Government Code particularly identifies the exemptions from payment
of real property tax, based on the ownership, character, and use of the property, viz.: cralawlaw lib rary
c ralawlawl ibra ry
(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are
real properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a
barangay, and (vi) registered cooperatives.
(b) Character Exemptions. Exempted from real property taxes on the basis of their character
are: (i) charitable institutions, (ii) houses and temples of prayer like churches, parsonages or
convents appurtenant thereto, mosques, and (iii) nonprofit or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and
exclusive use to which they are devoted are: (i) all lands, buildings and improvements which
are actually directly and exclusively used for religious, charitable or educational purposes; (ii)
all machineries and equipment actually, directly and exclusively used by local water districts or
by government-owned or controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power; and (iii) all machinery and
equipment used for pollution control and environmental protection.
To help provide a healthy environment in the midst of the modernization of the country, all
machinery and equipment for pollution control and environmental protection may not be taxed
by local governments.
2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical
ChanRoble sVirt ualawli bra ry persons including government-owned or controlled corporations are withdrawn upon the
effectivity of the Code.44
chan robles law
The last paragraph of Section 234 had unequivocally withdrawn, upon the effectivity of the
Local Government Code, exemptions from payment of real property taxes granted to natural or
juridical persons, including government-owned or controlled corporations, except as provided in
the same section.
MERALCO, a private corporation engaged in electric distribution, and its transformers, electric
posts, transmission lines, insulators, and electric meters used commercially do not qualify under
chan robles law
any of the ownership, character, and usage exemptions enumerated in Section 234 of the Local
Government Code. It is a basic precept of statutory construction that the express mention of
one person, thing, act, or consequence excludes all others as expressed in the familiar
maxim expressio unius est exclusio alterius.45 Not being among the recognized exemptions from
real property tax in Section 234 of the Local Government Code, then the exemption of the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO
from real property tax granted under its franchise was among the exemptions withdrawn upon
the effectivity of the Local Government Code on January 1, 1998.
It is worthy to note that the subsequent franchises for operation granted to
MERALCO, i.e., under the Certificate of Franchise dated October 28, 1993 issued by the National
Electrification Commission and Republic Act No. 9209 enacted on June 9, 2003 by Congress, are
completely silent on the matter of exemption from real property tax of MERALCO or any of its
properties.
It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax
exemption must point to a specific provision of law conferring on the taxpayer, in clear and
plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is
resolved against the taxpayer.46MERALCO has failed to present herein any express grant of and municipalities an xxxx
exemption from real property tax of its transformers, electric posts, transmission lines, annual ad valorem tax
insulators, and electric meters that is valid and binding even under the Local Government Code.
on real property, such (m) Machinery - shall
The transformers, electric posts, as land, buildings, embrace machines,
transmission lines, insulators, and electric machinery and other mechanical
meters of MERALCO may qualify as
"machinery" under the Local Government improvements affixed or contrivances,
Code subject to real property tax. attached to real instruments, appliances
Through the years, the relevant laws have consistently considered "machinery" as real property
property not hereinafter and apparatus attached
subject to real property tax. It is the definition of "machinery" that has been changing and specifically exempted. to the real estate. It
expanding, as the following table will show:
chanRoble svi rtual Lawli bra ry

includes the physical

facilities available for
Real Property Incidence of Real Definition of production, as well as
Tax Law Property Tax Machinery47 the installations and
The Assessment Section 2. Incidence of Section 3. Property appurtenant service
Law real property tax. - exempt from tax. - The facilities, together with
(Commonwealth Except in chartered exemptions shall be as all other equipment
Act No. 470) cities, there shall be follows: designed for or essential
levied, assessed, and xxxx to its manufacturing,
Effectivity: collected, an annual ad (f) Machinery, which industrial or agricultural
January 1, 1940 valorem tax on real term shall embrace purposes.
property, including land, machines, mechanical Real Property Section 38. Incidence of Section 3. Definition of
buildings, machinery, contrivances, Tax Code, as Real Property Tax. - Terms.
and other improvements instruments, appliances, amended by There shall be levied, When used in this
not hereinafter and apparatus attached Presidential assessed and collected Code -
specifically exempted. to the real estate, used Decree No. in all provinces, cities xxxx
for industrial agricultural 1383 and municipalities an
or manufacturing annual ad valorem tax (m) Machinery - shall
purposes, during the Effectivity: May on real property, such embrace machines,
first five years of the 25, 1978 as land, buildings, equipment, mechanical
operation of the machinery and other contrivances,
machinery. improvements affixed or instruments, appliances
Real Property Section 38. Incidence of Section 3. Definition of attached to real and apparatus attached
Tax Code Real Property Tax. - Terms. - property not hereinafter to the real estate. It
There shall be levied, When used in this Code specifically exempted. shall include the
Effectivity: June assessed and collected - physical facilities
1, 1974 in all provinces, cities available for production,
 as well as the includes the physical
installations and facilities for production,
appurtenant service the installations and
facilities, together with appurtenant service
all those not facilities, those which
permanently attached to are mobile, self-
the real estate but are powered or self-
actually, directly and propelled, and those
essentially used to meet not permanently
the needs of the attached to the real
particular industry, property which are
business, or works, actually, directly, and
which by their very exclusively used to meet
nature and purpose are the needs of the
designed for, or particular industry,
essential to business or activity and
manufacturing, which by their very
commercial, mining, nature and purpose are
industrial or agricultural designed for, or
purposes. necessary to its
Local Section 232. Power to Section manufacturing,
Government Levy Real Property 199. Definitions. - When mining,logging,
Code Tax. A province or used in this Title: commercial, industrial or
city or a municipality xxxx agricultural purposes[.]
Effectivity: within the Metropolitan
January 1, 1992 Manila Area may levy an (o) "Machinery" MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts,
annual ad valorem embraces machines, transmission lines, insulators, and electric meters constitute the physical facilities through which
MERALCO delivers electricity to its consumers. Each may be considered as one or more of the
tax on real property equipment, mechanical following: a
such as land, contrivances, "machine,"48 "equipment,"49 "contrivance,"50 "instrument,"51 "appliance,"52 "apparatus,"53 or
"installation."54
building, machinery, instruments, appliances
and other improvement or apparatuswhich may The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be
not hereinafter or may not be deemed real property subject to real property tax, need no longer be annexed to the land or
building as these "may or may not be attached, permanently or temporarily to the real
specifically exempted. attached, property," and in fact, such machinery may even be "mobile."55 The same provision though
permanently or requires that to be machinery subject to real property tax, the physical facilities for production,
installations, and appurtenant service facilities, those which are mobile, self-powered or self-
temporarily, to the propelled, or not permanently attached to the real property (a) must be actually, directly, and
real property. It exclusively used to meet the needs of the particular industry, business, or activity; and (2) by
their very nature and purpose, are designed for, or necessary for manufacturing, mining, unscrewing the bolts and reassembled by screwing the same. These steel towers or supports do
logging, commercial, industrial, or agricultural purposes. Thus, Article 290(o) of the Rules and not also fall under paragraph 5, for they are not machineries or receptacles, instruments or
Regulations Implementing the Local Government Code of 1991 recognizes the following implements, and even if they were, they are not intended for industry or works on the land.
exemption: c ralawlawli bra ry Petitioner is not engaged in an industry or works on the land in which the steel supports or
towers are constructed.56 (Emphases supplied.) chan roble slaw

Machinery which are of general purpose use including but not limited to office equipment,
typewriters, telephone equipment, breakable or easily damaged containers (glass or cartons), The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore
microcomputers, facsimile machines, telex machines, cash dispensers, furnitures and fixtures, under the Local Government Code.
freezers, refrigerators, display cases or racks, fruit juice or beverage automatic dispensing
machines which are not directly and exclusively used to meet the needs of a particular industry, While the Local Government Code still does not provide for a specific definition of "real
business or activity shall not be considered within the definition of machinery under this Rule. property," Sections 199(o) and 232 of the said Code, respectively, gives an extensive definition
(Emphasis supplied.) cha nrob leslaw

The 1964 MERALCO case was decided when The Assessment Law was still in effect and Section
3(f) of said law still required that the machinery be attached to the real property. Moreover, as
the Court pointed out earlier, the ruling in the 1964 MERALCO case - that the electric poles
(including the steel towers) of MERALCO are not subject to real property tax - was primarily
based on the express exemption granted to MERALCO under its previous franchise. The
reference in said case to the Civil Code definition of real property was only an alternative
argument: cralawlawli bra ry
of what constitutes "machinery" and unequivocally subjects such machinery to real property
tax. The Court reiterates that the machinery subject to real property tax under the Local
Government Code "may or may not be attached, permanently or temporarily to the real
property;" and the physical facilities for production, installations, and appurtenant service
facilities, those which are mobile, self-powered or self-propelled, or are not permanently
attached must (a) be actually, directly, and exclusively used to meet the needs of the particular
industry, business, or activity; and (2) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.

Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and,
Granting for the purpose of argument that the steel supports or towers in question buildings, roads and constructions of all kinds adhered to the soil." The land, buildings, and
are not embraced within the term poles, the logical question posited is whether they roads are immovables by nature "which cannot be moved from place to place," whereas the
constitute real properties, so that they can be subject to a real property tax. The tax constructions adhered to the soil are immovables by incorporation "which are essentially
law does not provide for a definition of real property; but Article 415 of the Civil Code does, movables, but are attached to an immovable in such manner as to be an integral part
by stating the following are immovable property: thereof."57 Article 415, paragraph (3) of the Civil Code, referring to "[ejverything attached to an
immovable in a fixed manner, in such a way that it cannot be separated therefrom without
c ralawlawl ibra ry

breaking the material or deterioration of the object," are likewise immovables by incorporation.
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
In contrast, the Local Government Code considers as real property machinery which "may or
ChanRoble sVirtualawli bra ry

may not be attached, permanently or temporarily to the real property," and even those which
xxxx
are "mobile."
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
Article 415, paragraph (5) of the Civil Code considers as immovables or real properties
separated therefrom without breaking the material or deterioration of the object;
"[machinery, receptacles, instruments or implements intended by the owner of the tenement for
ChanRob les Vi rtualawl ib rary

an industry or works which may be carried on in a building or on a piece of land, and which tend
xxxx
directly to meet the needs of the said industry or works." The Civil Code, however, does not
define "machinery."
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement
for an industry or works which may be carried in a building or on a piece of land, and which
The properties under Article 415, paragraph (5) of the Civil Code are immovables by
tends directly to meet the needs of the said industry or works;
destination, or "those which are essentially movables, but by the purpose for which they have
ChanRobles Vi rtua lawlib rary

xxxx
The steel towers or supports in question, do not come within the objects mentioned in
paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They
are not constructions analogous to buildings nor adhering to the soil. As per description, given
by the lower court, they are removable and merely attached to a square metal frame by means
of bolts, which when unscrewed could easily be dismantled and moved from place to place.
They can not be included under paragraph 3, as they are not attached to an immovable in a
fixed manner, and they can be separated without breaking the material or causing deterioration
upon the object to which they are attached. Each of these steel towers or supports consists of
steel bars or metal strips, joined together by means of bolts, which can be disassembled by
been placed in an immovable, partake of the nature of the latter because of the added utility
derived therefrom."58 These properties, including machinery, become immobilized if the
following requisites concur: (a) they are placed in the tenement by the owner of such
tenement; (b) they are destined for use in the industry or work in the tenement; and (c) they
tend to directly meet the needs of said industry or works.59 The first two requisites are not
found anywhere in the Local Government Code.
MERALCO insists on harmonizing the aforementioned provisions of the Civil Code and the Local
Government Code. The Court disagrees, however, for this would necessarily mean imposing
additional requirements for classifying machinery as real property for real property tax purposes
not provided for, or even in direct conflict with, the provisions of the Local Government Code.

As between the Civil Code, a general law governing property and property relations, and the
Local Government Code, a special law granting local government units the power to impose real
property tax, then the latter shall prevail. As the Court pronounced in Disomangcop v. The
Secretary of the Department of Public Works and Highways Simeon A. Datumanong60: cra lawlawlib rary
It is a finely-imbedded principle in statutory construction that a special provision or law prevails
over a general one. Lex specialis derogant generali. As this Court expressed in the case
of Leveriza v. Intermediate Appellate Court, "another basic principle of statutory construction
mandates that general legislation must give way to special legislation on the same subject, and
generally be so interpreted as to embrace only cases in which the special provisions are not
applicable, that specific statute prevails over a general statute and that where two statutes are
of equal theoretical application to a particular case, the one designed therefor specially should
prevail." (Citations omitted.)chanrobles law
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation61 that:
cralawlawl ibra ry
A general law and a special law on the same subject are statutes in pah materia and should,
accordingly, be read together and harmonized, if possible, with a view to giving effect to both.
The rule is that where there are two acts, one of which is special and particular and the other
general which, if standing alone, would include the same matter and thus conflict with the
special act, the special law must prevail since it evinces the legislative intent more clearly than
that of a general statute and must not be taken as intended to affect the more particular and
specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order
to give its words any meaning at all.
The circumstance that the special law is passed before or after the general act does not change
the principle. Where the special law is later, it will be regarded as an exception to, or a
qualification of, the prior general act; and where the general act is later, the special statute will
be construed as remaining an exception to its terms, unless repealed expressly or by necessary
implication. (Citations omitted.) chan roble slaw
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals,62 the Court
acknowledged that "[i]t is a familiar phenomenon to see things classed as real property for
purposes of taxation which on general principle might be considered personal property[.]"
Therefore, for determining whether machinery is real property subject to real property tax, the
definition and requirements under the Local Government Code are controlling.
MERALCO maintains that its electric posts are not machinery subject to real property tax
because said posts are not being exclusively used by MERALCO; these are also being utilized by
cable and telephone companies. This, however, is a factual issue which the Court cannot take
cognizance of in the Petition at bar as it is not a trier of facts. Whether or not the electric posts
of MERALCO are actually being used by other companies or industries is best left to the
determination of the City Assessor or his deputy, who has been granted the authority to take
evidence under Article 304 of the Rules and Regulations Implementing the Local Government
Code of 1991.
Nevertheless, the appraisal and
assessment of the transformers, electric
posts, transmission lines, insulators, and
electric meters of MERALCO as machinery
under Tax Declaration Nos. 019-6500 and
019-7394 were not in accordance with the
Local Government Code and in violation of
the right to due process of MERALCO and,
therefore, null and void.
The Local Government Code defines "appraisal" as the "act or process of determining the value
of property as of a specific date for a specific purpose." "Assessment" is "the act or process of
determining the value of a property, or proportion thereof subject to tax, including the
discovery, listing, classification, and appraisal of the properties[.]"63 When it comes to
machinery, its appraisal and assessment are particularly governed by Sections 224 and 225 of
the Local Government Code, which read: cralawlawl ib rary
Section 224. Appraisal and Assessment of Machinery. - (a) The fair market value of a brand-
new machinery shall be the acquisition cost. In all other cases, the fair market value shall be
determined by dividing the remaining economic life of the machinery by its estimated economic
life and multiplied by the replacement or reproduction cost.
(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other
charges, brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation,
handling, and installation charges at the present site. The cost in foreign currency of imported
machinery shall be converted to peso cost on the basis of foreign currency exchange rates as
fixed by the Central Bank.
Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a
depreciation allowance shall be made for machinery at a rate not exceeding five percent (5%)
of its original cost or its replacement or reproduction cost, as the case may be, for each year of
use: Provided, however, That the remaining value for all kinds of machinery shall be fixed at not
less than twenty percent (20%) of such original, replacement, or reproduction cost for so long
as the machinery is useful and in operation. chan robles law
It is apparent from these two provisions that every machinery must be individually appraised
and assessed depending on its acquisition cost, remaining economic life, estimated economic
life, replacement or reproduction cost, and depreciation.
Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991
expressly authorizes the local assessor or his deputy to receive evidence for the proper
appraisal and assessment of the real property:
c ralawlawl ibra ry
Article 304. Authority of Local Assessors to Take Evidence. - For the purpose of obtaining
information on which to base the market value of any real property, the assessor of the
province, city, or municipality or his deputy may summon the owners of the properties to be
affected or persons having legal interest therein and witnesses, administer oaths, and take
deposition concerning the property, its ownership, amount, nature, and value.
chanrobles law
The Local Government Code further mandates that the taxpayer be given a notice of the
assessment of real property in the following manner: c ralawlawli bra ry
Section 223. Notification of New or Revised Assessment. - When real property is assessed for
the first time or when an existing assessment is increased or decreased, the provincial, city or
municipal assessor shall within thirty (30) days give written notice of such new or revised
assessment to the person in whose name the property is declared. The notice may be delivered
personally or by registered mail or through the assistance of the punong barangay to the last
known address of the person to served. chanro bleslaw
A notice of assessment, which stands as the first instance the taxpayer is officially made aware
of the pending tax liability, should be sufficiently informative to apprise the taxpayer the legal
basis of the tax.64 In Manila Electric Company v. Barlis,65 the Court described the contents of a
valid notice of assessment of real property and differentiated the same from a notice of
collection:
cralaw lawlib rary
A notice of assessment as provided for in the Real Property Tax Code should effectively inform
the taxpayer of the value of a specific property, or proportion thereof subject to tax, including
the discovery, listing, classification, and appraisal of properties. The September 3, 1986 and
October 31, 1989 notices do not contain the essential information that a notice of assessment
must specify, namely, the value of a specific property or proportion thereof which is being
taxed, nor does it state the discovery, listing, classification and appraisal of the property subject
to taxation. In fact, the tenor of the notices bespeaks an intention to collect unpaid taxes, thus
the reminder to the taxpayer that the failure to pay the taxes shall authorize the government to
auction off the properties subject to taxes x x x. chanrobles law
Although the ruling quoted above was rendered under the Real Property Tax Code, the
requirement of a notice of assessment has not changed under the Local Government Code.
A perusal of the documents received by MERALCO on October 29, 1997 reveals that none of
them constitutes a valid notice of assessment of the transformers, electric posts, transmission
lines, insulators, and electric meters of MERALCO.
The letter dated October 16, 1997 of the City Treasurer of Lucena (which interestingly precedes
the purported Notice of Assessment dated October 20, 1997 of the City Assessor of Lucena) is a
notice of collection, ending with the request for MERALCO to settle the payable amount soon in
order to avoid accumulation of penalties. It only presented in table form the tax declarations
covering the machinery, assessed values in the tax declarations in lump sums for all the
machinery, the periods covered, and the taxes and penalties due again in lump sums for all the
machinery.
The Notice of Assessment dated October 20, 1997 issued by the City Assessor gave a summary
of the new/revised assessment of the "machinery" located in "Quezon Avenue Ext., Brgy.
Gulang-Gulang, Lucena City," covered by Tax Declaration No. 019-7394, with total market
value of P98,173,200.00 and total assessed value of P78,538,560.00. The Property Record
Form basically contained the same information. Without specific description or identification of
the machinery covered by said tax declaration, said Notice of Assessment and Property Record
Form give the false impression that there is only one piece of machinery covered.
In Tax Declaration No. 019-6500, the City Assessor reported its findings under "Building and
Improvements" and not "Machinery." Said tax declaration covered "capital investment-
commercial," specifically: (a) Transformer and Electric Post; (b) Transmission Line, (c)
Insulator, and (d) Electric Meter, with a total market value of P81,811,000.00, assessment level
of 80%, and assessed value of 65,448,800.00. Conspicuously, the table for "Machinery" -
requiring the description, date of operation, replacement cost, depreciation, and market value
of the machinery - is totally blank.
MERALCO avers, and the City Assessor and the City Treasurer of Lucena do not refute at all,
that MERALCO has not been furnished the Owner's Copy of Tax Declaration No. 019-7394, in
which the total market value of the machinery of MERALCO was increased by PI6,632,200.00,
compared to that in Tax Declaration No. 019-6500.
The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack
of a valid appraisal and assessment conducted by the City Assessor of Lucena in the first place.
It appears that the City Assessor of Lucena simply lumped together all the transformers, electric
posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City
under Tax Declaration Nos. 019-6500 and 019-7394, contrary to the specificity demanded
under Sections 224 and 225 of the Local Government Code for appraisal and assessment of
machinery. The City Assessor and the City Treasurer of Lucena did not even provide the most
basic information such as the number of transformers, electric posts, insulators, and electric
meters or the length of the transmission lines appraised and assessed under Tax Declaration
Nos. 019-6500 and 019-7394. There is utter lack of factual basis for the assessment of the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO.
The Court of Appeals laid the blame on MERALCO for the lack of information regarding its
transformers, electric posts, transmission lines, insulators, and electric meters for appraisal and
assessment purposes because MERALCO failed to file a sworn declaration of said properties as
required by Section 202 of the Local Government Code. As MERALCO explained, it cannot be
expected to file such a declaration when all the while it believed that said properties were
personal or movable properties not subject to real property tax. More importantly, Section 204
of the Local Government Code exactly covers such a situation, thus: cralawlawlibra ry
Section 204. Declaration of Real Property by the Assessor. -When any person, natural or
juridical, by whom real property is required to be declared under Section 202 hereof, refuses or
fails for any reason to make such declaration within the time prescribed, the provincial, city or
municipal assessor shall himself declare the property in the name of the defaulting owner, if
known, or against an unknown owner, as the case may be, and shall assess the property for
taxation in accordance with the provision of this Title. No oath shall be required of a declaration
thus made by the provincial, city or municipal assessor. chanro blesla w
Note that the only difference between the declarations of property made by the taxpayer, on
one hand, and the provincial/city/municipal assessor, on the other, is that the former must be
made under oath. After making the declaration of the property himself for the owner, the
provincial/city/municipal assessor is still required to assess the property for taxation in
accordance with the provisions of the Local Government Code.
It is true that tax assessments by tax examiners are presumed correct and made in good faith,
with the taxpayer having the burden of proving otherwise.66 In this case, MERALCO was able to
overcome the presumption because it has clearly shown that the assessment of its properties
by the City Assessor was baselessly and arbitrarily done, without regard for the requirements of
the Local Government Code.
The exercise of the power of taxation constitutes a deprivation of property under the due
process clause, and the taxpayer's right to due process is violated when arbitrary or oppressive
methods are used in assessing and collecting taxes. 67 The Court applies by analogy its
pronouncements in Commissioner of Internal Revenue v. United Salvage and Towage (Phils.),
Inc.,68 concerning an assessment that did not comply with the requirements of the National
Internal Revenue Code: cralawlawl ibra ry
On the strength of the foregoing observations, we ought to reiterate our earlier teachings that
"in balancing the scales between the power of the State to tax and its inherent right to
prosecute perceived transgressors of the law on one side, and the constitutional rights of a
citizen to due process of law and the equal protection of the laws on the other, the scales must
tilt in favor of the individual, for a citizen's right is amply protected by the Bill of Rights under
the Constitution." Thus, while "taxes are the lifeblood of the government," the power to tax has
its limits, in spite of all its plenitude. Even as we concede the inevitability and indispensability of
taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. (Citations omitted.) chan roble slaw
The appraisal and assessment of the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO under Tax Declaration Nos. 019-6500 and 019-7394, not being
in compliance with the Local Government Code, are attempts at deprivation of property without
due process of law and, therefore, null and void.
WHEREFORE, premises considered, the Court PARTLY GRANTS the instant Petition
and AFFIRMS with MODIFICATION the Decision dated May 13, 2004 of the Court of Appeals
in CA-G.R. SP No. 67027, affirming in toto the Decision dated May 3, 2001 of the Central Board
of Assessment Appeals in CBAA Case No. L-20-98. The Court DECLARES that the transformers,
electric posts, transmission lines, insulators, and electric meters of Manila Electric Company
are NOT EXEMPTED from real property tax under the Local Government Code. However, the
Court also DECLARES the appraisal and assessment of the said properties under Tax
Declaration Nos. 019-6500 and 019-7394 as NULL and VOID for not complying with the
requirements of the Local Government Code and violating the right to due process of Manila
Electric Company, and ORDERS the CANCELLATION of the collection letter dated October 16,
1997 of the City Treasurer of Lucena and the Notice of Assessment dated October 20, 1997 of
the City Assessor of Lucena, but WITHOUT PREJUDICE to the conduct of a new appraisal and
assessment of the same properties by the City Assessor of Lucena in accord with the provisions
of the Local Government Code and guidelines issued by the Bureau of Local Government
Financing.
SO ORDERED. chanroblesvi rtua llawli bra ry
Sereno, CJ., (Chairperson), Bersamin, Perez, and Perlas-Bernabe, JJ., concur.
SECOND DIVISION
G.R. No. 183416, October 05, 2016
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR, Petitioner, v. FILIPINAS PALM OIL
PLANTATION, INC., Respondent.
DECISION
LEONEN, J.:
The exemption from real property taxes given to cooperatives applies regardless of whether or
not the land owned is leased. This exemption benefits the cooperative's lessee. The
characterization of machinery as real property is governed by the Local Government Code and
not the Civil Code.
This Petition1 for review assails the Decision2 dated September 26, 2007 and the
Resolution3 dated May 26, 2008 of the Court of Appeals in CA-G.R. SP No. 74060. The Court of
Appeals affirmed the Decision of the Central Board of Assessment Appeals (CBAA) exempting
Filipinas Palm Oil Plantation Inc. from payment of real property taxes.4 chanrob leslaw
Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil
plantation5 with a total land area of more than 7,000 hectares of National Development
Company (NDC) lands in Agusan del Sur.6 Harvested fruits from oil palm trees are converted
into oil through Filipinas' milling plant in the middle of the plantation area.7 Within the
plantation, there are also three (3) plantation roads and a number of residential homes
constructed by Filipinas for its employees.8 chan rob leslaw
After the Comprehensive Agrarian Reform Law9 was passed, NDC lands were transferred to
Comprehensive Agrarian Reform Law beneficiaries who formed themselves as the merged NDC-
Guthrie Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-NGEI) Cooperatives.10 Filipinas
entered into a lease contract agreement with NGPI-NGEI.11 chanrobleslaw
The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency in
charge with the assessment of lands under the public domain.12 It assessed Filipinas' properties
found within the plantation area,13 which Filipinas assailed before the Local Board of Assessment
Appeals (LBAA) on the following grounds:
chanRoble svirtual Lawlib ra ry
(1.) The [petitioner] Provincial Assessors of Agusan del Sur ERRED in finding that the Market
Value of a single fruit bearing oil palm tree is P207.00 when it should only be P42.00 pesos per
tree;
(2.) The [petitioner] ERRED in finding that the total number of standing and fruit bearing oil
palm tree is PI 10 [sic] trees per hectare when it should be only 92 trees;
(3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation roads are: ChanRobles Vi rtualaw lib rary
A.) P270,000.00 per kilometer for primary roads
B.) P135,000.00 for secondary roads
C.) P67,567.00 for tertiary roads constructed by the company.
It should only be: ChanRobles Vi rtua lawlib rary
A.) P105,000.00 for primary roads
B.) P52,300.00 for secondary roads
C.) P26,250.00 for tertiary roads
Likewise, bridges, culverts, canals and pipes should not be assessed separately from plantation
roads, the same being components of the roads thereof;
(4.) The [petitioner] ERRED in imposing real property taxes against the petitioner for roads,
bridges, culverts, pipes and canals as these belonged to the cooperatives;

([5].) The [petitioner] ERRED in finding that the Market Value of NDC service area is
P11,000.00 per hectare when it should only be P6,000.00 per hectare;
([6].) The [petitioner] ERRED in imposing realty taxes on Residential areas built by
[respondent] except for three of them;
([7].) The [petitioner] ERRED when it included haulers and other equipments [sic] which are
unmovable as taxable real properties.14
In its Decision15 dated June 8, 1999, the LBAA found that the P207.00 market value declared in
the assessment by the Provincial Assessor was unreasonable.16 It found that the market value
should not have been more than P85.00 per oil palm tree.17 The sudden increase of realty tax
assessment level from P42.00 for each oil palm tree in 1993 to P207.00 was confiscatory.18 chanrob leslaw
The LBAA adopted Filipinas' claim that the basis for assessment should only be 98
trees.19 Although one (1) hectare of land can accommodate 124 oil palm trees, the mountainous
terrain of the plantation should be considered.20 Because of the terrain, not every meter of land
can be fully planted with trees.21 The LBAA found that roads of any kind, as well as all their
improvements, should not be taxed since these roads were intermittently used by the
public.22 It resolved that the market valuation should be based on the laws of the Department of
Agrarian Reform since the area is owned by the NDC, a quasi-governmental body of the
Philippines.23 chan rob leslaw
The LBAA exempted the low-cost housing units from taxation except those with a market value
of more than P150,000.00 under the Local Government Code.24 Finally, the LBAA considered the
road equipment and mini haulers as movables that are vital to Filipinas' business.
Filipinas appealed before the CBAA on July 16, 1999.26 On November 21, 2001, the CBAA
rendered a decision, the dispositive portion of which reads:
chanRoble svirtual Lawlib ra ry
WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision
rendered by the Local Board of Assessment Appeals of the Province of Agusan del Sur on June
8, 1999 in an unnumbered case entitled "[F]ilipinas Palm Oil Co., Inc. Petitioner, versus the
Provincial Assessors Office of Agusan del Sur, Respondent" and hereby orders as follows:
A. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100 PESOS
chanRoble svirtual Lawlib ra ry
(57.55), effective January 1, 1991. The assessment for each municipality shall be based on the
corresponding number of trees as listed in Petitioner-Appellee's "Hectarage Statement"
discussed hereinabove;
B. Petitioner-Appellee should not be made to pay for the real property taxes due on the roads
starting from January 1, 1991;
C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands
owned by the Multi-purpose Cooperative;
D. The housing units with a market value of PI75,000.00 or less each shall be subjected to 0%
assessment level, starting 1994;
E. Road Equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is
not liable for real property tax thereon;
F. Any real property taxes already paid by Petitioner-Appellee which, by virtue "of this decision,
were not due, shall be applied to future taxes rightfully due from Petitioner-Appellee.
SO ORDERED.27 (Emphasis supplied)
The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor.28 The
Provincial Assessor filed a Petition for Review before the Court of Appeals, which, in turn,
sustained the CBAA's Decision.29 chanro bleslaw
The Court of Appeals held that the land owned by NGPI-NGEI, which Filipinas has been leasing,
cannot be subjected to real property tax since these are owned by cooperatives that are tax-
exempt.30 Section 133(n) of the Local Government Code provides:
chanRoble svirtual Lawlib ra ry
SECTION 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:
....
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises
and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine
hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the
Philippines." (Emphasis supplied)
Section 234(d) of the Local Government Code exempts duly registered cooperatives, like NGPI-
NGEI, from payment of real property taxes:
chanRoble svirtual Lawlib ra ry
SECTION 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
....
(d) All real property owned by duly registered cooperatives as provided for under R.A. No.
6938[.] (Emphasis supplied)
The Court of Appeals held that the pertinent provisions "neither distinguishes nor specifies" that
the exemption only applies to real properties used by the cooperatives.31 It ruled that "[t]he
clear absence of any restriction or limitation in the provision could only mean that the
exemption applies to wherever the properties are situated and to whoever uses
them."32 Therefore, the exemption privilege extends to Filipinas as the cooperatives' lessee.33
cha nro bleslaw
On the roads constructed by Filipinas, the Court of Appeals held that although it is undisputed
that the roads were built primarily for Filipinas' benefit, the roads should be tax-exempt since
these roads were also being used by the cooperatives and the public.34 It applied, by
analogy, Bislig Bay Lumber Company, Inc. v. Provincial Government of Surigao:35 chanrob leslaw
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that
the ownership of the road that was constructed by appellee belongs to the government by right
accession not only because it is inherently incorporated or attached to the timber land leased to
appellee but also because upon the expiration of the concession, said road would ultimately
pass to the national government. In the second place, while the road was constructed by
appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease
contract entered into by the appellee and the government and by public in by the general. Thus,
under said lease contract, appellee cannot prevent the use of portions, of the concession for
homesteading purposes. It is also in duty bound to allow the free use of forest products within
the concession for the personal use of individuals residing in or within the vicinity of the land. . .
. In other words, the government has practically reserved the rights to use the road to promote
its varied activities. Since, as above shown, the road in question cannot be considered as an
improvement which belongs to appellee, although in part is for its benefit, it is clear that the
same cannot be the subject of assessment within the meaning of section 2 of Commonwealth
Act No. 470.36 (Citations omitted)
Furthermore, the Court of Appeals agreed with the CBAA that the roads constructed by Filipinas
had become permanent improvements on the land owned by NGPI-NGEI.37 Articles 440 and 445
of the Civil Code provide that these improvements redound to the benefit of the land owner
under the right of accession:38
chan roble slaw
Article 440. The ownership of property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or artificially.
....
Article 445. Whatever is built, planted or sown on the land of another and the improvements
or repairs made thereon, belong to the owner of the land, subject to the provisions of the
following articles.
On the road equipment and mini haulers as real properties subject to tax, the Court of Appeals
affirmed the CBAA's Decision that these are only movables.39 Section 199(o) of the Local
Government Code provides a definition of machinery subject to real property taxation:
chanRoble svirtual Lawlib ra ry
SECTION 199. Definition of Terms. When used in this Title, the term:
....
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments,
appliances or apparatus which may or may not be attached, permanently or temporarily, to the
real property. It includes the physical facilities for production, the installations and appurtenant
service facilities, those which are mobile, self-powered or self-propelled, and those not
permanently attached to the real property which are actually, directly, and exclusively used to
meet the needs of the particular industry, business or activity and which by their very nature
and purpose are designed for, or necessary to its manufacturing, mining.
The Court of Appeals held that Section 19^(o) of the Local Government Code should be
construed to include machineries covered by the meaning of real properties provided for under
Article 415(5) of the Civil Code:40 cha nrob leslaw
Article 415. The following are immovable property:
....
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works[.]
The Court of Appeals cited Davao Sawmill Company v. Castillo,41 where it has been held that
machinery that is movable by nature becomes immobilized only when placed by the owner of
the tenement, but not so when placed by a tenant or any other person having a temporary right
unless this person acts as an agent of the owner.42 Thus, the mini haulers and other road
equipment retain their nature as movables.43 chanrob leslaw
The Provincial Assessor filed before this Court a Petition for Review raising the following issues:
First, whether the exemption privilege of NGPI-NGEI from payment of real property tax
chanRoble svirtual Lawlib ra ry
extends to respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by
cooperatives; and cralawlawl ibra ry
Second, whether respondent's road equipment and mini haulers are movable properties and
have not been immobilized by destination for real property taxation.
Petitioner argues that based on Mactan Cebu International Airport Authority v. Ferdinand J.
Marcos,44cooperatives cannot extend its exemption from real property tax to taxable
persons.45 It argues that Sections 198, 199, 205, and 217 of the Local Government Code
provide that real property taxes are assessed based on actual use.46 Moreover, the exemption
of cooperatives applies only when it is the cooperative that actually, directly, and exclusively
uses and possesses the properties.47 Sections 198, 199, 205, and 217 of the Local Government
Code provide:
chanRoble svirtual Lawlib ra ry
SECTION 198. Fundamental Principles. The appraisal, assessment, levy and collection of real
property tax shall be guided by the following fundamental principles:
....
(b) Real property shall be classified for assessment purposes on the basis of its actual use[.]
....
SECTION 199. Definition of Terms. When used in this Title, the term:
....
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly
utilized by the person in possession thereof[.]
....
SECTION 205. Listing of Real Property in the Assessment Rolls.
....
(d) Real property owned by the Republic of the Philippines, its instrumentalities and political
subdivisions, the beneficial use of which has been granted, for consideration or otherwise, to a
taxable person, shall be listed, valued and assessed in the name of the possessor, grantee or of
the public entity if such property has been acquired or held for resale or lease.
....
SECTION 217. Actual Use of Real Property as Basis for Assessment. Real property shall be
classified, valued and assessed on the basis of its actual use regardless of where located,
whoever owns it, and whoever uses it. (Emphasis supplied)
Petitioner claims that Section 199(o) of the Local Government Code specifically covers
respondent's road equipment and mini haulers since these are directly and exclusively used to
meet the needs of respondent's industry, business, or activity.48 Article 415(5) of the Civil Code,
which defines real property, should not be made to control the Local Government Code,49 a
subsequent legislation that specifically defines "machinery" for taxation purposes.50 chanrob leslaw

In the Resolution51 dated October 13, 2008, this Court denied the Petition for Review due to
procedural missteps, which included the failure to attach legible duplicate original or certified
true copies of the assailed decision and failure to pay proper fees. On November 25, 2008,
petitioner moved for reconsideration,52 praying for the reversal of the Petition's denial due to
mere technicalities.
On January 26, 2009, this Court granted Petitioner's Motion for Reconsideration.53 It directed
the reinstatement of the Petition and required respondent to comment.54
On November 20, 2009, respondent filed its Comment.55 chan robles law
Respondent reiterates the rulings of the CBAA and the Court of Appeals that the exemption of
cooperatives from real property taxes extends to it as the lessee.56 It asserts that under its
lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental, which includes the payment
of taxes.57 It claims that in case NGPI-NGEI is liable to the local government for real property
tax on the land, the tax should be taken from the Annual Fixed Rental.58 To make respondent
pay real property taxes on the leased land would be equivalent to assessing it twice for the
same property.59 chan roble slaw
On the road equipment and mini haulers being subjected to real property taxation, respondent
maintains that it should be spared from real property tax since the equipment and mini haulers
are movables.60 chanro bles law
The Petition is granted to modify the Court of Appeals Decision, but only with respect to the
nature of respondent's road equipment and mini haulers.
Under Section 133(n) of the Local Government Code, the taxing power of local government
units shall not extend to the levy of taxes, fees, or charges on duly registered cooperatives
under the Cooperative Code.61 Section 234(d) of the Local Government Code specifically
provides for real property tax exemption to cooperatives:
chanRoble svirtual Lawlib ra ry
SECTION 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
....
(d) All real property owned by duly registered cooperatives as provided for under [Republic
Act] No. 6938[.] (Emphasis supplied)
NGPI-NGEI, as the owner of the land being leased by respondent, falls within the purview of the
law. Section 234 of the Local Government Code exempts all real property owned by
cooperatives without distinction. Nothing in the law suggests that the real property tax
exemption only applies when the property is used by the cooperative itself. Similarly, the
instance that the real property is leased to either an individual or corporation is not a ground for
withdrawal of tax exemption.62 chan robles law
In arguing the first issue, petitioner hinges its claim on a misplaced reliance in Mactan, which
refers to the revocation of tax exemption due to the effectivity of the Local Government Code.
However, Mactan does not refer to the tax exemption extended to cooperatives. The portion
that petitioner cited specifically mentions that the exemption granted to cooperatives has not
been withdrawn by the effectivity of the Local Government Code:
chanRoble svirtual Lawlib ra ry
[S]ection 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment] C[ode], we
conclude that as a general rule, as laid down in Section 133, the taxing powers of local
government units cannot extend to the levy of, inter alia, "taxes, fees and charges of any kind
on the National Government, its agencies and instrumentalities, and local government units";
however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan
chanrobles law
Manila Area may impose the real property tax except on, inter alia, "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," as provided in
item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical
persons, including government-owned and controlled corporations, Section 193 of the L[ocal]
G[overnment] C[ode] prescribes the general rule, viz., they are withdrawn upon the effectivity
of the L[ocal] G[overnment] C[ode], except those granted to local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the L[ocal] Gfovernment] C[ode]. The latter
proviso could refer to Section 234 which enumerates the properties exempt from real property
tax. But the last paragraph of Section 234 further qualifies the retention of the exemption
insofar as real property taxes are concerned by limiting the retention only to those enumerated
therein; all others not included in the enumeration lost the privilege upon the effectivity of the
L[ocal] G[overnment] C[ode]. Moreover, even as to real property owned by the Republic of the
Philippines or any of its political subdivisions covered by item (a) of the first paragraph of
Section 234, the exemption is withdrawn if the beneficial use of such property has been granted
to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
L[ocal] G[overnment] C[ode], exemptions from payment of real property taxes granted to
natural or juridical persons, including government-owned or controlled corporations, except as
provided in the said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its
Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if
the petitioner can seek refuge under any of the exceptions provided in Section 234, but not
under Section 133, as it now asserts, since, as shown above, the said section is qualified by
Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing
powers of the local government units cannot extend to the levy of:
chanRoble svirtual Lawlib ra ry
(o) taxes, fees or charges of any kind on the National Government, its agencies or
instrumentalities, and local government units.
It must show that the parcels of land in question, which are real property, are any one of those
enumerated in Section 234, either by virtue of ownership, character, or use of the
property.63 (Emphasis supplied)
The roads that respondent constructed within the leased area should not be assessed with real
property taxes. Bislig Bay finds application here. Bislig Bay Lumber Company, Inc. (Bislig Bay)
was a timber concessionaire of a portion of public forest in the provinces of Agusan and
Surigao.64 To aid in developing its concession, Bislig Bay built a road at its expense from a
barrio leading towards its area.65The Provincial Assessor of Surigao assessed Bislig Bay with real
property tax on the constructed road, which was paid by the company under protest.66 It
claimed that even if the road was constructed on public land, it should be subjected to real
property tax because it was built by the company for its own benefit.67 On the other hand, Bislig
Bay asserted that the road should be exempted from real property tax because it belonged to
national government by right of accession.68 Moreover, the road constructed already became an
inseparable part of the land.69 The records also showed that the road was not only built for the
benefit of Bislig Bay, but also of the public.70 This Court ruled for Bislig Bay, thus:
chanRoble svirtual Lawlib ra ry
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that
the ownership of the road that was constructed by appellee belongs to the government by right
accession not only because it is inherently incorporated or attached to the timber land leased to
appellee but also because upon the expiration of the concession, said road would ultimately
pass to the national government. ... In the second place, while the road was constructed by
appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease
contract entered into by the appellee and the government and by public in by the general. Thus,
under said lease contract, appellee cannot prevent the use of portions, of the concession for
homesteading purposes. ... It is also in duty bound to allow the free use of forest products
within the concession for the personal use of individuals residing in or within the vicinity of the
land. ... In other words, the government has practically reserved the rights to use the road to
promote its varied activities. Since, as above shown, the road in question cannot be considered
as an improvement which belongs to appellee, although in part is for its benefit, it is clear that
the same cannot be the subject of assessment within the meaning of section 2 of
Commonwealth Act No. 470.71
This was reiterated in Board of Assessment Appeals ofZamboanga del Sur v. Samar Mining
Company, Inc.72 Samar Mining Company, Inc. (Samar Mining) was a domestic corporation
engaged in the mining industry.73 Since Samar Mining's mining site and mill were in an inland
location entailing long distance from its area to the loading point, Samar Mining was constrained
to construct a road for its convenience.74 Initially, Samar Mining filed miscellaneous lease
applications for a road right of way covering lands under the jurisdiction of the Bureau of Lands
and the Bureau of Forestry where the proposed road would pass through.75 Samar Mining was
given a "temporary permit to occupy and use the lands applied for by it";76 hence, it was able to
build what was eventually known as the Samico Road. Samar Mining was assessed by the
Provincial Assessor of Zamboanga del Sur with real property taxes on the road, which prompted
it to appeal before the Board of Assessment Appeals.77 Invoking Bislig Bay, Samar Mining
claimed that it should not be assessed with real property tax since the road was constructed on
public land. This Court ruled for Samar Mining, thus:
chanRoble svirtual Lawlib ra ry
There is no question that the road constructed by respondent Saimar on the public lands leased
to it by the government is an improvement. But as to whether the same is taxable under the
aforequoted provision of the Assessment Law, this question has already been answered in the
negaitive by this Court. In the case of Bislig Bay Lumber Co., Inc. vs. Provincial Government of
Surigao, where a similar issue was raised. . ..
....
. . . What is emphasized in the Bislig case is that the improvement is exempt from taxation
because it is an integral part of the public land on which it is constructed and the improvement
is the property of the government by right of accession. Under Section 3(a) of the Assessment
Law, all properties owned by the government, without any distinction, are exempt from
taxation.79 (Emphasis supplied, citations omitted)
The roads that respondent constructed became permanent improvements on the land owned by
the NGPI-NGEI by right of accession under the Civil Code, thus:
chanRoble svirtual Lawlib ra ry
Article 440. The ownership of property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or artificially.
....
Article 445. Whatever is built, planted or sown on the land of another and the improvements
or repairs made thereon, belong to the owner of the land[.]
Despite the land being leased by respondent when the roads were constructed, the ownership of
the improvement still belongs to NGPI-NGEI. As provided under Article 440 and 445 of the Civil
Code, the land is owned by the cooperatives at the time respondent built the roads. Hence,
whatever is incorporated in the land, either naturally or artificially, belongs to the NGPI-NGEI as
the landowner.
Although the roads were primarily built for respondent's benefit, the roads were also being used
by the members of NGPI and the public.80 Furthermore, the roads inured to the benefit of NGPI-
NGEI as owners of the land not only by right of accession but through the express provision in
the lease agreement:
chanRoble svirtual Lawlib ra ry
On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie
Plantations, Inc., as Lessee, entered into a "Lease Agreement" . . . covering the agricultural
lands transferred by NDC to the DAR, which lands the DAR ultimately distributed undivided to
qualified workers-beneficiaries. . . .
....
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements
on the Leased Property except those improvements on the Area that the LESSOR shall have
utilized under Clause 1.2 hereof, shall be for the account of the LESSEE."
Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent
improvements, such as roads and palm trees introduced on the Leased Property, shall
automatically accrue to the LESSOR upon termination of this Lease Agreement without need of
reimbursement."
All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative
and NDC-Guthrie Plantations, Inc. were reconfirmed and reaffirmed in the Addendum to Lease
Agreement entered into by and between NGPI Multi-Purpose Cooperative and Filipinas Palmoil
Plantations, Inc. on January 30, 1998. . . . The main subject of the said Addendum was the
extension of the term of the lease agreement up to December 31, 2032, along with economic
benefits to the lessor other than rentals.
There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative
which leased the same to Petitioner-Appellee. These roads belong to the Multi-Purpose
Cooperative, not only by right of accession but also by express provisions of the Contract of
Lease[.]81

Respondent claims that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed
Rental, which includes the payment of taxes.82 If NGPI-NGEI were liable to the local government
for real property tax on the land, the tax should be taken from the Annual Fixed Rental:
chanRoble svirtual Lawlib ra ry
"2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following
annual rentals:
ChanRoblesVi rtua lawlib rary
"1) An annual fixed rental, in the following amount "SIX HUNDRED THIRTY FIVE PESOS"
(P635.00) PER HECTARE PER ANNUM which would cover the following:
"(1) All Taxes on the Land
chanRoble svirtual Lawlib ra ry
"(2) Administration Charges
"(3) Amortization charges
"It is understood that, if the annual fixed rental of "SIX HUNDRED THIRTY FIVE PESOS" (p
635.00) is insufficient to pay any increase on the land taxes, the Lessee shall pay the
difference, provided such increase does not exceed ten percent (10%) of the immediately
preceding tax imposed on the land; provided further, that any increase beyond these
percentage shall be borne equally by the LESSOR and LESSEE.
"The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty
taxes on the Leased Property Primarily and principally lies with the LESSOR and any reference
herein to payment by LESSEE of said taxes is only for purposes of earmarking the proceeds of
the rentals herein agreed upon."
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements
on the Leased Property except those improvements on the Area that the LESSOR shall have
utilized under Clause 1.2 hereof, shall be for the account of the LESSEE."83 (Emphasis supplied)
Therefore, NGPI-NGEI, as owner of the roads that permanently became part of the land being
leased by respondent, shall be liable for real property taxes, if any. However, by express
provision of the Local Government Code, NGPI-NGEI is exempted from payment of real property
tax.84 chanroble slaw
II
The road equipment and mini haulers shall be considered as real property, subject to real
property tax.
Section 199(o) of the Local Government Code defines "machinery" as real property subject to
real property tax,85 thus:
chanRoble svirtual Lawlib ra ry
SECTION 199. Definition of Terms. When used in this Title, the term:
....
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments,
appliances or apparatus which may or may not be attached, permanently or temporarily, to the
real property. It includes the physical facilities for production, the installations and appurtenant
service facilities, those which are mobile, self-powered or self-propelled, and those not
permanently attached to the real property which are actually, directly, and exclusively used to
meet the needs of the particular industry, business or activity and which by their very nature
and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial,
industrial or agricultural purposes[.]
Article 415(5) of the New Civil Code defines "machinery" as that which constitutes an
immovable property:
chanRoble svirtual Lawlib ra ry
Article 415. The following are immovable property:
....
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works[.] (Emphasis supplied)
Petitioner contends that the second sentence of Section 199(o) includes the road equipment
and mini haulers since these are directly and exclusively used by respondent to meet the needs
of its operations.86 It further claims that Article 415(5) of the New Civil Code should not control
the Local Government Code, a subsequent legislation.87 chan roble sla w
On the other hand, respondent claims that the road equipment and mini haulers are movables
by nature. It asserts that although there may be a difference between the meaning of
"machinery" under the Local Government Code arid that of immovable property under Article
415(5) of the Civil Code, "the controlling interpretation of Section 199(o) of [the Local
Government Code] is the interpretation of Article 415(5) of the Civil Code."88 chanrob leslaw
In Manila Electric Company v. City Assessor,89 a similar issue of which definition of "machinery"
prevails to warrant the assessment of real property tax on it was raised.
Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code
and the Local Government Code and asserted that "machinery" contemplated under Section
199(o) of the Local Government must still be within the contemplation of immovable property
under Article 415 of the Civil Code.90 However, this Court ruled that harmonizing such laws
"would necessarily mean imposing additional requirements for classifying machinery as real
property for real property tax purposes not provided for, or even in direct conflict with, the
provisions of the Local Government Code."91 Thus:
chanRoble svirtual Lawlib ra ry
While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199(o) and 232 of the said Code, respectively, gives an extensive definition
of what constitutes "machinery" and unequivocally subjects such machinery to real property
tax. The Court reiterates that the machinery subject to real property tax under the Local
Government Code "may or may not be attached, permanently or temporarily to the real
property"; and the physical facilities for production, installations, and appurtenant service
facilities, those which are mobile, self-powered or self-propelled, or are not permanently
attached must (a) be actually, directly, and exclusively used to meet the needs of the particular
industry, business, or activity; and (b) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
....
Article 415, paragraph (5) of the Civil Code considers as immovables or real properties
"[m]achinery, receptacles, instruments or implements intended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works." The Civil Code, however, does
not define "machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by
destination, or "those which are essentially movables, but by the purpose for which they have
been placed in an immovable, partake of the nature of the latter because of the added utility
derived therefrom." These properties, including machinery, become immobilized if the following
requisites concur: (a) they are placed in the tenement by the owner of such tenement; (b) they
are destined for use in the industry or work in the tenement; and (c) they tend to directly meet
the needs of said industry or works. The first two requisites are not found anywhere in the Local
Government Code.92 (Emphasis supplied, citations omitted)
Respondent is engaged in palm oil plantation.94 Thus, it harvests fruits from palm trees for oil
conversion through its milling plant.95 By the nature of respondent's business, transportation is
indispensable for its operations.
Under the definition provided in Section 199(o) of the Local Government Code, the road
equipment and the mini haulers are classified as machinery, thus:
chanRoble svirtual Lawlib ra ry

SECTION 199. Definition of Terms. When used in this Title, the terra:
....
Section 199(o) of the Local Government prevails over Article 415(5) of the Civil Code. In Manila
Electric Company: (o) "Machinery" . . . includes the physical facilities for production, the installations and
appurtenant service facilities, those which are mobile, self-powered or self-propelled, and
those not permanently attached to the real property which are actually, directly, and
chanRoble svirtual Lawlib ra ry

As between the Civil Code, a general law governing property and property relations, and the
Local Government Code, a special law granting local government units the power to impose real
property tax, then the latter shall prevail. As the Court pronounced in Disomangcop v. The
Secretary of the Department of Public Works and Highways Simeon A. Datumanong: ChanRobles Vi rtua lawlib rary
It is a finely-imbedded principle in statutory construction that a special provision or law prevails
over a general one. Lex specialis derogant generali. As this Court expressed in the case
of Leveriza v. Intermediate Appellate Court, "another basic principle of statutory construction
mandates that general legislation must give way to special legislation on the same subject, and
generally be so interpreted as to embrace only cases in which the special provisions are not
applicable, that specific statute prevails over a general statute and that where two statutes are
of equal theoretical application to a particular case, the one designed therefor specially should
prevail."
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporationthat:
chanRoble svirtual Lawlib ra ry
exclusively used to meet the needs of the particular industry, business or activity and
which by their very nature and purpose are designed for, or necessary to its manufacturing,
mining, logging, commercial, industrial or agricultural purposes [.] (Emphasis supplied)
Petitioner is correct in claiming that the phrase pertaining to physical facilities for production is
comprehensive enough to include the road equipment and mini haulers as actually, directly, and
exclusively used by respondent to meet the needs of its operations in palm oil
production.96 Moreover, "mini-haulers are farm tractors pulling attached trailers used in the
hauling of seedlings during planting season and in transferring fresh palm fruits from the farm
[or] field to the processing plant within the plantation area."97 The indispensability of the road
equipment and mini haulers in transportation makes it actually, directly, and exclusively used in
the operation of respondent's business.
In its Comment, respondent claims that the equipment is no longer vital to its operation
because it is currently employing equipment outside the company to do the task.98 However,

A general law and a special law on the same subject are statutes in pari materia and should,
respondent never raised this contention before the lower courts. Hence, this is a factual issue of
accordingly, be read together and harmonized, if possible, with a view to giving effect to both.
which this Court cannot take cognizance. This Court is not a trier of facts.99 Only questions of
The rule is that where there are two acts, one of which is special and particular and the other
law are entertained in a petition for review assailing a Court of Appeals decision.100
general which, if standing alone, would include the same matter and thus conflict with the
chan roble sla w

special act, the special law must prevail since it evinces the legislative intent more clearly than
WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the Court of Appeals dated
that of a general statute and must not be taken as intended to affect the more particular and
September 26, 2007 and the Resolution dated May 26, 2008 in CA-G.R. SP No. 74060
specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order
are AFFIRMED with MODIFICATION, in that the road equipment and the mini haulers should
to give its words any meaning at all.
be assessed with real property taxes.
The circumstance that the special law is passed before or after the general act does not change
SO ORDERED.
the principle. Where the special law is later, it will be regarded as an exception to, or a
qualification of, the prior general act; and where the general act is later, the special statute will
Carpio, (Chairperson), Del Castillo, , and Mendoza, JJ., concur.
be construed as remaining an exception to its terms, unless repealed expressly or by necessary
Brion, J., on leave.
implication.
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court
acknowledged that "[i]t is a familiar phenomenon to see things classed as real property for
Republic of the Philippines
purposes of taxation which on general principle might be considered personal property[.]" SUPREME COURT
Manila
Therefore, for determining whether machinery is real property subject to real property tax, the
definition and requirements under the Local Government Code are controlling.93(Emphasis THIRD DIVISION
supplied, citations omitted)
G.R. No. 168557 February 16, 2007
FELS ENERGY, INC., Petitioner,
vs.
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents.
x----------------------------------------------------x
G.R. No. 170628 February 16, 2007
NATIONAL POWER CORPORATION, Petitioner,
vs.
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA,
in his capacity as the Assessor of the Province of Batangas, and the PROVINCE
OF BATANGAS represented by its Provincial Assessor, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No.
170628, which were filed by petitioners FELS Energy, Inc. (FELS) and National Power
Corporation (NPC), respectively. The first is a petition for review on certiorari assailing
the August 25, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490
and its Resolution2 dated June 20, 2005; the second, also a petition for review on
certiorari, challenges the February 9, 2005 Decision3 and November 23, 2005
Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were dismissed on the
ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over
3x30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The
contract, denominated as an Energy Conversion Agreement5 (Agreement), was for a
period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes,
import duties, fees, charges and other levies imposed by the National Government of the
Republic of the Philippines or any agency or instrumentality thereof to which POLAR may
be or become subject to or in relation to the performance of their obligations under this
agreement (other than (i) taxes imposed or calculated on the basis of the net income of
POLAR and Personal Income Taxes of its employees and (ii) construction permit fees,
environmental permit fees and other similar fees and charges) and (b) all real estate
taxes and assessments, rates and other charges in respect of the Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The
NPC initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the
Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power
barges from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax,
which likewise covered those due for 1994, amounted to P56,184,088.40 per annum.
FELS referred the matter to NPC, reminding it of its obligation under the Agreement to
pay all real estate taxes. It then gave NPC the full power and authority to represent it in
any conference regarding the real property assessment of the Provincial Assessor.
In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial
Assessors decision to assess real property taxes on the power barges. However, the
motion was denied on September 22, 1995, and the Provincial Assessor advised NPC to
pay the assessment.8 This prompted NPC to file a petition with the Local Board of
Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration
of the barges as non-taxable items; it also prayed that should LBAA find the barges to be
taxable, the Provincial Assessor be directed to make the necessary corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real
property for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the
LBAA that the Department of Finance (DOF) had rendered an opinion10 dated May 20,
1996, where it is clearly stated that power barges are not real property subject to real
property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo
reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate
tax in the amount of P56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable
or personal property, are nevertheless considered real property for taxation purposes
because they are installed at a specific location with a character of permanency. The
LBAA also pointed out that the owner of the bargesFELS, a private corporationis the jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from
one being taxed, not NPC. A mere agreement making NPC responsible for the payment pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160.
of all real estate taxes and assessments will not justify the exemption of FELS; such a The Provincial Assessor filed a motion for reconsideration, which was opposed by FELS
privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA and NPC.
also ruled that the petition was filed out of time.
In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its
Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment earlier decision. The fallo of the resolution reads:
Appeals (CBAA).
WHEREFORE, premises considered, it is the resolution of this Board that:
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy
and Warrant by Distraint13over the power barges, seeking to collect real property taxes (a) The decision of the Board dated 6 April 2000 is hereby reversed.
amounting to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially
served to FELS on November 8, 1996. It then filed a Motion to Lift Levy dated November (b) The petition of FELS, as well as the intervention of NPC, is dismissed.
14, 1996, praying that the Provincial Assessor be further restrained by the CBAA from
enforcing the disputed assessment during the pendency of the appeal.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is
hereby affirmed,
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the
properties of FELS in order not to preempt and render ineffectual, nugatory and illusory
(d) The real property tax assessment on FELS by the Provincial Assessor of
any resolution or judgment which the Board would issue.
Batangas is likewise hereby affirmed.
Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the
SO ORDERED.21
proceedings before the CBAA. This was approved by the CBAA in an Order16 dated
September 22, 1998.
FELS and NPC filed separate motions for reconsideration, which were timely opposed by
the Provincial Assessor. The CBAA denied the said motions in a Resolution22 dated
During the pendency of the case, both FELS and NPC filed several motions to admit
October 19, 2001.
bond to guarantee the payment of real property taxes assessed by the Provincial
Assessor (in the event that the judgment be unfavorable to them). The bonds were duly
approved by the CBAA. Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No.
67490. Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from
real property tax. The dispositive portion reads: On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP
No. 67490 praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a
Resolution23 dated February 12, 2002, the appellate court directed NPC to re-file its
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the
motion for consolidation with CA-G.R. SP No. 67491, since it is the ponente of the latter
Province of Batangas is hereby reversed. Respondent-appellee Provincial Assessor of
petition who should resolve the request for reconsideration.
the Province of Batangas is hereby ordered to drop subject property under ARP/Tax
Declaration No. 018-00958 from the List of Taxable Properties in the Assessment Roll.
The Provincial Treasurer of Batangas is hereby directed to act accordingly. NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth
Division of the appellate court rendered judgment in CA-G.R. SP No. 67490 denying the
petition on the ground of prescription. The decretal portion of the decision reads:
SO ORDERED.18
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to
Resolutions dated July 31, 2001 and October 19, 2001 of the Central Board of
NPC; since they are actually, directly and exclusively used by it, the power barges are
Assessment Appeals are AFFIRMED.
covered by the exemptions under Section 234(c) of R.A. No. 7160.19 As to the other
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the
reversal of the appellate courts decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court,
docketed as G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP No.
67490. The petition was, however, denied in this Courts Resolution25 of November 8,
2004, for NPCs failure to sufficiently show that the CA committed any reversible error in
the challenged decision. NPC filed a motion for reconsideration, which the Court denied
with finality in a Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held
that the right to question the assessment of the Provincial Assessor had already
prescribed upon the failure of FELS to appeal the disputed assessment to the LBAA
within the period prescribed by law. Since FELS had lost the right to question the
assessment, the right of the Provincial Government to collect the tax was already
absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of
the February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied
in a Resolution27 dated November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier
denied for lack of merit in a Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this
Court, raising the following issues:
A.
Whether power barges, which are floating and movable, are personal properties and
therefore, not subject to real property tax.
B.
Assuming that the subject power barges are real properties, whether they are exempt
from real estate tax under Section 234 of the Local Government Code ("LGC").
C.
Assuming arguendo that the subject power barges are subject to real estate tax, whether
or not it should be NPC which should be made to pay the same under the law.
D.
Assuming arguendo that the subject power barges are real properties, whether or not the
same is subject to depreciation just like any other personal properties.
E.
Whether the right of the petitioner to question the patently null and void real property tax
assessment on the petitioners personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No.
170628), indicating the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO
THE LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER
BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH
LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered the
consolidation of the two cases in a Resolution31 dated March 8, 2006.
1awphi1.net
In an earlier Resolution dated February 1, 2006, the Court had required the parties to
submit their respective Memoranda within 30 days from notice. Almost a year passed but
the parties had not submitted their respective memoranda. Considering that taxesthe
lifeblood of our economyare involved in the present controversy, the Court was
prompted to dispense with the said pleadings, with the end view of advancing the
interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-
barred. FELS argues that when NPC moved to have the assessment reconsidered on
September 7, 1995, the running of the period to file an appeal with the LBAA was tolled.
For its part, NPC posits that the 60-day period for appealing to the LBAA should be
reckoned from its receipt of the denial of its motion for reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991,
provides:
SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may, within sixty (60) days from the
date of receipt of the written notice of assessment, appeal to the Board of Assessment
Appeals of the province or city by filing a petition under oath in the form prescribed for
the purpose, together with copies of the tax declarations and such affidavits or
documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on
August 7, 1995, contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the
date of receipt hereof, appeal to the Board of Assessment Appeals of the province by
filing a petition under oath on the form prescribed for the purpose, together with copies of
ARP/Tax Declaration and such affidavits or documents submitted in support of the
appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC
opted to file a motion for reconsideration of the Provincial Assessors decision, a remedy
not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the
provincial, city or municipal assessor in the assessment of the property. It follows then
that the determination made by the respondent Provincial Assessor with regard to the
taxability of the subject real properties falls within its power to assess properties for
taxation purposes subject to appeal before the LBAA.33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-
G.R. SP No. 67491. The two divisions of the appellate court cited the case of Callanta v.
Office of the Ombudsman,34 where we ruled that under Section 226 of R.A. No
7160,35 the last action of the local assessor on a particular assessment shall be the
notice of assessment; it is this last action which gives the owner of the property the right
to appeal to the LBAA. The procedure likewise does not permit the property owner the
remedy of filing a motion for reconsideration before the local assessor. The pertinent
holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought
their appeals before the LBAA. Unfortunately, despite the advice to this effect contained
in their respective notices of assessment, the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not sanctioned by the law. To
allow this procedure would indeed invite corruption in the system of appraisal and
assessment. It conveniently courts a graft-prone situation where values of real property
may be initially set unreasonably high, and then subsequently reduced upon the request
of a property owner. In the latter instance, allusions of a possible covert, illicit trade-off
cannot be avoided, and in fact can conveniently take place. Such occasion for mischief
must be prevented and excised from our system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to
the owner or lawful possessor of real property of its revised assessed value, the former
shall no longer have any jurisdiction to entertain any request for a review or
readjustment. The appropriate forum where the aggrieved party may bring his appeal is
the LBAA as provided by law. It follows ineluctably that the 60-day period for making the
appeal to the LBAA runs without interruption. This is what We held in SP 67490 and
reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local
government to collect the taxes due with respect to the taxpayers property becomes
absolute upon the expiration of the period to appeal.38 It also bears stressing that the
taxpayers failure to question the assessment in the LBAA renders the assessment of the
local assessor final, executory and demandable, thus, precluding the taxpayer from
questioning the correctness of the assessment, or from invoking any defense that would
reopen the question of its liability on the merits.39
In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having
been filed out of time; the CBAA and the appellate court were likewise correct in affirming
the dismissal. Elementary is the rule that the perfection of an appeal within the period
therefor is both mandatory and jurisdictional, and failure in this regard renders the
decision final and executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is
barred by res judicata; that the final and executory judgment in G.R. No. 165113 (where
there was a final determination on the issue of prescription), effectively precludes the
claims herein; and that the filing of the instant petition after an adverse judgment in G.R.
No. 165113 constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced
since it was not a party to the erroneous petition which the NPC filed in G.R. No. 165113.
It avers that it did not participate in the aforesaid proceeding, and the Supreme Court
never acquired jurisdiction over it. As to the issue of forum shopping, petitioner claims
that no forum shopping could have been committed since the elements of litis pendentia
or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon two
grounds embodied in various maxims of common law, namely: (1) public policy and
necessity, which makes it to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the
hardship on the individual of being vexed twice for the same cause nemo debet bis
vexari et eadem causa. A conflicting doctrine would subject the public peace and quiet to
the will and dereliction of individuals and prefer the regalement of the litigious disposition
on the part of suitors to the preservation of the public tranquility and happiness.41 As we
ruled in Heirs of Trinidad De Leon Vda. de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree rendered upon the merits, without fraud or
collusion, by a court of competent jurisdiction acting upon a matter within its authority is
conclusive on the rights of the parties and their privies. This ruling holds in all other
actions or suits, in the same or any other judicial tribunal of concurrent jurisdiction,
touching on the points or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same
parties or their privies to litigate anew a question once it has been considered and
decided with finality. Litigations must end and terminate sometime and somewhere. The
effective and efficient administration of justice requires that once a judgment has become
final, the prevailing party should not be deprived of the fruits of the verdict by subsequent
suits on the same issues filed by the same parties.
This is in accordance with the doctrine of res judicata which has the following elements:
(1) the former judgment must be final; (2) the court which rendered it had jurisdiction over
the subject matter and the parties; (3) the judgment must be on the merits; and (4) there
must be between the first and the second actions, identity of parties, subject matter and
causes of action. The application of the doctrine of res judicata does not require absolute
identity of parties but merely substantial identity of parties. There is substantial identity of
parties when there is community of interest or privity of interest between a party in the
first and a party in the second case even if the first case did not implead the latter.43
To recall, FELS gave NPC the full power and authority to represent it in any proceeding
regarding real property assessment. Therefore, when petitioner NPC filed its petition for
review docketed as G.R. No. 165113, it did so not only on its behalf but also on behalf of
FELS. Moreover, the assailed decision in the earlier petition for review filed in this Court
was the decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was the
petitioner. Thus, the decision in G.R. No. 165116 is binding on petitioner FELS under the
principle of privity of interest. In fine, FELS and NPC are substantially "identical parties"
as to warrant the application of res judicata. FELSs argument that it is not bound by the
erroneous petition filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping
exists when, as a result of an adverse judgment in one forum, a party seeks another and
possibly favorable judgment in another forum other than by appeal or special civil action
or certiorari. There is also forum shopping when a party institutes two or more actions or
proceedings grounded on the same cause, on the gamble that one or the other court
would make a favorable disposition.44
Petitioner FELS alleges that there is no forum shopping since the elements of res
judicata are not present in the cases at bar; however, as already discussed, res judicata
may be properly applied herein. Petitioners engaged in forum shopping when they filed
G.R. Nos. 168557 and 170628 after the petition for review in G.R. No. 165116. Indeed,
petitioners went from one court to another trying to get a favorable decision from one of
the tribunals which allowed them to pursue their cases.
It must be stressed that an important factor in determining the existence of forum
shopping is the vexation caused to the courts and the parties-litigants by the filing of
similar cases to claim substantially the same reliefs.45 The rationale against forum
shopping is that a party should not be allowed to pursue simultaneous remedies in two
different fora. Filing multiple petitions or complaints constitutes abuse of court processes,
which tends to degrade the administration of justice, wreaks havoc upon orderly judicial
procedure, and adds to the congestion of the heavily burdened dockets of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such
parties as represent the same interests in both actions, (b) identity of rights asserted and
relief prayed for, the relief being founded on the same facts, and (c) the identity of the
two preceding particulars is such that any judgment rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the
consolidated cases, a discussion of the other issues is no longer necessary.
Nevertheless, for the peace and contentment of petitioners, we shall shed light on the
merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property and
are thus subject to real property tax. This is also the inevitable conclusion, considering
that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error.
Tax assessments by tax examiners are presumed correct and made in good faith, with
the taxpayer having the burden of proving otherwise.48 Besides, factual findings of
administrative bodies, which have acquired expertise in their field, are generally binding
and conclusive upon the Court; we will not assume to interfere with the sensible exercise
of the judgment of men especially trained in appraising property. Where the judicial mind
is left in doubt, it is a sound policy to leave the assessment undisturbed.49 We find no
reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et
al.,50 a power company brought an action to review property tax assessment. On the
citys motion to dismiss, the Supreme Court of New York held that the barges on which
were mounted gas turbine power plants designated to generate electrical power, the fuel
oil barges which supplied fuel oil to the power plant barges, and the accessory
equipment mounted on the barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures
which, though floating, are intended by their nature and object to remain at a fixed place
on a river, lake, or coast" are considered immovable property. Thus, power barges are
categorized as immovable property by destination, being in the nature of machinery and
other implements intended by the owner for an industry or work which may be carried on
in a building or on a piece of land and which tend directly to meet the needs of said
industry or work.51
Petitioners maintain nevertheless that the power barges are exempt from real estate tax
under Section 234 (c) of R.A. No. 7160 because they are actually, directly and
exclusively used by petitioner NPC, a government- owned and controlled corporation
engaged in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is
petitioner FELS, which in fine, is the entity being taxed by the local government. As
stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the
fixtures, fittings, machinery and equipment on the Site used in connection with the Power
Barges which have been supplied by it at its own cost. POLAR shall operate, manage
and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into
electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by
invoking its exemption in Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
xxx
(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; x x x
Indeed, the law states that the machinery must be actually, directly and exclusively used
by the government owned or controlled corporation; nevertheless, petitioner FELS still
cannot find solace in this provision because Section 5.5, Article 5 of the Agreement
provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the
supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it
will operate the Power Barges to convert such Fuel into electricity in accordance with
Part A of Article 7.53
It is a basic rule that obligations arising from a contract have the force of law between the
parties. Not being contrary to law, morals, good customs, public order or public policy,
the parties to the contract are bound by its terms and conditions.54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is
the exception.55 The law does not look with favor on tax exemptions and the entity that
would seek to be thus privileged must justify it by words too plain to be mistaken and too
categorical to be misinterpreted.56 Thus, applying the rule of strict construction of laws
granting tax exemptions, and the rule that doubts should be resolved in favor of
provincial corporations, we hold that FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it
shall be responsible for the payment of all real estate taxes and assessments, does not
justify the exemption. The privilege granted to petitioner NPC cannot be extended to
FELS. The covenant is between FELS and NPC and does not bind a third person not
privy thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in
the local governments deprivation of revenues. The power to tax is an incident of
sovereignty and is unlimited in its magnitude, acknowledging in its very nature no
perimeter so that security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency who are to pay for it.57 The right of
local government units to collect taxes due must always be upheld to avoid severe tax
erosion. This consideration is consistent with the State policy to guarantee the autonomy
of local governments58 and the objective of the Local Government Code that they enjoy
genuine and meaningful local autonomy to empower them to achieve their fullest
development as self-reliant communities and make them effective partners in the
attainment of national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the
needed revenues to finance and support myriad activities of the local government units
for the delivery of basic services essential to the promotion of the general welfare and
the enhancement of peace, progress, and prosperity of the people.60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions
AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
A.M. No. 486-MJ September 13, 1977
JOSE MARIA ANTONIO FERNANDEZ, complainant,
vs.
JUDGE JULIO PRESBITERO, Municipal Judge of Pulupandan, Negros
Occidental, respondent.
Noe C. Baja for the complainant.
Juan M. Hagad for the respondent.
CONCEPCION JR., J.:
Administrative case against a municipal judge for grave misconduct, partiality, and
oppression, for having conducted the preliminary examination of a criminal case at night,
and at the private residence of a relative of the political opponent of the herein
complainant's father, about three (3) to four (4) kilometers from the town hall; thereafter
issuing the warrant for the arrest of the complainant, knowing that the next and
succeeding clays are religious and public holidays when government and other offices
are closed, thus precluding the seasonal filing of a bail bond; and recommending the
criminal prosecution of complainant's father who is not a party to the criminal case and
had no opportunity to reexamine the witnesses.
The case was referred to the Executive Judge of the Court of First Instance of the
province, for investigation, report and recommendation, 1 who, after a proper hearing,
found the respondent judge guilty of partiality and recommended the suspension of the
respondent judge from office for a period of two (2) months, without pay. 2
The Judicial Consultant, however, recommends the imposition of a lesser penalty of
reprimand, for the reason that respondent judge acted in good faith. 3
The facts of the case are not disputed. It appears that a stabbing incident, involving
herein complainant, Jose Maria Antonio Fernandez, son of the incumbent Municipal
Mayor Joaquin O. Fernandez, and one Francisco Bescaser, took place at Veraguth St.,
Pulupandan, Negros Occidental, at about 9:00 o'clock in the evening of April 16, 1973.
The next day, April 17, 1973, agents of the PC Criminal Investigation Service (CIS)
investigated herein complainant Fernandez, after which complainant was sent home.
Complainant, however, was directed not to leave his house.
On the following day, April 18, 1973, Holy Wednesday, the CIS agents, together with
Francisco Bescaser and the latter's witnesses, went to the Municipal Court of
Pulupandan to file a complaint for attempted murder against the herein complainant
Fernandez. The respondent, Judge Julio V. Presbitero of the Municipal Court of
Pulupandan Negros Occidental, was not in his office as, according to a clerk in the office
of the Municipal Court, the respondent judge was then hearing a case in the Municipal
Court of Murcia, Negros Occidental. At the suggestion of one Sgt. Yap, the group
proceeded to the house of one Mario Pea, a relative of the political opponent of
complainant's father, at Barrio Ubay, Pulupandan about three (3) to four (4) kilometers
from the town hall of Pulupandan. At about 5:45 o'clock that afternoon, the CIS team sent
a man to fetch the respondent judge from his house at Barrio Palaka, Valladolid, Negros
Occidental, and take him to the house of Mario Pea at Barrio Ubay because they were
riling a case with the Municipal Court of Pulupandan.
The respondent judge arrived at the house of Mario Pea at about 6:30 o'clock that
evening, together with his clerk, Miss Elsie P. Java, bringing with him the Criminal
Docket and Seal of the Municipal Court of Pulupandan. 4 Upon arrival, the respondent
judge was presented with a copy of the criminal complaint and the affidavits of witnesses.
Despite the fact that these affidavits 5 have been previously subscribed and sworn to before
Asst. Provincial Fiscal Othello Amunategui, the respondent judge, with the help of his clerk,
personally took anew the sworn statements of Francisco Bescaser and his witnesses. 6 The
complaint was thereafter entered in the Docket as Crim. Case No. 1046, following which the
respondent judge issued a warrant for the arrest of the complainant and fixing the bail bond
for his temporary release at P15,000.00. By virtue of the warrant, the herein complainant was
arrested by CIS agents on April 19, Maundy Thursday of the Holy Week, and detained at the
PC Stockade at Bacolod City.
After the preliminary investigation of the case, a motion to dismiss the case was filed,
which motion was duly opposed by the prosecution. In his Order, dated July 9,
1973,7 denying the said motion to dismiss the case, the respondent judge, relying upon the
testimony of Francisco Bescaser implicating Mayor Joaquin Fernandez in the killing of one
Yanson, strongly recommended the investigation of said killing by investigative agencies of
the government, finishing the Chief Justice, the Secretary of National Defense, the Secretary
of Justice, and the Executive Secretary with a copy of said order.
The respondent judge testifies his actions, saying that he wanted to conduct the
preliminary examination of the criminal case against Fernandez in the courtroom during
regular office hours and had told the CIS agents of his desire, but relented when he
recalled that there were no lights in the courtroom, and found soundness in the argument
of the CIS agents of the urgency of the need for the warrant of arrest to be issued that
night in order to discontinue the harassment of the witnesses by the Mayor of
Pulupandan.
This contention may be valid if the criminal case was filed against the Mayor of
Pulupandan for then the harassment of witnesses may cease upon his arrest. The
criminal case, however, is against the son of the mayor, whose arrest may not prevent
the mayor from harassing the witnesses.
The respondent's act of vehemently recommending the investigation of the
circumstances surrounding the death of one Yanson, contained in the order of July 9,
1973, may also be considered an indication of respondent's partiality. His testimony
before the Investigator in this regard, is most revealing. He declared as follows:
BY THE COURT
Q. Judge Presbitero, why is it in your order denying the
motion to dismiss by accused Jose Maria Antonio
Fernandez in Crim. Case No. 1046 issued on July 9,
1973, you have alluded to the municipal mayor of
Pulupandan who was not the accused in that Crim. Case
No. 1046?
A. Because in the motion, Your Honor, the integrity of the
trying judge, Your Honor, was mentioned. So I have to
answer those points, Your Honor, in the motion filed by
Atty. Benito.
Q. Why did you include, that?
A. But, Your Honor, I have to.
Q. That shows that you have an axe to gripe against at
the mayor?
A. But, Your Honor, precisely in that motion there was an
allusion to the presiding judge as being antagonistic. I
have to defend myself.
Q. But not in the kind of complaint?
A. I was attacked, Your Honor, by the lawyer in his motion
to dismiss. Naturally, I have to defend myself.
Q. Yes, you could have cited that lawyer but not in your
order?
A. Because these points were raised. 8
At any rate, it "has always been stressed that judges should not only be impartial but
should also appear impartial. For 'impartiality is not a technical conception. It is a state of
mind' and, consequently, the `appearance of impartiality is an essential manifestation of
its reality.' It must be obvious, therefore, that while judges should possess proficiency in
law in order that they can competently construe and enforce the law, it is more important
that they should act and behave in such a manner that the parties before them should
have confidence in their impartially." 9
Here, the actuations of the respondent judge, in holding the preliminary examination of
the criminal case in the residence of a relative of a political opponent of the father of the
accused, about three (3) to four (4) kilometers from the courthouse, at night, cannot but
lead to a suspicion of partiality. The respondent judge should have exercised due
prudence in the discharge of his officials duties.
WHEREFORE, judgment is hereby rendered ordering the respondent, Judge Julio V. On or about September 10-19, 1999, or prior thereto in Makati City, and within the
Presbitero of the Municipal Court of Pulupandan Negros Occidental, to pay a fine jurisdiction of this Honorable Court, the accused, conspiring and confederating together
equivalent to his salary for two (2) months. and all of them mutually helping and aiding one another, with intent to gain and without
the knowledge and consent of the Philippine Long Distance Telephone (PLDT), did then
SO ORDERED. and there willfully, unlawfully and feloniously take, steal and use the international long
distance calls belonging to PLDT by conducting International Simple Resale (ISR), which
Barredo (Actg. Chairman), Antonio, Aquino and Santos, JJ., concur. is a method of routing and completing international long distance calls using lines,
cables, antenae, and/or air wave frequency which connect directly to the local or
domestic exchange facilities of the country where the call is destined, effectively stealing
Republic of the Philippines
this business from PLDT while using its facilities in the estimated amount of
SUPREME COURT
P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.
Manila
CONTRARY TO LAW.2
EN BANC
Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on the ground
G.R. No. 155076 January 13, 2009
that the factual allegations in the Amended Information do not constitute the felony of
theft. The trial court denied the Motion to Quash the Amended Information, as well
LUIS MARCOS P. LAUREL, Petitioner, petitioners subsequent Motion for Reconsideration.
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati City,
Petitioners special civil action for certiorari was dismissed by the Court of Appeals. Thus,
Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE LONG DISTANCE
petitioner filed the instant petition for review with this Court.
TELEPHONE COMPANY Respondents.
In the above-quoted Decision, this Court held that the Amended Information does not
RESOLUTION
contain material allegations charging petitioner with theft of personal property since
international long distance calls and the business of providing telecommunication or
YNARES-SANTIAGO, J.: telephone services are not personal properties under Article 308 of the Revised Penal
Code.
On February 27, 2006, this Courts First Division rendered judgment in this case as
follows: Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for
Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of maintains that the Amended Information charging petitioner with theft is valid and
the Regional Trial Court and the Decision of the Court of Appeals are REVERSED and sufficient; that it states the names of all the accused who were specifically charged with
SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the crime of theft of PLDTs international calls and business of providing
the petitioner to quash the Amended Information. telecommunication or telephone service on or about September 10 to 19, 1999 in Makati
City by conducting ISR or International Simple Resale; that it identifies the international
SO ORDERED.1 calls and business of providing telecommunication or telephone service of PLDT as the
personal properties which were unlawfully taken by the accused; and that it satisfies the
By way of brief background, petitioner is one of the accused in Criminal Case No. 99- test of sufficiency as it enabled a person of common understanding to know the charge
2425, filed with the Regional Trial Court of Makati City, Branch 150. The Amended against him and the court to render judgment properly.
Information charged the accused with theft under Article 308 of the Revised Penal Code,
committed as follows: PLDT further insists that the Revised Penal Code should be interpreted in the context of
the Civil Codes definition of real and personal property. The enumeration of real
properties in Article 415 of the Civil Code is exclusive such that all those not included
therein are personal properties. Since Article 308 of the Revised Penal Code used the
words "personal property" without qualification, it follows that all "personal properties" as
understood in the context of the Civil Code, may be the subject of theft under Article 308
of the Revised Penal Code. PLDT alleges that the international calls and business of
providing telecommunication or telephone service are personal properties capable of
appropriation and can be objects of theft.
PLDT also argues that "taking" in relation to theft under the Revised Penal Code does
not require "asportation," the sole requisite being that the object should be capable of
"appropriation." The element of "taking" referred to in Article 308 of the Revised Penal
Code means the act of depriving another of the possession and dominion of a movable
coupled with the intention, at the time of the "taking," of withholding it with the character
of permanency. There must be intent to appropriate, which means to deprive the lawful
owner of the thing. Thus, the term "personal properties" under Article 308 of the Revised
Penal Code is not limited to only personal properties which are "susceptible of being
severed from a mass or larger quantity and of being transported from place to place."
PLDT likewise alleges that as early as the 1930s, international telephone calls were in
existence; hence, there is no basis for this Courts finding that the Legislature could not
have contemplated the theft of international telephone calls and the unlawful
transmission and routing of electronic voice signals or impulses emanating from such
calls by unlawfully tampering with the telephone device as within the coverage of the
Revised Penal Code.
According to respondent, the "international phone calls" which are "electric currents or
sets of electric impulses transmitted through a medium, and carry a pattern representing
the human voice to a receiver," are personal properties which may be subject of theft.
Article 416(3) of the Civil Code deems "forces of nature" (which includes electricity)
which are brought under the control by science, are personal property.
In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a
telephone call is a conversation on the phone or a communication carried out using the
telephone. It is not synonymous to electric current or impulses. Hence, it may not be
considered as personal property susceptible of appropriation. Petitioner claims that the
analogy between generated electricity and telephone calls is misplaced. PLDT does not
produce or generate telephone calls. It only provides the facilities or services for the
transmission and switching of the calls. He also insists that "business" is not personal
property. It is not the "business" that is protected but the "right to carry on a business."
This right is what is considered as property. Since the services of PLDT cannot be
considered as "property," the same may not be subject of theft.
The Office of the Solicitor General (OSG) agrees with respondent PLDT that
"international phone calls and the business or service of providing international phone
calls" are subsumed in the enumeration and definition of personal property under the
Civil Code hence, may be proper subjects of theft. It noted that the cases of United
States v. Genato,3 United States v. Carlos4 and United States v. Tambunting,5 which
recognized intangible properties like gas and electricity as personal properties, are
deemed incorporated in our penal laws. Moreover, the theft provision in the Revised
Penal Code was deliberately couched in broad terms precisely to be all-encompassing
and embracing even such scenario that could not have been easily anticipated.
According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access
Device Regulations Act of 1998and RA 8792 or the Electronic Commerce Act of
2000 does not preclude prosecution under the Revised Penal Code for the crime of theft.
The latter embraces unauthorized appropriation or use of PLDTs international calls,
service and business, for personal profit or gain, to the prejudice of PLDT as owner
thereof. On the other hand, the special laws punish the surreptitious and advanced
technical means employed to illegally obtain the subject service and business. Even
assuming that the correct indictment should have been under RA 8484, the quashal of
the information would still not be proper. The charge of theft as alleged in the Information
should be taken in relation to RA 8484 because it is the elements, and not the
designation of the crime, that control.
Considering the gravity and complexity of the novel questions of law involved in this
case, the Special First Division resolved to refer the same to the Banc.
We resolve to grant the Motion for Reconsideration but remand the case to the trial court
for proper clarification of the Amended Information.
Article 308 of the Revised Penal Code provides:
Art. 308. Who are liable for theft. Theft is committed by any person who, with intent to
gain but without violence against, or intimidation of persons nor force upon things, shall
take personal property of another without the latters consent.
The elements of theft under Article 308 of the Revised Penal Code are as follows: (1)
that there be taking of personal property; (2) that said property belongs to another; (3)
that the taking be done with intent to gain; (4) that the taking be done without the consent
of the owner; and (5) that the taking be accomplished without the use of violence against
or intimidation of persons or force upon things.
Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of
the term "personal property" in the penal code provision on theft had been established in
Philippine jurisprudence. This Court, in United States v. Genato, United States v. Carlos,
and United States v. Tambunting, consistently ruled that any personal property, tangible
or intangible, corporeal or incorporeal, capable of appropriation can be the object of theft.
Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term
"personal property" has had a generally accepted definition in civil law. In Article 335 of
the Civil Code of Spain, "personal property" is defined as "anything susceptible of
appropriation and not included in the foregoing chapter (not real property)." Thus, the
term "personal property" in the Revised Penal Code should be interpreted in the context
of the Civil Code provisions in accordance with the rule on statutory construction that
where words have been long used in a technical sense and have been judicially
construed to have a certain meaning, and have been adopted by the legislature as
having a certain meaning prior to a particular statute, in which they are used, the words
used in such statute should be construed according to the sense in which they have
been previously used.6 In fact, this Court used the Civil Code definition of "personal
property" in interpreting the theft provision of the penal code in United States v. Carlos.
Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term
"personal property" at the time the old Penal Code was being revised, still the legislature
did not limit or qualify the definition of "personal property" in the Revised Penal Code.
Neither did it provide a restrictive definition or an exclusive enumeration of "personal
property" in the Revised Penal Code, thereby showing its intent to retain for the term an
extensive and unqualified interpretation. Consequently, any property which is not
1avvphi1.zw+
included in the enumeration of real properties under the Civil Code and capable of
appropriation can be the subject of theft under the Revised Penal Code.
The only requirement for a personal property to be the object of theft under the penal
code is that it be capable of appropriation. It need not be capable of "asportation," which
is defined as "carrying away."7 Jurisprudence is settled that to "take" under the theft
provision of the penal code does not require asportation or carrying away.8
To appropriate means to deprive the lawful owner of the thing.9 The word "take" in the
Revised Penal Code includes any act intended to transfer possession which, as held in
the assailed Decision, may be committed through the use of the offenders own hands,
as well as any mechanical device, such as an access device or card as in the instant
case. This includes controlling the destination of the property stolen to deprive the owner
of the property, such as the use of a meter tampering, as held in Natividad v. Court of
Appeals,10 use of a device to fraudulently obtain gas, as held in United States v.
Tambunting, and the use of a jumper to divert electricity, as held in the cases of United
States v. Genato, United States v. Carlos, and United States v. Menagas.11
As illustrated in the above cases, appropriation of forces of nature which are brought
under control by science such as electrical energy can be achieved by tampering with
any apparatus used for generating or measuring such forces of nature, wrongfully
redirecting such forces of nature from such apparatus, or using any device to fraudulently
obtain such forces of nature. In the instant case, petitioner was charged with engaging in
International Simple Resale (ISR) or the unauthorized routing and completing of
international long distance calls using lines, cables, antennae, and/or air wave frequency
and connecting these calls directly to the local or domestic exchange facilities of the
country where destined.
As early as 1910, the Court declared in Genato that ownership over electricity (which an
international long distance call consists of), as well as telephone service, is protected by
the provisions on theft of the Penal Code. The pertinent provision of the Revised
Ordinance of the City of Manila, which was involved in the said case, reads as follows:
Injury to electric apparatus; Tapping current; Evidence. No person shall destroy,
mutilate, deface, or otherwise injure or tamper with any wire, meter, or other apparatus
installed or used for generating, containing, conducting, or measuring electricity,
telegraph or telephone service, nor tap or otherwise wrongfully deflect or take any
electric current from such wire, meter, or other apparatus.
No person shall, for any purpose whatsoever, use or enjoy the benefits of any device by
means of which he may fraudulently obtain any current of electricity or any telegraph or
telephone service; and the existence in any building premises of any such device shall,
in the absence of satisfactory explanation, be deemed sufficient evidence of such use by
the persons benefiting thereby.
It was further ruled that even without the above ordinance the acts of subtraction
punished therein are covered by the provisions on theft of the Penal Code then in force,
thus:
Even without them (ordinance), the right of the ownership of electric current is secured
by articles 517 and 518 of the Penal Code; the application of these articles in cases of
subtraction of gas, a fluid used for lighting, and in some respects resembling electricity, is
confirmed by the rule laid down in the decisions of the supreme court of Spain of January
20, 1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and
531 of the Penal Code of that country, articles 517 and 518 of the code in force in these
islands.
The acts of "subtraction" include: (a) tampering with any wire, meter, or other apparatus
installed or used for generating, containing, conducting, or measuring electricity,
telegraph or telephone service; (b) tapping or otherwise wrongfully deflecting or taking
any electric current from such wire, meter, or other apparatus; and (c) using or enjoying
the benefits of any device by means of which one may fraudulently obtain any current of
electricity or any telegraph or telephone service.
In the instant case, the act of conducting ISR operations by illegally connecting various
equipment or apparatus to private respondent PLDTs telephone system, through which
petitioner is able to resell or re-route international long distance calls using respondent
PLDTs facilities constitutes all three acts of subtraction mentioned above.
The business of providing telecommunication or telephone service is likewise personal
property which can be the object of theft under Article 308 of the Revised Penal Code.
Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence,
could be object of theft:
Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares,
merchandise, provisions, or materials otherwise than in the ordinary course of trade and
the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor,
or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business
or trade theretofore conducted by the vendor, mortgagor, transferor or assignor, or all, or
substantially all, of the fixtures and equipment used in and about the business of the
vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in
bulk, in contemplation of the Act. x x x.
In Strochecker v. Ramirez,12 this Court stated:
With regard to the nature of the property thus mortgaged which is one-half interest in the
business above described, such interest is a personal property capable of appropriation
and not included in the enumeration of real properties in article 335 of the Civil Code,
and may be the subject of mortgage.
Interest in business was not specifically enumerated as personal property in the Civil
Code in force at the time the above decision was rendered. Yet, interest in business was
declared to be personal property since it is capable of appropriation and not included in
the enumeration of real properties. Article 414 of the Civil Code provides that all things
which are or may be the object of appropriation are considered either real property or
personal property. Business is likewise not enumerated as personal property under the
Civil Code. Just like interest in business, however, it may be appropriated. Following the
ruling in Strochecker v. Ramirez, business should also be classified as personal
property. Since it is not included in the exclusive enumeration of real properties under
Article 415, it is therefore personal property.13
As can be clearly gleaned from the above disquisitions, petitioners acts constitute theft
of respondent PLDTs business and service, committed by means of the unlawful use of
the latters facilities. In this regard, the Amended Information inaccurately describes the
offense by making it appear that what petitioner took were the international long distance
telephone calls, rather than respondent PLDTs business.
A perusal of the records of this case readily reveals that petitioner and respondent PLDT
extensively discussed the issue of ownership of telephone calls. The prosecution has
taken the position that said telephone calls belong to respondent PLDT. This is evident
from its Comment where it defined the issue of this case as whether or not "the
unauthorized use or appropriation of PLDT international telephone calls, service and
facilities, for the purpose of generating personal profit or gain that should have otherwise
belonged to PLDT, constitutes theft."14
In discussing the issue of ownership, petitioner and respondent PLDT gave their
respective explanations on how a telephone call is generated.15 For its part, respondent
PLDT explains the process of generating a telephone call as follows:
38. The role of telecommunication companies is not limited to merely providing the
medium (i.e. the electric current) through which the human voice/voice signal of the caller
is transmitted. Before the human voice/voice signal can be so transmitted, a
telecommunication company, using its facilities, must first break down or decode the
human voice/voice signal into electronic impulses and subject the same to further
augmentation and enhancements. Only after such process of conversion will the
resulting electronic impulses be transmitted by a telecommunication company, again,
through the use of its facilities. Upon reaching the destination of the call, the
telecommunication company will again break down or decode the electronic impulses
back to human voice/voice signal before the called party receives the same. In other
words, a telecommunication company both converts/reconverts the human voice/voice
signal and provides the medium for transmitting the same.
39. Moreover, in the case of an international telephone call, once the electronic impulses
originating from a foreign telecommunication company country (i.e. Japan) reaches the
Philippines through a local telecommunication company (i.e. private respondent PLDT), it
is the latter which decodes, augments and enhances the electronic impulses back to the
human voice/voice signal and provides the medium (i.e. electric current) to enable the
called party to receive the call. Thus, it is not true that the foreign telecommunication
company provides (1) the electric current which transmits the human voice/voice signal
of the caller and (2) the electric current for the called party to receive said human
voice/voice signal.
40. Thus, contrary to petitioner Laurels assertion, once the electronic impulses or
electric current originating from a foreign telecommunication company (i.e. Japan)
reaches private respondent PLDTs network, it is private respondent PLDT which
decodes, augments and enhances the electronic impulses back to the human
voice/voice signal and provides the medium (i.e. electric current) to enable the called
party to receive the call. Without private respondent PLDTs network, the human
voice/voice signal of the calling party will never reach the called party.16
In the assailed Decision, it was conceded that in making the international phone calls,
the human voice is converted into electrical impulses or electric current which are
transmitted to the party called. A telephone call, therefore, is electrical energy. It was
also held in the assailed Decision that intangible property such as electrical energy is
capable of appropriation because it may be taken and carried away. Electricity is
personal property under Article 416 (3) of the Civil Code, which enumerates "forces of
nature which are brought under control by science."17
Indeed, while it may be conceded that "international long distance calls," the matter
alleged to be stolen in the instant case, take the form of electrical energy, it cannot be
said that such international long distance calls were personal properties belonging to
PLDT since the latter could not have acquired ownership over such calls. PLDT merely
encodes, augments, enhances, decodes and transmits said calls using its complex
communications infrastructure and facilities. PLDT not being the owner of said telephone
calls, then it could not validly claim that such telephone calls were taken without its
consent. It is the use of these communications facilities without the consent of PLDT that
constitutes the crime of theft, which is the unlawful taking of the telephone services and
business.
Therefore, the business of providing telecommunication and the telephone service are
personal property under Article 308 of the Revised Penal Code, and the act of engaging
in ISR is an act of "subtraction" penalized under said article. However, the Amended
Information describes the thing taken as, "international long distance calls," and only later
mentions "stealing the business from PLDT" as the manner by which the gain was
derived by the accused. In order to correct this inaccuracy of description, this case must
be remanded to the trial court and the prosecution directed to amend the Amended
Information, to clearly state that the property subject of the theft are the services and
business of respondent PLDT. Parenthetically, this amendment is not necessitated by a
mistake in charging the proper offense, which would have called for the dismissal of the
information under Rule 110, Section 14 and Rule 119, Section 19 of the Revised Rules
on Criminal Procedure. To be sure, the crime is properly designated as one of theft. The
purpose of the amendment is simply to ensure that the accused is fully and sufficiently
apprised of the nature and cause of the charge against him, and thus guaranteed of his
rights under the Constitution.
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision
dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the
Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C.
Abrogar of the Regional Trial Court of Makati City, Branch 150, which denied the Motion
to Quash (With Motion to Defer Arraignment) in Criminal Case No. 99-2425 for theft, is
AFFIRMED. The case is remanded to the trial court and the Public Prosecutor of Makati
City is hereby DIRECTED to amend the Amended Information to show that the property
subject of the theft were services and business of the private offended party.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26278 August 4, 1927
LEON SIBAL , plaintiff-appellant,
vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.
J. E. Blanco for appellant.
Felix B. Bautista and Santos and Benitez for appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of Tarlac on
the 14th day of December 1924. The facts are about as conflicting as it is possible for
facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal,
deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the
Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J.
Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land
described in the complaint in the third paragraph of the first cause of action; that within
one year from the date of the attachment and sale the plaintiff offered to redeem said
sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price
paid by the latter, the interest thereon and any assessments or taxes which he may have
paid thereon after the purchase, and the interest corresponding thereto and that Valdez
refused to accept the money and to return the sugar cane to the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez
was attempting to harvest the palay planted in four of the seven parcels mentioned in the
first cause of action; that he had harvested and taken possession of the palay in one of
said seven parcels and in another parcel described in the second cause of action,
amounting to 300 cavans; and that all of said palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the defendant
Emiliano J. Valdez his attorneys and agents, restraining them (1) from distributing him in
the possession of the parcels of land described in the complaint; (2) from taking
possession of, or harvesting the sugar cane in question; and (3) from taking possession,
or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be
rendered in his favor and against the defendants ordering them to consent to the
redemption of the sugar cane in question, and that the defendant Valdez be condemned
to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two
parcels above-mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon approval of the
bond for P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in
the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied generally and
specifically each and every allegation of the complaint and step up the following
defenses:
(a) That the sugar cane in question had the nature of personal property and was
not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of
action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the
preliminary injunction he was unable to gather the sugar cane, sugar-cane shoots
(puntas de cana dulce) palay in said parcels of land, representing a loss to him of
P8,375.20 and that, in addition thereto, he suffered damages amounting to P3,458.56.
He prayed, for a judgment (1) absolving him from all liability under the complaint; (2)
declaring him to be the absolute owner of the sugar cane in question and of the palay in
parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76,
representing the value of the sugar cane and palay in question, including damages.
Upon the issues thus presented by the pleadings the cause was brought on for trial. After
hearing the evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge,
rendered a judgment against the plaintiff and in favor of the defendants
(1) Holding that the sugar cane in question was personal property and, as such,
was not subject to redemption;
(2) Absolving the defendants from all liability under the complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang
and Marcos Sibal to jointly and severally pay to the defendant Emiliano J. Valdez
the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which the defendant was not
able to raise by reason of the injunction, at P4 cavan. 9,439.08 From that
judgment the plaintiff appealed and in his assignments of error contends
that the lower court erred: (1) In holding that the sugar cane in question
was personal property and, therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as
parcels 7 and 8, and that the palay therein was planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction failed to
realized P6,757.40 from the sugar cane and P1,435.68 from sugar-cane shoots
(puntas de cana dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the
defendant was unable to raise palay on the land, which would have netted him
the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of
P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of
writ of execution in civil case No. 20203 of the Court of First Instance of Manila
(Macondray & Co., Inc. vs. Leon Sibal),levied an attachment on eight parcels of
land belonging to said Leon Sibal, situated in the Province of Tarlac, designated
in the second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit
2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of
land, at the auction held by the sheriff of the Province of Tarlac, for the sum to
 P4,273.93, having paid for the said parcels separately as follows (Exhibit C, and
2-A):
Parcel
1 .....................................................................
2 .....................................................................
3 .....................................................................
4 .....................................................................
5 .....................................................................
6 .....................................................................
7 with the house thereon ..........................
8 .....................................................................
==========
(3) That within one year from the sale of said parcel of land, and on the 24th day
of September, 1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray
& Co., Inc., for the account of the redemption price of said parcels of land,
without specifying the particular parcels to which said amount was to applied.
The redemption price said eight parcels was reduced, by virtue of said
transaction, to P2,579.97 including interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the
Province of Tarlac, by virtue of a writ of execution in civil case No. 1301 of the
Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1. the same parties
in the present case), attached the personal property of said Leon Sibal located in
Tarlac, among which was included the sugar cane now in question in the seven
parcels of land described in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said
personal properties of Leon Sibal, including the sugar cane in question to Emilio
J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar
cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution,
also attached the real property of said Leon Sibal in Tarlac, including all of his
rights, interest and participation therein, which real property consisted of eleven
P1.00 parcels of land and a house and camarin situated in one of said parcels (Exhibit
A).
2,000.00
(4) That on June 25, 1924, eight of said eleven parcels, including the house and
120.93
the camarin, were bought by Emilio J. Valdez at the auction held by the sheriff for
1,000.00 the sum of P12,200. Said eight parcels were designated in the certificate of sale
as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and camarin were situated on
1.00 parcel 7 (Exhibit A).
1.00 (5) That the remaining three parcels, indicated in the certificate of the sheriff as
150.00 parcels 2, 12, and 13, were released from the attachment by virtue of claims
presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).
1,000.00 (6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed
to Emilio J. Valdez for P2,579.97 all of its rights and interest in the eight parcels
of land acquired by it at public auction held by the deputy sheriff of Tarlac in
4,273.93 connection with civil case No. 20203 of the Court of First Instance of Manila, as
stated above. Said amount represented the unpaid balance of the redemption
price of said eight parcels, after payment by Leon Sibal of P2,000 on September
24, 1923, fro the account of the redemption price, as stated above. (Exhibit C and
2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven
parcels of land described in the first cause of action of the complaint at public
auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels
of land situated in the Province of Tarlac belonging to Leon Sibal and that on
September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for the account
of the redemption price of said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of
its rights and interest in the said eight parcels of land.
 (4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and
interest which Leon Sibal had or might have had on said eight parcels by virtue of
the P2,000 paid by the latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight parcels of
land.
The first question raised by the appeal is, whether the sugar cane in question is personal
or real property. It is contended that sugar cane comes under the classification of real
property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said
paragraph 2 of article 334 enumerates as real property the following: Trees, plants, and
ungathered products, while they are annexed to the land or form an integral part of any
immovable property." That article, however, has received in recent years an
interpretation by the Tribunal Supremo de Espaa, which holds that, under certain
conditions, growing crops may be considered as personal property. (Decision of March
18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334
of the Civil Code, in view of the recent decisions of the supreme Court of Spain, admits
that growing crops are sometimes considered and treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque muchos autores
hacen tocante a la venta de toda cosecha o de parte de ella cuando aun no esta
cogida (cosa frecuente con la uvay y la naranja), y a la de lenas, considerando
ambas como muebles. El Tribunal Supremo, en sentencia de 18 de marzo de
1904, al entender sobre un contrato de arrendamiento de un predio rustico,
resuelve que su terminacion por desahucio no extingue los derechos del
arrendario, para recolectar o percibir los frutos correspondientes al ao agricola,
dentro del que nacieron aquellos derechos, cuando el arrendor ha percibido a su
vez el importe de la renta integra correspondiente, aun cuando lo haya sido por
precepto legal durante el curso del juicio, fundandose para ello, no solo en que
de otra suerte se daria al desahucio un alcance que no tiene, sino en que, y esto
es lo interesante a nuestro proposito, la consideracion de inmuebles que el
articulo 334 del Codigo Civil atribuge a los frutos pendientes, no les priva del
caracter de productos pertenecientes, como tales, a quienes a ellos tenga
derecho, Ilegado el momento de su recoleccion.
xxx xxx xxx
Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria,
publicada en 16 de diciembre de 1909, con las reformas introducidas por la de
21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo contrario, y
cualquiera que sea la naturaleza y forma de la obligacion que garantice, no
comprende los frutos cualquiera que sea la situacion en que se encuentre. (3
Manresa, 5. edicion, pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities, pending fruits and
ungathered products may be sold and transferred as personal property; (2) that the
Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held
that the lessee was entitled to gather the products corresponding to the agricultural year,
because said fruits did not go with the land but belonged separately to the lessee; and
(3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece
of land does not include the fruits and products existing thereon, unless the contract
expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give us some
light on the question which we are discussing. Article 465 of the Civil Code of Louisiana,
which corresponds to paragraph 2 of article 334 of our Civil Code, provides: "Standing
crops and the fruits of trees not gathered, and trees before they are cut down, are
likewise immovable, and are considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision, held that in
some cases "standing crops" may be considered and dealt with as personal property. In
the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court
said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the
fruits of trees not gathered and trees before they are cut down . . . are considered as part
of the land to which they are attached, but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired by others than the
owners of the property to which the crop is attached. . . . The existence of a right on the
growing crop is a mobilization by anticipation, a gathering as it were in advance,
rendering the crop movable quoad the right acquired therein. Our jurisprudence
recognizes the possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31
La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann.,
629; Lewis vs. Klotz, 39 La. Ann., 267.)
"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28
La. An., 761) that "article 465 of the Revised Code says that standing crops are
considered as immovable and as part of the land to which they are attached, and article
466 declares that the fruits of an immovable gathered or produced while it is under
seizure are considered as making part thereof, and incurred to the benefit of the person
making the seizure. But the evident meaning of these articles, is where the crops belong
to the owner of the plantation they form part of the immovable, and where it is seized, the
fruits gathered or produced inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the immovable. It
belongs to the lessee, and may be sold by him, whether it be gathered or not,
 and it may be sold by his judgment creditors. If it necessarily forms part of the
leased premises the result would be that it could not be sold under execution
separate and apart from the land. If a lessee obtain supplies to make his crop,
the factor's lien would not attach to the crop as a separate thing belonging to his
debtor, but the land belonging to the lessor would be affected with the recorded
privilege. The law cannot be construed so as to result in such absurd
consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an immovable, it
would be destructive of the very objects of the act, it would render the pledge of
the crop objects of the act, it would render the pledge of the crop impossible, for if
the crop was an inseparable part of the realty possession of the latter would be
necessary to that of the former; but such is not the case. True, by article 465 C.
C. it is provided that "standing crops and the fruits of trees not gathered and trees
before they are cut down are likewise immovable and are considered as part of
the land to which they are attached;" but the immovability provided for is only
one in abstracto and without reference to rights on or to the crop acquired by
other than the owners of the property to which the crop was attached. The
immovability of a growing crop is in the order of things temporary, for the crop
passes from the state of a growing to that of a gathered one, from an immovable
to a movable. The existence of a right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance, rendering the crop
movable quoad the right acquired thereon. The provision of our Code is identical
with the Napoleon Code 520, and we may therefore obtain light by an
examination of the jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de Espaa but by the
Supreme Court of Louisiana, is followed in practically every state of the Union.
From an examination of the reports and codes of the State of California and other states
we find that the settle doctrine followed in said states in connection with the attachment
of property and execution of judgment is, that growing crops raised by yearly labor and
cultivation are considered personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p.
379; 23 Corpus Juris, p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55
Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126;
McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644;
Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution,
vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually
in existence, is reasonably certain to come into existence as the natural increment or
usual incident of something already in existence, and then belonging to the vendor, and
then title will vest in the buyer the moment the thing comes into existence.
(Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21
Am. St. Rep., 63.) Things of this nature are said to have a potential existence. A man
may sell property of which he is potentially and not actually possessed. He may make a
valid sale of the wine that a vineyard is expected to produce; or the gain a field may grow
in a given time; or the milk a cow may yield during the coming year; or the wool that shall
thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net;
or fruits to grow; or young animals not yet in existence; or the good will of a trade and the
like. The thing sold, however, must be specific and identified. They must be also owned
at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of the Code of Civil Procedure as well as by Act
No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of a
judgment debtor which may be subjected to execution. The pertinent portion of said
section reads as follows: "All goods, chattels, moneys, and other property, both real and
personal, * * * shall be liable to execution. Said section 450 and most of the other
sections of the Code of Civil Procedure relating to the execution of judgment were taken
from the Code of Civil Procedure of California. The Supreme Court of California, under
section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held,
without variation, that growing crops were personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are
personal property. Section 2 of said Act provides: "All personal property shall be subject
to mortgage, agreeably to the provisions of this Act, and a mortgage executed in
pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If
growing crops be mortgaged the mortgage may contain an agreement stipulating that the
mortgagor binds himself properly to tend, care for and protect the crop while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the
assumption that "growing crops" are personal property. This consideration tends to
support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense
that "ungathered products" as mentioned in said article of the Civil Code have the nature
of personal property. In other words, the phrase "personal property" should be
understood to include "ungathered products."
At common law, and generally in the United States, all annual crops which are
raised by yearly manurance and labor, and essentially owe their annual existence
to cultivation by man, . may be levied on as personal property." (23 C. J., p. 329.)
On this question Freeman, in his treatise on the Law of Executions, says: "Crops,
whether growing or standing in the field ready to be harvested, are, when
produced by annual cultivation, no part of the realty. They are, therefore, liable to
 voluntary transfer as chattels. It is equally well settled that they may be seized
and sold under execution. (Freeman on Executions, vol. p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been
modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense
that, for the purpose of attachment and execution, and for the purposes of the Chattel
Mortgage Law, "ungathered products" have the nature of personal property. The lower
court, therefore, committed no error in holding that the sugar cane in question was
personal property and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above stated, relate to
questions of fact only. Before entering upon a discussion of said assignments of error,
we deem it opportune to take special notice of the failure of the plaintiff to appear at the
trial during the presentation of evidence by the defendant. His absence from the trial and
his failure to cross-examine the defendant have lent considerable weight to the evidence
then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause of action of
the complaint, the plaintiff made a futile attempt to show that said two parcels belonged
to Agustin Cuyugan and were the identical parcel 2 which was excluded from the
attachment and sale of real property of Sibal to Valdez on June 25, 1924, as stated
above. A comparison of the description of parcel 2 in the certificate of sale by the sheriff
(Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show that
they are not the same.
The description of the parcels in the complaint is as follows:
1. La caa dulce sembrada por los inquilinos del ejecutado Leon Sibal 1. en una
parcela de terreno de la pertenencia del citado ejecutado, situada en Libutad,
Culubasa, Bamban, Tarlac, de unas dos hectareas poco mas o menos de
superficie.
2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., Ilamado
Alejandro Policarpio, en una parcela de terreno de la pertenencia del ejecutado,
situada en Dalayap, Culubasa, Bamban, Tarlac de unas dos hectareas de
superficie poco mas o menos." The description of parcel 2 given in the certificate
of sale (Exhibit A) is as follows:
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros
cuadrados de superficie, linda al N. con Canuto Sibal, Esteban Lazatin and
Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mau and others; al S. con
Alejandro Dayrit, Isidro Santos and Melecio Mau; y al O. con Alejandro Dayrit
and Paulino Vergara. Tax No. 2854, vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that parcels 1 and 2
of the complaint were included among the parcels bought by Valdez from Macondray on
June 25, 1924, and corresponded to parcel 4 in the deed of sale (Exhibit B and 2), and
were also included among the parcels bought by Valdez at the auction of the real
property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the certificate
of sale made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel
3 (Exhibit A) is as follows:
Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban,
Tarlac, I. F. de 145,000 metros cuadrados de superficie, lindante al Norte con
Road of the barrio of Culubasa that goes to Concepcion; al Este con Juan Dizon;
al Sur con Lucio Mao y Canuto Sibal y al Oeste con Esteban Lazatin, su valor
amillarado asciende a la suma de P2,990. Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint
and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did
not care to appear at the trial when the defendant offered his evidence, we are inclined to
give more weight to the evidence adduced by him that to the evidence adduced by the
plaintiff, with respect to the ownership of parcels 1 and 2 of the compliant. We, therefore,
conclude that parcels 1 and 2 of the complaint belong to the defendant, having acquired
the same from Macondray & Co. on June 25, 1924, and from the plaintiff Leon Sibal on
the same date.
It appears, however, that the plaintiff planted the palay in said parcels and harvested
therefrom 190 cavans. There being no evidence of bad faith on his part, he is therefore
entitled to one-half of the crop, or 95 cavans. He should therefore be condemned to pay
to the defendant for 95 cavans only, at P3.40 a cavan, or the sum of P323, and not for
the total of 190 cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel
corresponds to parcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and
2), and to parcel 4 in the certificate of sale to Valdez of real property belonging to Sibal,
executed by the sheriff as above stated (Exhibit A). Valdez is therefore the absolute
owner of said parcel, having acquired the interest of both Macondray and Sibal in said
parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the
second cause of action, it appears from the testimony of the plaintiff himself that said
parcel corresponds to parcel 8 of the deed of sale of Macondray to Valdez (Exhibit B and
2) and to parcel 10 in the deed of sale executed by the sheriff in favor of Valdez (Exhibit
A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of
both Macondray and Sibal therein.
In this connection the following facts are worthy of mention: In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and
his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were pay to the defendant jointly and severally the sum of P8,900.80, instead of P9,439.08
attached under said execution. Said parcels of land were sold to Macondray & Co. on the allowed by the lower court, as follows:
30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to
Macondray & Co. P2,000 on the redemption of said parcels of land. (See Exhibits B and
P6,757.40 for the sugar cane;
C ).
1,220.40 for the sugar cane shoots;
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached,
including the sugar cane in question. (Exhibit A) The said personal property so attached, 323.00 for the palay harvested by plaintiff in parcels 1 and 2;
sold at public auction May 9 and 10, 1924. April 29, 1924, the real property was attached
600.00 for the palay which defendant could have raised.
under the execution in favor of Valdez (Exhibit A). June 25, 1924, said real property was
sold and purchased by Valdez (Exhibit A).
8,900.80
June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public ============
auction on the 30th day of July, 1923, to Valdez.
In all other respects, the judgment appealed from is hereby affirmed, with costs. So
As to the loss of the defendant in sugar cane by reason of the injunction, the evidence
ordered.
shows that the sugar cane in question covered an area of 22 hectares and 60 ares
(Exhibits 8, 8-b and 8-c); that said area would have yielded an average crop of 1039
picos and 60 cates; that one-half of the quantity, or 519 picos and 80 cates would have Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.
corresponded to the defendant, as owner; that during the season the sugar was selling at
P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have netted P Republic of the Philippines
6,757.40 from the sugar cane in question. The evidence also shows that the defendant SUPREME COURT
could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de cana) Manila
and not 1,170,000 as computed by the lower court. During the season the shoots were
selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have EN BANC
netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower
court. G.R. No. 18520 September 26, 1922

As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting
to 190 cavans, one-half of said quantity should belong to the plaintiff, as stated above,
and the other half to the defendant. The court erred in awarding the whole crop to the
defendant. The plaintiff should therefore pay the defendant for 95 cavans only, at P3.40
a cavan, or P323 instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of the plaintiff
from cultivating about 10 hectares of the land involved in the litigation. He expected to
have raised about 600 cavans of palay, 300 cavans of which would have corresponded
to him as owner. The lower court has wisely reduced his share to 150 cavans only. At P4
a cavan, the palay would have netted him P600.
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee,
vs.
ILDEFONSO RAMIREZ, creditor and appellant.
WILLIAM EDMONDS, assignee.
Lim & Lim for appellant.
Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co.
ROMUALDEZ, J.:
The question at issue in this appeal is, which of the two mortgages here in question must
be given preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of
Ildefonso Ramirez. The first was declared by the trial court to be entitled to preference.
In the lower court there were three mortgagees each of whom claimed preference. They
were the two above mentioned and Concepcion Ayala. The latter's claim was rejected by
the trial court, and from that ruling she did not appeal.
There is no question as to the priority in time of the mortgage in favor of the Fidelity &
Surety Co. which was executed on March 10, 1919, and registered in due time in the
registry of property, that in favor of the appellant being dated September 22, 1919, and
registered also in the registry.
The appellant claims preference on these grounds: (a) That the first mortgage above-
mentioned is not valid because the property which is the subject-matter thereof is not
capable of being mortgaged, and the description of said property is not sufficient; and (b)
that the amount due the appellant is a purchase price, citing article 1922 of the Civil
Code in support thereof, and that his mortgage is but a modification of the security given
by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the
Fidelity & Surety Co.
As to the first ground, the thing that was mortgaged to this corporation is described in the
document as follows:
. . . his half interest in the drug business known as Antigua Botica
Ramirez (owned by Srta. Dolores del Rosario and the mortgagor herein referred
to as the partnership), located at Calle Real Nos. 123 and 125, District of
Intramuros, Manila, Philippine Islands.
With regard to the nature of the property thus mortgaged, which is one-half interest in the
business above described, such interest is a personal property capable of appropriation
and not included in the enumeration of real properties in article 335 of the Civil Code,
and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 2,
Act No. 1508.)
The description contained in the document is sufficient. The law (sec. 7, Act No. 1508)
requires only a description of the following nature:
The description of the mortgaged property shall be such as to enable the parties
to the mortgage, or any other person, after reasonable inquiry and investigation,
to identify the same.
Turning to the second error assigned, numbers 1, 2, and 3 of article 1922 of the Civil
Code invoked by the appellant are not applicable. Neither he, as debtor, nor the debtor
himself, is in possession of the property mortgaged, which is, and since the registration
of the mortgage has been, legally in possession of the Fidelity & Surety Co. (Sec. 4, Act
No. 1508; Meyers vs. Thein, 15 Phil., 303.)
In no way can the mortgage executed in favor of the appellant on September 22, 1919,
be given effect as of February 15, 1919, the date of the sale of the drug store in question.
On the 15th of February of that year, there was a stipulation about a persons security,
but not a mortgage upon any property, and much less upon the property in question.
Moreover, the appellant cannot deny the preferential character of the mortgage in favor
of the Fidelity & Surety Co. because in the very document executed in his favor it was
stated that his mortgage was a second mortgage, subordinate to the one made in favor
of the Fidelity & Surety Co.
The judgment appealed from is affirmed with costs against the appellant. So ordered.
Araullo, C.J., Street, Malcolm, Avancea, Villamor, Ostrand and Johns, JJ., concur.
SECOND DIVISION
September 7, 2015
GR. No. 197472
REPUBLIC OF THE PHILIPPINES, represented by Commander Raymond Alpuerto
of the Naval Base Camillo Osias, Port San Vicente, Sta. Ana, Cagayan, Petitioner,
vs.
REV. CLAUDIO R. CORTEZ, SR., Respondent.
DECISION
DEL CASTILLO, J.:
An inalienable public land cannot be appropriated and thus may not be the proper object
of possession. Hence, injunction cannot be issued in order to protect ones alleged right
of possession over the same.
This Petition for Review on Certiorari1 assails the June 29, 2011 Decision2 of the Court of
Appeals (CA) in CA-GR. CV No. 89968, which dismissed the appeal therewith and
affirmed the July 3, 2007 Decision3 of the Regional Trial Court (RTC) of Aparri, Cagayan,
Branch 8 in Spl. Civil Action Case No. II-2403.
Factual Antecedents
Respondent Rev. Claudio R. Cortez, Sr. (Rev. Cortez), a missionary by vocation
engaged in humanitarian and charitable activities, established an orphanage and school
in Punta Verde, Palaui Island, San Vicente, Sta. Ana, Cagayan. He claimed that since
1962, he has been in peaceful possession of about 50 hectares of land located in the
western portion of Palaui Island in Sitio Siwangag, Sta. Ana, Cagayan which he, with the
help of Aetas and other people under his care, cleared and developed for agricultural
purposes in order to support his charitable, humanitarian and missionary works.4
On May 22, 1967, President Ferdinand E. Marcos issued Proclamation No. 201
reserving for military purposes a parcel of the public domain situated in Palaui Island.
Pursuant thereto, 2,000 hectares of the southern half portion of the Palaui Island were
withdrawn from sale or settlement and reserved for the use of the Philippine Navy,
subject, however, to private rights if there be any.
More than two decades later or on August 16, 1994, President Fidel V. Ramos issued
Proclamation No. 447 declaring Palaui Island and the surrounding waters situated in the
Municipality of Sta. Ana, Cagayan as marine reserve. Again subject to any private rights,
the entire Palaui Island consisting of an aggregate area of 7,415.48 hectares was
accordingly reserved as a marine protected area.
On June 13, 2000, Rev. Cortez filed a Petition for Injunction with Prayer for the Issuance
of a Writ of Preliminary Mandatory Injunction5 against Rogelio C. Bias (Bias) in his
capacity as Commanding Officer of the Philippine Naval Command in Port San Vicente,
Sta. Ana, Cagayan. According to him, some members of the Philippine Navy, upon
1w phi 1
orders of Bias, disturbed his peaceful and lawful possession of the said 50-hectare
portion of Palaui Island when on March 15, 2000, they commanded him and his men,
through the use of force and intimidation, to vacate the area. When he sought assistance
from the Office of the Philippine Naval Command, he was met with sarcastic remarks
and threatened with drastic military action if they do not vacate. Thus, Rev. Cortez and
his men were constrained to leave the area. In view of these, Rev. Cortez filed the said
Petition with the RTC seeking preliminary mandatory injunction ordering Bias to restore
to him possession and to not disturb the same, and further, for the said preliminary writ, if
issued, to be made permanent.
Proceedings before the Regional Trial Court
After the conduct of hearing on the application for preliminary mandatory injunction and
6 Cortez] has not perfected his right over the 50 hectares of land nor acquired any vested
the parties submission of their respective memoranda,7 the RTC issued an Order8 dated
February 21, 2002 granting the application for a writ of preliminary mandatory injunction.
However, the same pertained to five hectares (subject area) only, not to the whole 50
hectares claimed to have been occupied by Rev. Cortez, viz.:
It should be noted that the claim of [Rev. Cortez] covers an area of 50 hectares more or
less located at the western portion of Palaui Island which is within the Naval reservation.
[Rev. Cortez] presented what he called as a survey map (Exh. "H") indicating the location
of the area claimed by the Church of the Living God and/or Rev. Claudio Cortez with an
approximate area of 50 hectares identified as Exh. "H-4". However, the Survey Map
allegedly prepared by [a] DENR personnel is only a sketch map[,] not a survey map as
claimed by [Rev. Cortez]. Likewise, the exact boundaries of the area [are] not specifically
indicated. The sketch only shows some lines without indicating the exact boundaries of
the 50 hectares claimed by [Rev. Cortez]. As such, the identification of the area and its
exact boundaries have not been clearly defined and delineated in the sketch map.
Therefore, the area of 50 hectares that [Rev. Cortez] claimed to have peacefully and
lawfully possessed for the last 38 years cannot reasonably be determined or accurately
identified.
For this reason, there is merit to the contention of [Bias] that [Rev. Cortez] claim to the
50 hectares of land identified as Exh. ["]H-4" is unclear and ambiguous. It is a settled
jurisprudence that mandatory injunction is the strong arm of equity that never ought to be
extended unless to cases of great injury, where courts of law cannot afford an adequate
and commensurate remedy in damages. The right must be clear, the injury impending or
threatened, so as to be averted only by the protecting preventive process of injunction.
The reason for this doctrine is that before the issue of ownership is determined in the
light of the evidence presented, justice and equity demand that the [status quo be
maintained] so that no advantage may be given to one to the prejudice of the other. And
so it was ruled that unless there is a clear pronouncement regarding ownership and
possession of the land, or unless the land is covered by the torrens title pointing to one of
the parties as the undisputed owner, a writ of preliminary injunction should not issue to
take the property out of possession of one party to place it in the hands of another x x x.
Admittedly, the documentary exhibits of [Rev. Cortez] tended only to show that [he] has a
pending application of patent with the DENR. Even so, [Rev. Cortez] failed to present in
evidence the application for patent allegedly filed by [him] showing that he applied for
patent on the entire 50 hectares of land which he possessed or occupied for a long
period of time. Under the circumstances, therefore, the title of petitioner to the 50
hectares of land in Palaui Island remains unclear and doubtful, and [is] seriously disputed
by the government.
More significantly, at the time that Proc. No. 201 was issued on May 22, 1967, [Rev.
right thereto considering that he only occupied the land as alleged by him in 1962 or
barely five (5) years before the issuance of the Presidential Proclamation. Proclamation
No. 201 had the effect of removing Palaui Island from the alienable or disposable portion
of the public domain and therefore the island, as of the date of [the] issuance [of the
proclamation], has ceased to be disposable public land.
However, the court is not unmindful that [Rev. Cortez] has lawfully possessed and
occupied at least five (5) hectares of land situated at the western portion of the Palaui
Island identified as Exh "H-4". During the hearing, Cmdr.
Rogelio Bias admitted that when he was assigned as Commanding Officer in December
1999, he went to Palaui Island and [saw only] two (2) baluga families tilling the land
consisting of five (5) hectares. Therefore, it cannot be seriously disputed that [Rev.
Cortez] and his baluga tribesmen cleared five (5) hectares of land for planting and
cultivation since 1962 on the western portion identified as Exhibit "H-4". The Philippine
Navy also admitted that they have no objection to settlers of the land prior to the
Presidential Proclamation and [Rev. Cortez] had been identified as one of the early
settlers of the area before the Presidential Proclamation. The DENR also acknowledged
that [Rev. Cortez] has filed an application for patent on the western area and that he
must be allowed to pursue his claim.
Although the court is not persuaded by the argument of [Rev. Cortez] that he has already
acquired vested rights over the area claimed by him, the court must recognize that [Rev.
Cortez] may have acquired some propriety rights over the area considering the directive
of the DENR to allow [Rev. Cortez] to pursue his application for patent. However, the
court wants to make clear that the application for patent by [Rev. Cortez] should be
limited to an area not to exceed five (5) hectares situated at the western portion of x x x
Palaui Island identified in the sketch map as Exh. "H-4." This area appears to be the
portion where [Rev. Cortez] has clearly established his right or title by reason of his long
possession and occupation of the land.9
In his Answer,10 Bias countered that: (1) Rev. Cortez has not proven that he has been in
exclusive, open, continuous and adverse possession of the disputed land in the concept
of an owner; (2) Rev. Cortez has not shown the exact boundaries and identification of the
entire lot claimed by him; (3) Rev. Cortez has not substantiated his claim of exemption
from Proclamation No. 201; (4) under Proclamation No. 447, the entire Palaui Island,
which includes the land allegedly possessed and occupied by Rev. Cortez, was reserved
as a marine protected area; and, (4) injunction is not a mode to wrest possession of a
property from one person by another.
Pre-trial and trial thereafter ensued.
On July 3, 2007, the RTC rendered its Decision11 making the injunction final and
permanent. In so ruling, the said court made reference to the Indigenous Peoples [Right]
Act (IPRA) as follows:
The Indigenous [Peoples Right] Act should be given effect in this case. The affected
community belongs to the group of indigenous people which are protected by the State
of their rights to continue in their possession of the lands they have been tilling since time
immemorial. No subsequent passage of law or presidential decrees can alienate them
from the land they are tilling.12
Ultimately, the RTC held, thus:
WHEREFORE, finding the petition to be meritorious, the same is hereby GRANTED.
xxxx
SO DECIDED.13
Representing Bias, the Office of the Solicitor General (OSG) filed a Notice of
Appeal14 which was given due course by the RTC in an Order15 dated August 6, 2007.
Ruling of the Court of Appeals
In its brief,16 the OSG pointed out that Rev. Cortez admitted during trial that he filed the
Petition for injunction on behalf of the indigenous cultural communities in Palaui Island
and not in his capacity as pastor or missionary of the Church of the Living God. He also
claimed that he has no interest over the land. Based on these admissions, the OSG
argued that the Petition should have been dismissed outright on the grounds that it did
not include the name of the indigenous cultural communities that Rev. Cortez is
supposedly representing and that the latter is not the real party-in-interest. In any case,
the OSG averred that Rev. Cortez failed to show that he is entitled to the issuance of the
writ of injunction. Moreover, the OSG questioned the RTCs reference to the IPRA and
argued that it is not applicable to the present case since Rev. Cortez neither alleged in
his Petition that he is claiming rights under the said act nor was there any showing that
he is a member of the Indigenous Cultural Communities and/or the Indigenous Peoples
as defined under the IPRA.
In its Decision17 dated June 29, 2011, the CA upheld the RTCs issuance of a final
injunction based on the following ratiocination:
The requisites necesary for the issuance of a writ of preliminary injunction are: (1) the
existence of a clear and unmistakable right that must be protected; and (2) an urgent and
paramount necessity for the writ to prevent serious damage. Here, [Rev. Cortez] has
shown the existence of a clear and unmistakable right that must be protected and an
urgent and paramount necessity for the writ to prevent serious damage. Records reveal
that [Rev. Cortez] has been in peaceful possession and occupation of the western
portion of Palaui Island, Sitio Siwangag, San Vicente, Sta. Ana[,] Cagayan since 1962 or
prior to the issuance of Proclamation Nos. 201 and 447 in 1967 and 1994, respectively.
There he built an orphanage and a school for the benefit of the members of the Dumagat
Tribe, in furtherance of his missionary and charitable works. There exists a clear and
unmistakable right in favor [of Rev. Cortez] since he has been in open, continuous and
notorious possession of a portion of Palaui island. To deny the issuance of a writ of
injunction would cause grave and irreparable injury to [Rev. Cortez] since he will be
displaced from the said area which he has occupied since 1962. It must be emphasized
that Proclamation Nos. 201 and 447 stated that the same are subject to private rights, if
there be [any]. Though Palaui Island has been declared to be part of the naval
reservation and the whole [i]sland as a marine protected area, both recognized the
existence of private rights prior to the issuance of the same.
From the foregoing, we rule that the trial court did not err when it made permanent the
writ of preliminary mandatory injunction. Section 9, Rule 58 of the Rules of Court
provides that if after the trial of the action it appears that the applicant is entitled to have
the act or acts complained of permanently enjoined, the court shall grant a final injunction
perpetually restraining the party or person enjoined from the commission or continuance
of the act or acts or confirming the preliminary mandatory injunction.18
Anent the issue of Rev. Cortez not being a real party-in-interest, the CA noted that this
was not raised before the RTC and therefore cannot be considered by it. Finally, with
respect to the RTCs mention of the IPRA, the CA found the same to be a mere obiter
dictum.
The dispositive portion of the CA Decision reads:
WHEREFORE, premise[s] considered, the instant Appeal is hereby DENIED. The
assailed 3 July 2007 Decision of the Regional Trial Court of Aparri, Cagayan, Branch 8 in
Civil Case No. II-2403 is AFFIRMED.
SO ORDERED.19
Hence, this Petition brought by the OSG on behalf of the Republic of the Philippines (the
Republic).
The Issue
The ultimate issue to be resolved in this case is whether Rev. Cortez is entitled to a final
writ of mandatory injunction.
The Parties Arguments
The bone of contention as the OSG sees it is the injunctive writ since Rev. Cortez failed
to prove his clear and positive right over the 5-hectare portion of Palaui Island covered
by the same. This is considering that by his own admission, Rev. Cortez started to
occupy the said area only in 1962. Hence, when the property was declared as a military
reserve in 1967, he had been in possession of the 5-hectare area only for five years or
short of the 30-year possession requirement for a bona fide claim of ownership under the
law. The OSG thus argues that the phrase "subject to private rights" as contained in
Proclamation No. 201 and Proclamation No. 447 cannot apply to him since it only
pertains to those who have already complied with the requirements for perfection of title
over the land prior to the issuance of the said proclamations.
Rev. Cortez, for his part, asserts that the arguments of the OSG pertaining to ownership
are all immaterial as his Petition for injunction does not involve the right to possess
based on ownership but on the right of possession which is a right independent from
ownership. Rev. Cortez avers that since he has been in peaceful and continuous
possession of the subject portion of Palaui Island, he has the right of possession over the
same which is protected by law. He asserts that based on this right, the writ of injunction
was correctly issued by the RTC in his favor and aptly affirmed by the CA. On the
technical side, Rev. Cortez avers that the Republic has no legal personality to assail the
CA Decision through the present Petition since it was not a party in the appeal before the
CA.
The Courts Ruling
We grant the Petition.
For starters, the Court shall distinguish a preliminary injunction from a final injunction.
"Injunction is a judicial writ, process or proceeding whereby a party is directed either to
do a particular act, in which case it is called a mandatory injunction, [as in this case,] or
to refrain from doing a particular act, in which case it is called a prohibitory
injunction."20 "It may be the main action or merely a provisional remedy for and as an
incident in the main action."21
"The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction."22 A preliminary injunction does not determine the merits of a case
or decide controverted facts.23 Since it is a mere preventive remedy, it only seeks to
prevent threatened wrong, further injury and irreparable harm or injustice until the rights
of the parties are settled.24 "It is usually granted when it is made to appear that there is a
substantial controversy between the parties and one of them is committing an act or
threatening the immediate commission of an act that will cause irreparable injury or
destroy the status quo of the controversy before a full hearing can be had on the merits
of the case."25 A preliminary injunction is granted at any stage of an action or proceeding
prior to judgment or final order.26 For its issuance, the applicant is required to show, at
least tentatively, that he has a right which is not vitiated by any substantial challenge or
contradiction.27 Simply stated, the applicant needs only to show that he has the ostensible
right to the final relief prayed for in his complaint.28 On the other hand, the main action for
injunction seeks a judgment that embodies a final injunction.29 A final injunction is one
which perpetually restrains the party or person enjoined from the commission or
continuance of an act, or in case of mandatory injunctive writ, one which confirms the
preliminary mandatory injuction.30 It is issued when the court, after trial on the merits, is
convinced that the applicant is entitled to have the act or acts complained of permanently
enjoined.31 Otherwise stated, it is only after the court has come up with a definite
pronouncement respecting an applicants right and of the act violative of such right,
based on its appreciation of the evidence presented, that a final injunction is issued. To
be a basis for a final and permanant injunction, the right and the act violative thereof
must be established by the applicant with absolute certainty.32
What was before the trial court at the time of the issuance of its July 3, 2007 Decision is
whether a final injunction should issue. While the RTC seemed to realize this as it in fact
made the injunction permanent, the Court, however, finds the same to be wanting in
basis.
Indeed, the RTC endeavored to provide a narrow distinction between a preliminary
injunction and a final injunction. Despite this, the RTC apparently confused itself. For
one, what it cited in its Decision were jurisprudence relating to preliminary injunction
and/or mandatory injunction as an ancillary writ and not as a final injunction. At that point,
the duty of the RTC was to determine, based on the evidence presented during trial, if
Rev. Cortez has conclusively established his claimed right (as opposed to preliminary
injunction where an applicant only needs to at least tentatively show that he has a right)
over the subject area. This is considering that the existence of such right plays an
important part in determining whether the preliminary writ of mandatory injunction should
be confirmed.
Surprisingly, however, the said Decision is bereft of the trial courts factual findings on
the matter as well as of its analysis of the same vis-a-vis applicable jurisprudence. As it
is, the said Decision merely contains a restatement of the parties respective allegations
in the Complaint and the Answer, followed by a narration of the ensuing proceedings, an
enumeration of the evidence submitted by Rev. Cortez, a recitation of jurisprudence
relating to preliminary injunction and/or specifically, to mandatory injunction as an
ancillary writ, a short reference to the IPRA which the Court finds to be irrelevant and
finally, a conclusion that a final and permanent injunction should issue. No discussion
whatsoever was made with respect to whether Rev. Cortez was able to establish with
absolute certainty hisclaimed right over the subject area.
Section 14, Article VIII of the Constitution, as well as Section 1 of Rule 36 and Section 1,
Rule 120 of the Rules on Civil Procedure, similarly state that a decision, judgment or final
order determining the merits of the case shall state, clearly and distinctly, the facts and
the law on which it is based. Pertinently, the Court issued on January 28, 1988
Administrative Circular No. 1, which requires judges to make complete findings of facts in
their decision, and scrutinize closely the legal aspects of the case in the light of the
evidence presented, and avoid the tendency to generalize and to form conclusion without
detailing the facts from which such conclusions are deduced.33
Clearly, the Decision of the RTC in this case failed to comply with the aforestated
guidelines.
In cases such as this, the Court would normally remand the case to the court a quo for
compliance with the form and substance of a Decision as required by the Constitution. In
order, however, to avoid further delay, the Court deems it proper to resolve the case
based on the merits.34
"Two requisites must concur for injunction to issue: (1) there must be a right to be
protected and (2) the acts against which the injunction is to be directed are violative of
said right."35 Thus, it is necessary that the Court initially determine whether the right
asserted by Rev. Cortez indeed exists. As earlier stressed, it is necessary that such right
must have been established by him with absolute certainty.
Rev. Cortez argues that he is entitled to the injunctive writ based on the
right of possession (jus possesionis) by reason of his peaceful and continuous
possession of the subject area since 1962. He avers that as this right is protected by law,
he cannot be peremptorily dispossessed therefrom, or if already dispossessed, is entitled
to be restored in possession. Hence, the mandatory injunctive writ was correctly issued
in his favor.
Jus possessionis or possession in the concept of an owner36 is one of the two concepts of
possession provided under Article 52537 of the Civil Code. Also referred to as adverse
possession,38 this kind of possesion is one which can ripen into ownership by
prescription.39 As correctly asserted by Rev. Cortez, a possessor in the concept of an
owner has in his favor the legal presumption that he possesses with a just title and he
cannot be obliged to show or prove it.40 In the same manner, the law endows every
possessor with the right to be respected in his possession.41
It must be emphasized, however, that only things and rights which are susceptible of
being appropriated may be the object of possession.42 The following cannot be
appropriated and hence, cannot be possessed: property of the public dominion, common
things (res communes) such as sunlight and air, and things specifically prohibited by
law.43
Here, the Court notes that while Rev. Cortez relies heavily on his asserted right of
possession, he, nevertheless, failed to show that the subject area over which he has a
claim is not part of the public domain and therefore can be the proper object of
possession.
Pursuant to the Regalian Doctrine, all lands of the public domain belong to the
State.44 Hence, "[a]ll lands not appearing to be clearly under private ownership are
presumed to belong to the State. Also, public lands remain part of the inalienable land of
the public domain unless the State is shown to have reclassified or alienated them to
private persons."45 To prove that a land is alienable, the existence of a positive act of the
government, such as presidential proclamation or an executive order; an administrative
action; investigation reports of Bureau of Lands investigators; and a legislative act or a
statute declaring the land as alienable and disposable must be established.46
In this case, there is no such proof showing that the subject portion of Palaui Island has
been declared alienable and disposable when Rev. Cortez started to occupy the same.
Hence, it must be considered as still inalienable public domain. Being such, it cannot be
appropriated and therefore not a proper subject of possession under Article 530 of the
Civil Code. Viewed in this light, Rev. Cortez claimed right of possession has no leg to
stand on. His possession of the subject area, even if the same be in the concept of an
owner or no matter how long, cannot produce any legal effect in his favor since the
property cannot be lawfully possessed in the first place.
The same goes true even if Proclamation No. 201 and Proclamation No. 447 were made
subject to private rights. The Court stated in Republic v. Bacas,47 viz.:
Regarding the subject lots, there was a reservation respecting private rights. In Republic
v. Estonilo, where the Court earlier declared that Lot No. 4319 was part of the Camp
Evangelista Military Reservation and, therefore, not registrable, it noted the proviso in
Presidential Proclamation No. 265 requiring the reservation to be subject to private rights
as meaning that persons claiming rights over the reserved land were not precluded from
proving their claims. Stated differently, the said proviso did not preclude the LRC from
determining whether x x x the respondents indeed had registrable rights over the
property.
As there has been no showing that the subject parcels of land had been
segregated from the military reservation, the respondents had to prove that the
subject properties were alienable or disposable land of the public domain prior to
its withdrawal from sale and settlement and reservation for military purposes
under Presidential Proclamation No. 265. The question is primordial importance
because it is determinative if the land can in fact be subject to acquisitive prescription
and, thus, registrable under the Torrens system. Without first determining the nature
and character of the land, all other requirements such as length and nature of
possession and occupation over such land do not come into play. The required
length of possession does not operate when the land is part of the public domain.
In this case, however, the respondents miserably failed to prove that, before the
proclamation, the subject lands were already private lands. They merely relied on such
recognition of possible private rights. In their application, they alleged that at the time of
their application, they had been in open, continuous, exclusive and notorious possession
of the subject parcels of land for at least thirty (30) years and became its owners by
prescription. There was, however, no allegation or showing that the government had
earlier declared it open for sale or settlement, or that it was already pronounced as
inalienable and disposable.48
In view of the foregoing, the Court finds that Rev. Cortez failed to conclusively establish
his claimed right over the subject portion of Palaui Island as would entitle him to the
issuance of a final injunction.
Anent the technical issue raised by Rev. Cortez, i. e, that the Republic has no personality
to bring this Petition since it was not a party before the CA, the Court deems it prudent to
set aside this procedural barrier. After all, "a party's standing before [the] Court is a
[mere] procedural technicality which may, in the exercise of [its] discretion, be set aside
in view of the importance of the issue raised."49
We note that Rev. Cortez alleged that he sought the injunction so that he could continue
his humanitarian works. However, considering that inalienable public land was involved,
this Court is constrained to rule in accordance with the aforementioned.
WHEREFORE, the Petition is GRANTED. The June 29, 2011 Decision of the Court of
Appeals in CA-GR. CV No. 89968 denying the appeal and affirming the July 3, 2007
Decision of the Regional Trial Court of Aparri, Cagayan-Branch 08 in Spl. Civil Action
Case No. II-2403, is REVERSED and SET ASIDE. Accordingly, the final injunction
issued in this case is ordered DISSOLVED and the Petition for Injunction in Spl. Civil
Action Case No. II-2403, DISMISSED.
SO ORDERED.
SECOND DIVISION
G.R. No. 177168, August 03, 2015
NAVY OFFICERS' VILLAGE ASSOCIATION, INC. (NOVAI), Petitioner, v. REPUBLIC OF
THE PHILIPPINES, Respondent.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 assailing the December 28, 2006
decision2 and March 28, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 85179.
The CA reversed and set aside the August 20, 2004 decision4 of the Regional Trial Court (RTC)
Branch 67, Pasig City, that dismissed the complaint filed by the Republic of the Philippines
(respondent or the Republic) for the cancellation of Transfer Certificate of Title (TCT) No. T-
15387 issued in the name of Navy Officers' Village Association, Inc. or NOVAI (petitioner).
The Factual Antecedents
TCT No. T-15387,5 issued in NOVAI's name, covers a 475,009 square-meter parcel of land (the
property)6 situated inside the former Fort Andres Bonifacio Military Reservation (FBMR) in
Taguig, Metro Manila.
The property previously formed part of a larger 15,812,684 square-meter parcel of land
situated at the former Fort William McKinley, Rizal, which was covered by TCT No. 61524 issued
in the name of the Republic of the Philippines.
On July 12, 1957, then President Carlos P. Garcia issued Proclamation No. 4237 "reserving for
military purposes certain parcels of the public domain situated in the municipalities of Pasig,
Taguig, Paraaque, province of Rizal, and Pasay City," which included the 15,812,684 square-
meter parcel of land covered by TCT No. 61524.
On September 29, 1965, then Pres. Diosdado Macapagal issued Proclamation No. 4618 which
excluded from Fort McKinley "a certain portion of land embraced therein, situated in the
municipalities of Taguig and Paraaque, Province of Rizal, and Pasay City," with an area of
2,455,310 square meters, and declared the excluded area as "AFP Officers' Village" to be
disposed of under the provisions of Republic Act Nos. 2749 and 730.10 cralawred nad
Barely a month after, or on October 25, 1965, Pres. Macapagal issued Proclamation No.
47811"reserving for the veterans rehabilitation, medicare and training center site purposes" an
area of 537,520 square meters of the land previously declared as AFP Officers' Village under
Proclamation No. 461, and placed the reserved area under the administration of the Veterans
Federation of the Philippines (VFP).
The property is within the 537,520 square-meter parcel of land reserved in VFP's favor.
On November 15, 1991, the property was the subject of a Deed of Sale12between the
Republic of the Philippines, through former Land Management Bureau (LMB) Director
Abelardo G. Palad, Jr., (Dir. Palad) and petitioner NOVAI. The deed of sale was
subsequently registered and from which TCT No. T-15387 was issued in NOVAI's
name.
The Republic's Complaint for Cancellation of Title
In its complaint13 filed with the RTC on December 23, 1993, the Republic sought to cancel
NOVAFs title based on the following grounds: (a) the land covered by NOVAFs title is part of a
military reservation; (b) the deed of sale conveying the property to NOVAI, which became the
basis for the issuance of TCT No. 15387, is fictitious; (c) the LMB has no records of any
application made by NOVAI for the purchase of the property, and of the NOVAFs alleged
payment of P14,250,270.00 for the property; and (d) the presidential proclamation, i.e.,
Proclamation No. 2487, claimed to have been issued by then President Corazon C. Aquino in
1991 that authorized the transfer and titling of the property to NOVAI, is fictitious.
NOVAI's Answer to the Complaint
In its answer (which was later amended) to the Republic's complaint, NOVAI counter-argued
that the property was no longer part of the public dominion, as the land had long been
segregated from the military reservation pursuant to Proclamation No. 461.
NOVAI claimed that, contrary to the Republic's contention that there were no records of the
sale, it had actually filed a letter-application for a sales patent over the property with the LMB
which prepared, verified and approved the property's plan and technical description; and that
the LMB delivered to it a copy of the deed of sale, signed and executed by Dir. Palad, after it
had paid a portion of the P14,250,270.00 purchase price, corresponding taxes, and other
charges, with the balance to be paid in installments.
Also, NOVAI contended that, since any alleged irregularities that may have attended the sale
pertained only to formalities, the proper remedy for the Republic was to file an action for
reformation of instrument, not for cancellation of title. In any event, it added that the Republic's
cause of action had prescribed because its title to the property had already become
indefeasible.
The RTC's decision
The RTC narrowed down the issues to: (a) the character of the property in question, i.e.,
whether the property in question was part of the FBMR, and hence, inalienable; and (b) the
validity of the deed of sale conveying the property to NOVAI, i.e., whether the title over the
property was acquired by NOVAI through fraud. The RTC resolved both issues in NOVAI's
favor.
In its decision, the RTC ruled that: (a) the property is alienable and disposable in character, as
the land falls within the area segregated from the FBMR pursuant to Proclamation No. 461; (b)
the subject deed of sale should be presumed valid on its face, as it was executed with all the
formalities of a notarial certification; (c) notwithstanding the claims of forgery, the signature of
Dir. Palad on the deed of sale appeared genuine and authentic; and (d) NOVAI's title to the
property had attained indefeasibility since the Republic's action for cancellation of title was filed
close to two (2) years from the issuance of the title.
The CA's decision
The CA reversed and set aside the RTC's decision. It ruled that the property is inalienable
land of the public domain; thus, it cannot be disposed of or be the subject of a sale. It pointed
out that, since NOVAI failed to discharge its burden of proving the existence of Proclamation No.
2487 - the positive governmental act that would have removed the property from the public
domain the property remained reserved for veterans rehabilitation purposes under
Proclamation No. 478, the latest executive issuance affecting the property.
Since the property is inalienable, the CA held that the incontestability and indefeasibility
generally accorded to a Torrens title cannot apply because the property, as in this case, is
unregistrable land; that a title issued by reason or on account of any sale, alienation, or transfer
of an inalienable property is void and a patent nullity; and that, consequently, the Republic's
action for the cancellation of NOVAI's title cannot be barred by prescription.
Also, the CA held that there can be no presumption of regularity in the execution of the subject
deed of sale given the questionable circumstances that surrounded the alleged sale of the
property to NOVAI,14e.g., NOVAI's failure to go through the regular process in the Department
of Environment and Natural Resources (DENR) or the LMB Offices in the filing of an application
for sales patent and in the conduct of survey and investigation; the execution of the deed of
sale without payment of the full purchase price as required by policy; and the appearances of
forgery and falsification of Dir. Palad's signature on the deed of sale and on the receipts issued
to NOVAI for its installment payments on the property, among others.
Lastly, the CA held that the Court's observations and ruling in Republic of the Philippines v.
Southside Homeowners Association, Inc (Southside)15 is applicable to the present case. In
Southside, the Republic similarly sought the cancellation of title - TCT No. 15084 - issued in
favor of Southside Homeowners Association, Inc. (SHAI) over a 39.99 hectare area of land
situated in what was known as the Joint U.S. Military Assistance Group (JUSMAG) housing area
in Fort Bonifacio. The Court cancelled the certificate of title issued to SHAI, as the latter failed to
prove that the JUSMAG area had been withdrawn from the military reservation and had been
declared open for disposition. The Court therein ruled that, since the JUSMAG area was still part
of the FBMR, its alleged sale to SHAI is necessarily void and of no effect.
NOVAI sought reconsideration of the CA's decision, which the CA denied in its March 28, 2007
resolution;16 hence, this petition.
The Petition
NOVAI alleges that the CA erred in declaring that: (a) the property is inalienable land of the
public domain, (b) the deed of sale and Proclamation No. 2487 were void and nonexistent,
respectively, (c) the Republic's action for cancellation of title was not barred by prescription,
and (d) the ruling in Southsidewas applicable to the present case.
In support of its petition, NOVAI raises the following arguments: ChanRoblesvi rtua lLawl ibra ry
(a)The property is no longer part of the public domain because, by
virtue of Proclamation No. 461, s. of 1965, the property was
excluded from the FBMR and made available for disposition to
qualified persons, subject to the provisions of R.A. Nos. 274 and
720 in relation to the Public Land Act;
(b)The deed of sale was, in all respects, valid and enforceable, as it
was shown to have been officially executed by an authorized
public officer under the provisions of the Public Land Act, and
celebrated with all the formalities of a notarial certification;
(c) Proclamation No. 2487 is to be presumed valid until proven
otherwise; that the Republic carried the burden of proving that
Proclamation No. 2487 was a forgery, and that it failed to
discharge this burden;
(d)The CA should not have considered as evidence the testimony of
Senator Franklin Drilon on the nonexistence of Proclamation No.
2487 because such testimony was given by Senator Drilon in
another case17 and was not formally offered in evidence by the
Republic during the trial of the present case before the RTC;
(e) The action for cancellation of title filed by the Republic is already
barred by prescription because it was filed only on December 23,
1993, or close to two (2) years from the issuance of NOVAI's
title on January 9, 1992; and
(f) The case of Southside is not a cognate or companion case to the
present case because the two cases involve completely dissimilar
factual and doctrinal bases; thus, the Court's observations and
ruling in Southside should not be applied to the present case.
The Republic's Comment to the Petition
Procedurally, the Republic assails the propriety of the issues raised by NOVAI, such as "whether
Proclamation No. 2487 and the signature of LMB Director Palad on the assailed deed of sale are
forged or fictitious," and "whether the Republic had presented adequate evidence to establish
the spuriousness of the subject proclamation," which are factual in nature and not allowed in a
Rule 45 petition.
On the petition's substance, the Republic counters that: ChanRobles virtua lLawl ibra ry
(a) The property is inalienable public land incapable of private
appropriation because, while the property formed part of the
area segregated from the FBMR under Proclamation No. 461, it
was subsequently reserved for a specific public use or purpose
under Proclamation No. 478;
(b)Proclamation No. 2487, which purportedly revoked Proclamation
No. 478, does not legally exist and thus cannot be presumed
valid and constitutional unless proven otherwise; the
presumption of validity and constitutionality of a law applies only
where there is no dispute as to the authenticity and due
execution of the law in issue;
(c) The deed of sale executed by NOVAI and by Dir. Palad was
undeniably forged, as Dir. Palad categorically denied having
signed the deed of sale, and a handwriting expert from the
National Bureau of Investigation (NBI) confirmed that Dir.
Palad's signature was indeed a forgery;18
(d)NOVAI, a private corporation, is disqualified from purchasing the
property because R.A. Nos. 274 and 730, and the Public Land
Act only allow the sale of alienable and disposable public lands to
natural persons, not juridical persons; and
(e)The Court's decision in Southside applies to the present case
because of the strong factual and evidentiary relationship
between the two cases.
BCDA's Comment-in-Intervention
On December 28, 2007, and while the case was pending before this Court, the Bases
Conversion Development Authority (BCDA) filed a motion for leave to file comment-in-
intervention and to admit the attached comment-in-intervention.19 cra lawredna d
In a resolution dated February 18, 2008, 20
the Court allowed the BCDA's intervention.
As the Republic has done, the BCDA contends that NOVAI is disqualified from acquiring the
property given the constitutional and statutory provisions that prohibit the acquisition of lands
of the public domain by a corporation or association; that any sale of land in violation of the
Constitution or of the provisions of R.A. Nos. 274 and 730, and the Public Land Act are null and
void; and that any title which may have been issued by mistake or error on the part of a public
official can be cancelled at any time by the State.
The BCDA further contends that NOVAI miserably failed to comply with the legal requirements
for the release of the property from the military reservation. More specifically, (1) the Director
of Lands did not cause the property's subdivision, including the determination of the number of
prospective applicants and the area of each subdivision lot which should not exceed one
thousand (1,000) square meters for residential purposes; (2) the purchase price for the
property was not fixed by the Director of Lands as approved by the DENR Secretary; (3) NOVAI
did not pay the purchase price or a portion of it to the LMB; and (4) the Deed of Sale was not
signed by the President of the Republic of the Philippines or by the Executive Secretary, but was
signed only by the LMB Director.
Also, the BCDA observed that NOVAI was incorporated only on December 11, 1991, while the
deed of sale was purportedly executed on November 15, 1991, which shows that NOVAI did not
yet legally exist at the time of the property's purported sale.
OUR RULING
We resolve to DENY NOVAI's petition for review on certiorari as we find no reversible
error committed by the CA in issuing its December 28, 2006 decision and March 28, 2007
resolution.
I. Procedural Objections
A. In the filing of the present petition before this Court
Under Section 1, Rule 45 of the Rules of Court, a party desiring to appeal from a judgment or
final order of the CA shall raise only questions of law which must be distinctly set forth.
A question of law exists when the doubt or controversy concerns the correct application of law
or jurisprudence on a certain state of facts.21 The issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of the facts being
admitted.22 In contrast, a question of fact exists when a doubt or difference arises as to the
truth or falsehood of facts or when the query invites the calibration of the whole evidence
considering mainly the credibility of the witnesses; the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the whole; and the
probability of the situation.23 cralaw rednad
The rule that only questions of law may be the subject of a Rule 45 Petition before this Court,
however, has exceptions.24 Among these exceptions is when there is conflict between the
factual findings of the RTC and that of the CA.
In this case, the CA totally reversed the RTC on the nature and character of the land, in
question, and on the,validity of the deed of sale between the parties. Due to the conflicting
findings of the RTC and the CA on these issues, we are allowed to reexamine the facts and the
parties' evidence in order to finally resolve the present controversy.
B. On BCD A's Intervention
In its reply25 to the BCDA's comment-in-intervention, NOVAI primarily objects to the BCDA's
cralawre d
intervention because it was made too late.
Intervention is a proceeding in a suit or action by which a third person is permitted by the court
to make himself a party, either joining the plaintiff or defendant, or demanding something
adverse to both of them.26 Its purpose is to enable such third party to protect or preserve a
right or interest which may be affected by the proceeding,27 such interest being actual,
material, direct and immediate, not simply contingent and expectant.28
cralawredna d
As a general rule, intervention cannot be made at the appeal stage. Section 2, Rule 19 of the
Rules of Court, governing interventions, provides that "the motion to intervene may be filed at
any time before rendition of judgment by the trial court." This rule notwithstanding, intervention
may be allowed after judgment where it is necessary to protect some interest which cannot
otherwise be protected, and may be allowed for the purpose of preserving the intervenor's right
to appeal.29 "The rule on intervention, like all other rules of procedure, is intended to make the
powers of the Court fully and completely available for justice x x x and aimed to facilitate a
comprehensive adjudication of rival claims overriding technicalities on the timeliness of the filing
thereof."30
cralawre dnad
Thus, in exceptional cases, the Court may allow intervention although the trial court has already
rendered judgment. In fact, the Court had allowed intervention in one case even when the
petition for review was already submitted for decision before it.31 c ralawred nad
In the present case, the BCDA is indisputably the agency specifically created under R.A. No.
722732 to own, hold and/or administer military reservations including, among others, those
located inside the FBMR. If we are to affirm the CA's decision, the BCDA stands to benefit as a
favorable ruling will enable it to pursue its mandate under R.A. No. 7227. On the other hand, if
we reverse the CA's decision, it stands to suffer as the contrary ruling will greatly affect the
BCDA's performance of its legal mandate as it will lose the property without the opportunity to
defend its right in court.
Indeed, the BCDA has such substantial and material interest both in the outcome of the case
and in the disputed property that a final adjudication cannot be made in its absence without
affecting such interest. Clearly, the BCDA's intervention is necessary; hence, we allow the
BCDA's intervention although made beyond the period prescribed under Section 2, Rule 19 of
the Rules of Court.
II. Substantive Issues
A. The property is non-disposable land of the public domain reserved for public or
quasi-public use or purpose
We agree with the CA that the property remains a part of the public domain that could not have
been validly disposed of in NOVAI's favor. NOVAI failed to discharge its burden of proving that
the property was withdrawn from the intended public or quasi-public use or purpose.
While the parties disagree on the character and nature of the property at the time of the
questioned sale, they agree, however, that the property formed part of the FBMR - a military
reservation belonging to the public domain. We note that the FBMR has been the subject of
several presidential proclamations and statues issued subsequent to Proclamation No. 423,
which either removed or reserved for specific public or quasi-public use or purpose certain of its
portions.
On the one hand, NOVAI argues that Proclamation No. 461 had already transferred the property
from the State's "public domain" to its "private domain." On the other hand, the respondents
argue that Proclamation No. 478, in relation with RA 7227 and EO No. 40, had reverted the
property to the inalienable property of the "public domain."
The classification and disposition of lands of the public domain are governed by Commonwealth
Act (C.A.) No. 141 or the Public Land Act, the country's primary law on the matter.
Under Section 6 of C.A. No. 141, the President of the Republic of the Philippines, upon the
recommendation of the Secretary of Agriculture and Natural Resources, may, from time to
time, classifylands of the public domain into alienable or disposable, timber and mineral lands,
and transfer these lands from one class to another for purposes of their administration and
disposition.
Under Section 7 of C.A. No. 141, the President may, from time to time, upon recommendation
of the Secretary of Agriculture and Natural Resources and for purposes of the administration
and disposition of alienable and disposable public lands, declare what lands are open to
disposition or concession under the Acts' provisions.33
cralaw rednad
Section 8 of C.A. No. 141 sets out the public lands open to disposition or concession and the
requirement that they have been officially delimited and classified, and when practicable,
surveyed. Section 8 excludes (by implication) from disposition or concession, public lands which
have been reserved for public or quasi-public uses; appropriated by the Government; or in any
manner have become private property, or those on which a private right authorized and
recognized by the Act or any other valid law may be claimed. Further, Section 8 authorizes the
President to suspend the concession or disposition of lands previously declared open to
disposition, until again declared open to disposition by his proclamation or by act of Congress.
Lands of the public domain classified as alienable and disposable are further classified, under
Section 9 of C.A. No. 141, according to their use or purpose into: (1) agricultural; (2)
residential, commercial, industrial, or for similar productive purposes; (3) educational,
charitable, or other similar purposes; and (4) reservations for townsites and for public and
quasi-public uses. Section 9 also authorizes the President to make the classifications and, at
any time, transfer lands from one class to another.
Section 83 of C.A. No. 141 defines public domain lands classified as reservations for
public and quasi-public uses as "any tract or tracts of land of the public domain" which
the President, by proclamation and upon recommendation of the Secretary of Agriculture and
Natural Resources, may designate "as reservations for the use of the Republic of the Philippines
or any of its branches, or of the inhabitants thereof or "for quasi-public uses or purposes when
the public interest requires it."34 Under Section 88 of the same Act, these "reserved tract or
tracts of lands 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
[CA No. 141] or by proclamation of the President."35 cralaw rednad
As these provisions operate, the President may classify lands of the public domain as alienable
and disposable, mineral or timber land, and transfer such lands from one class to another at
any time.
Within the class of alienable and disposable lands of the public domain, the President may
further classify public domain lands, according to the use or purpose to which they are destined,
as agricultural: residential, commercial, industrial, etc.; educational, charitable, etc.; and
reservations for townsites and for public and quasi-public uses; and, he may transfer such lands
from one class to the other at any time.
Thus, the President may, for example, transfer a certain parcel of land from its classification as
agricultural (under Section 9 [a]), to residential, commercial, industrial, or for similar purposes
(under Section 9 [b]) and declare it available for disposition under any of the modes of
disposition of alienable and disposable public lands available under C.A. No. 141, as amended.
The modes of disposition of alienable and disposable lands available under C.A. No. 141 include:
(1) by homestead settlement (Chapter IV), by sale (Chapter V), by lease (Chapter VI) and by
confirmation of imperfect or incomplete titles (Chapters VII and VIII) for agricultural lands
under Title II of C.A. No. 141 as amended; (2) by sale or by lease for residential, commercial,
or industrial lands under Title III of C.A. No. 141, as amended; (3) by donation, sale, lease,
exchange or any other form for educational and charitable lands under Title IV of C.A. No. 141,
as amended; and (4) by sale by public auction for townsite reservations under Chapter XI, Title
V of C.A. No. 141, as amended.
Once these parcels of lands are actually acquired by private persons, either by sale, grant, or
other modes of disposition, they are removed from the mass of land of the public domain and
become, by operation of law, their private property.
With particular regard, however, to parcels of land classified as reservations for public and
quasi-public uses (under Section 9 [d]), when the President transfers them to the class of
.alienable and disposable public domain lands destined for residential, commercial, industrial, or
for similar purposes (under Section 9 [b]), or some other class under Section 9, these reserved
public domain lands become available for disposition under any of the available modes of
disposition under C.A. No. 141, as provided above. Once these re-classified lands (to residential
purposes from reservation for public and quasi-public uses) are actually acquired by private
persons, they become private property.
In the meantime, however, and until the parcels of land are actually granted to, acquired, or
purchased by private persons, they remain lands of the public domain which the President,
under Section 9 of C.A. No. 141, may classify again as reservations for public and quasi-public
uses. The President may also, under Section 8 of C.A. No. 141, suspend their concession or
disposition.
If these parcels of land are re-classified as reservations before they are actually acquired by
private persons, or if the President suspends their concession or disposition, they shall not be
subject to occupation, entry, sale, lease, or other disposition until again declared open for
disposition by proclamation of the President pursuant to Section 88 in relation with Section 8 of
C.A. No. 141.
Thus, in a limited sense, parcels of land classified as reservations for public or quasi-public uses
under Section 9 (d) of C.A. No. 141 are still non-alienable and non-disposable, even though
they are, by the general classification under Section 6, alienable and disposable lands of the
public domain. By specific declaration under Section 88, in relation with Section 8, these lands
classified as reservations are non-alienable and non-disposable.
In short, parcels of land classified as reservations for public or quasi-public uses: (1) are non-
alienable and non-disposable in view of Section 88 (in relation with Section 8) of CA No. 141
specifically declaring them as non-alienable and not subject to disposition; and (2) they remain
public domain lands until they are actually disposed of in favor of private persons.
Complementing and reinforcing this interpretation - that lands designated as reservations for
public and quasi-public uses are non-alienable and non-disposable and retain their character as
land of the public domain is the Civil Code with its provisions on Property that deal with lands in
general. We find these provisions significant to our discussion and interpretation as lands are
property, whether they are public lands or private lands.36 cralaw rednad
In this regard, Article 419 of the Civil Code classifies property as either of public dominion or of
private ownership. Article 42037 defines property of the public dominion as those which are
intended for public use or, while not intended for public use, belong to the State and are
intended for some public service. Article 421, on the other hand, defines patrimonial property as
all other property of the State which is not of the character stated in Article 420. While Article
422 states that public dominion property which is no longer intended for public use or service
shall form part of the State's patrimonial property.
Thus, from the perspective of the general Civil Code provisions on Property, lands which are
intended for public use or public service such as reservations for public or quasi-public uses are
property of the public dominion and remain to be so as long as they remain reserved.
As property of the public dominion, public lands reserved for public or quasi-public uses are
outside the commerce of man.38 They cannot be subject to sale, disposition or encumbrance;
any sale, disposition or encumbrance of such property of the public dominion is void for being
contrary to law and public policy.39 c ralawred nad
To be subject to sale, occupation or other disposition, lands of the public domain designated as
reservations must first be withdrawn, by act of Congress or by proclamation of the President,
from the public or quasi-public use for which it has been reserved or otherwise positively
declared to have been converted to patrimonial property, pursuant to Sections 8 and 88 of C.A.
No. 141 and Article 422 of the Civil Code.40 Without such express declaration or positive
governmental act, the reserved public domain lands remain to be public dominion property of
the State.41
cralawrednad
To summarize our discussion: ChanRoblesvi rtua lLawl ibra ry
(1) Lands of the public domain classified as reservations for public or quasi-public uses are non-
alienable and shall not be subject to disposition, although they are, by the general classification
under Section 6 of C.A. No. 141, alienable and disposable lands of the public domain, until
declared open for disposition by proclamation of the President; and
(2) Lands of the public domain classified as reservations are property of the public dominion;
they remain to be property of the public dominion until withdrawn from the public or quasi-
public use for which they have been reserved, by act of Congress or by proclamation of the
President, or otherwise positively declared to have been converted to patrimonial property.
Based on these principles, we now examine the various issuances affecting the property in order
to determine the property's character and nature, i.e., whether the property remains public
domain property of the State or has become its private property.
For easier reference, we reiterate the various presidential proclamations and statutes affecting
the property: c ralawlawli bra ry
(1)Proclamation No. 423, series of 1957 - established the FBMR, a
military reservation; the property falls within the FBMR;
(2)Proclamation No. 461, series of (September) 1965 - segregated,
from the FBMR, a portion of Parcel 3, plan Psd-2031, which
includes the property, for disposition in favor of the AFPOVAI;
(3)Proclamation No. 478, series of (October) 1965 reserved the
property in favor of the Veterans Rehabilitation and Medical
Training Center (VRMTC); and
(4)RA No. 7227 (1992), as implemented by EO No. 40, series of
1992 - subject to certain specified exemptions, transferred the
military camps within Metro Manila, among others, to the BCDA.
1. Proclamation No. 461 was not the legal basis for the property's sale in favor of NOVAI
We agree with the respondents that while Proclamation No. 461, issued in September 1965,
removed from the FBMR a certain parcel of land that includes the property, Proclamation No.
478, issued in October 1965, in turn segregated the property from the area made available for
disposition under Proclamation No. 461, and reserved it for the use of the VRMTC.
We find it clear that Proclamation No. 478 was issued after, not before, Proclamation No. 461.
Hence, while Proclamation No. 461 withdrew a certain area or parcel of land from the FBMR and
made the covered area available for disposition in favor of the AFPOVAI, Proclamation No. 478
subsequently withdrew the property from the total disposable portion and reserved it for the
use of the VRMTC. With the issuance of Proclamation No. 478, the property was transferred
back to that class of public domain land reserved for public or quasi-public use or purpose
which, consistent with Article 420 of the Civil Code, is property of the public dominion, not
patrimonial property of the State.
Even under the parties' deed of sale, Proclamation No. 2487, not Proclamation No. 461, was
used as the authority for the transfer and sale of the property to NOVAI. The subject deed of
sale pertinently reads: c ralawlaw lib rary
"This DEED OF SALE, made and executed in Manila, Philippines, by the Director of Lands,
Pursuant to Batas Pambansa Blg. 878 and in representation of the Republic of the Philippines,
hereinafter referred to as the Vendor, in favor of THE NAVY OFFICERS VILLAGE ASSOCIATION
(NOVA) and residing in Fort Bonifacio, Metro Manila, referred to as the Vendee,
WITNESSETH: ChanRoblesvirtua lLawl ibra ry
xxxx
WHEREAS, pursuant to Presidential proclamation No. 478 as amended by proclamation
No. 2487 in relation to the provision of Act No. 3038 and similar Acts supplemented thereto,
the Vendee applied for the purchase of a portion of the above-described Property which portion
is identical to Lot 3, Swo-000183 and more particularly described on page two hereof;
xxxx
WHEREAS, the Vendee has complied with all other conditions required by Act No. 3038 in
relation to Commonwealth Act No. 141, as amended, and the rules and regulation promulgated
thereunder.
x x x x. (Emphasis supplied)
Clearly, the legal basis of the property's sale could not have been Proclamation No. 461.
2. Proclamation No. 2487 which purportedly revoked Proclamation No. 478 does not legally
exist; hence, it did not withdraw the property from the reservation or from the public dominion
Neither can Proclamation No. 2487 serve as legal basis for the property's sale in NOVAI's favor.
Proclamation No. 2487 purportedly revoked Proclamation No. 478 and declared the property
open for disposition in favor of NOVAI.
The Republic and the BCD A (now respondents) argue that Proclamation No. 2487 does not
legally exist; it could not have served to release the property from the mass of the non-
alienable property of the State.
Hence, even if NOVAI relies on Proclamation No. 2487 - on which it did not as it relied on
Proclamation No. 4.61 - the sale and NOVAI's title are still void. NOVAI, on the other hand,
claims in defense that Proclamation No. 2487 is presumed valid and constitutional, and the
burden of proving otherwise rests on the respondents.
In insisting on the presumptive validity of law, NOVAI obviously failed to grasp and appreciate
the thrust of the respondents' arguments, including the impact of the evidence which they
presented to support the question they raised regarding the authenticity of Proclamation No.
2487.
Rather than the validity or constitutionality of Proclamation No. 2487, what the respondents
assailed was its legal existence, not whether it was constitutional or not. Put differently, they
claimed that Proclamation No. 2487 was never issued by former Pres. Aquino; hence, the
presumptive validity and constitutionality of laws cannot apply.
Accordingly, after the respondents presented their evidence, it was NOVAI's turn to present its
own evidence sufficient to rebut that of the respondents. On this point, we find the Republic's
evidence sufficiently convincing to show that Proclamation No. 2487 does not legally exist.
These pieces of evidence include: ChanRoble svi rtual Lawli bra ry
First, the October 26, 1993 letter of the Solicitor General to the Office of the President inquiring
about the existence of Proclamation No. 2487.42 cralawrednad
Second, the November 12, 1993 letter-reply of the Office of the President informing the
Solicitor General that Proclamation No. 2487 "is not among the alleged documents on file with
[its] Office."43 cralaw rednad
Third, the testimony of the Assistant Director of the Records Office in Malacaang confirming
that indeed, after verifying their records or of the different implementing agencies, "[t]here is
no existing document(s) in [their] possession regarding that alleged Proclamation No.
2487;"44 and
Fourth and last, the October 11, 1993 Memorandum of then Department of Justice Secretary
Frahklin M. Drilon (DOJ Secretary Drilon) to the NBI to investigate, among others, the
circumstances surrounding the issuance of Proclamation No. 2487.45 Notably, this October 11,
1993 Memorandum of DOJ Secretary Drilon stated that: "Proclamation No. 2487 is null and void
x x x. [It] does not exist in the official records of the Office of the President x x x [and] could
riot have been issued by the former President since the last Proclamation issued during her
term was proclamation No. 932 dated 19 June 1992."46 cralawre dnad
In this regard, we quote with approval the CA's observations in its December 28, 2006
decision:c ralawlawl ibra ry
Cast against this backdrop, it stands to reason enough that the defendant-appellee NOVAI was
inevitably duty bound to prove and establish the very existence, as well as the genuineness or
authenticity, of this Presidential Proclamation No. 2487. For certain inexplicable reasons,
however, the defendant-appellee did not do so, but opted to build up and erect its case upon
Presidential Proclamation No. 461.
To be sure, the existence of Presidential Proclamation No. 2487 could be easily proved,
and established, by its publication in the Official Gazette. But the defendant-appellee
could not, as it did not, submit or present any copy or issue of the Official Gazette
mentioning or referring to this Presidential Proclamation No. 2487, this even in the face
of the Government's determined and unrelenting claim that it does not exist at all.47 (Emphasis
supplied)
A final point, we did not fail to notice the all too obvious and significant difference between the
proclamation number of Proclamation No. 2487 and the numbers of the proclamations actually
issued by then President Corazon C. Aquino on or about that time.
We take judicial notice that on September 25, 1991 - the very day when Proclamation No. 2487
was supposedly issued - former Pres. Aquino issued Proclamation No. 80048 and Proclamation
No. 801.49Previously, on September 20, 1991, Pres. Aquino issued Proclamation No. 799;50 and
thereafter, on September 27, 1991, she issued Proclamation No. 802.51
Other proclamations issued around or close to September 25, 1991, included the following:
1. Proclamation No. 750 issued on July 1, 1991;52 cra lawredna d
2. Proclamation No. 760 issued on July 18, 1991;53
cra lawredna d
3. Proclamation No. 770 issued on August 12, 1991;54
cralaw rednad
4. Proclamation No. 780 issued on August 26, 1991; 55
cralaw rednad
5. Proclamation No. 790 issued on September 3, 1991;56
6. Proclamation No. 792 issued on September 5, 1991;57
7. Proclamation No. 797 issued on September 11, 1991;58
8. Proclamation No. 798 issued on September 12, 1991;
9. Proclamation No. 804 issued on September 30, 1991;
10. Proclamation No. 805 issued on September 30, 1991;61
11. Proclamation No. 806 issued on October 2, 1991;62
cralaw redn ad
12. Proclamation No. 810 issued on October 7, 1991;63
cralaw redn ad
13. Proclamation No. 820 issued on October 25, 1991;64
cralaw rednad
14. Proclamation No. 834 issued on November 13, 1991;
15. Proclamation No. 840 issued on November 26, 1991.66
This list shows that the proclamations issued by former Pres. Aquino followed a series or
sequential pattern with each succeeding issuance bearing a proclamation number one count
higher than the proclamation number of the preceding Presidential Proclamation. It also shows
that on or about the time Proclamation No. 2487 was purportedly issued, the proclamation
numbers of the proclamations issued by President Aquino did not go beyond the hundreds
series.
It is highly implausible that Proclamation No. 2487 was issued on September 25, 1991, or on
any day close to September 25, 1991, when the proclamations issued for the same period were
sequentially numbered and bore three-digit proclamation numbers.
As Proclamation No. 2487 does not legally exist and therefore could not have validly revoked
Proclamation No. 478, we find, as the CA also correctly did, that Proclamation No. 478 stands as
the most recent manifestation of the State's intention to reserve the property anew for some
public or quasi-public use or purpose. Thus, consistent with Sections 88, in relation with Section
8, of C.A. No. 141 and Article 420 of the Civil Code, as discussed above, the property which was
classified again as reservation for public or quasi-public use or purpose is non-alienable and not
subject to disposition; it also remains property of the public dominion; hence, non-alienable and
non-disposable land of the public domain.
As a consequence, when R.A. No. 7227 took effect in 1992, the property subject of this case,
cralawredna d
which does not fall among the areas specifically designated as exempt from the law's
operation67 was, by legal fiat, transferred to the BCDA's authority.
c ralawlawl ibra ry
B. As the property remains a reserved public domain land, its sale and the title issued
pursuant to the sale are void
As the property remains a reserved public domain land, it is outside the commerce of man.
Property which are intended for public or quasi- public use or for some public purpose are public
dominion property of the State68 and are outside the commerce of man. NOVAI, therefore, could
not have validly purchased the property in 1991.
cralaw rednad
We reiterate and emphasize that property which has been reserved for public or quasi-public
use or purpose are non-alienable and shall not be subject to sale or other disposition until again
cralaw rednad
declared alienable by law or by proclamation of the President.69 Any sale or disposition of
property of the public dominion is void for being contrary to law and public policy.70
cra lawredna d
cra lawre dnad
59
Since the sale of the property, in this case, is void, the title issued to NOVAI is similarly void ab
cra lawredna d
initio. It is a well-settled doctrine that registration under the Torrens System does not, by itself,
60
vest title as it is not a mode of acquiring ownership;71 that registration under the Torrens
cra lawredna d
System merely confirms the registrant's already existing title.72
c ralawre dnad
cra lawredna d
Accordingly, the indefeasibility of a Torrens title does not apply in this case and does not attach
to NOVAI's title. The principle of indefeasibility does not apply when the sale of the property and
the title based thereon are null and void. Hence, the Republic's action to declare the nullity of
NOVAI's void title has not prescribed.
NOVAI insists that the deed of sale carries the presumption of regularity in the performance of
official duties as it bears all the earmarks of a valid deed of sale and is duly notarized.
65
and
While we agree that duly notarized deeds of sale carry the legal presumption of regularity in the
performance of official duties,73 the presumption of regularity in the performance of official
duties, like all other disputable legal presumptions, applies only in the absence of clear and
convincing evidence establishing the contrary.74 cralawred nad
When, as in this case, the evidence on record shows not only that the property was reserved for
public use or purpose, and thus, non-disposable - a fact that on its own defeats all the evidence
which the petitioner may have had to support the validity of the sale - but also shows that the
sale and the circumstances leading to it are void in form and in substance, the disputable
presumption of regularity in the performance of official duties certainly cannot apply.
C. Even assuming that Proclamation No. 2487 legally exists, the sale of the property they appeared on the submitted comparison documents "were not written by one and
to NOVAI is illegal. the same person,"85 and concluded that "[t]he questioned signature of 'ABELARDG G.
PALAD, JR.' xxx is a TRACED FORGERY by carbon process;"86 and
1. Dir. Palad did not have the authority to sell and convey the property.
f. Lastly, the LMB Cashier's Office did not receive the amount of P14,250,270.00 allegedly
The subject deed of sale points to Proclamation No. 2487, purportedly amending Proclamation paid by NOVAI as consideration for the property. The receipts87 - O.R. No. 8282851
No. 478, in relation with Act No. 3038,75 as legal basis for authorizing the sale. dated November 28, 1991, for P160,000.00 and O.R. No. 317024 dated December 23,
1992, for P200,000.00 - which NOVAI presented as evidence of its alleged payment
Section 176 of Act No. 3038 authorizes the sale or lease only: (i) of land of the private domain, bore official receipt numbers which were not among the series of official receipts issued
not land of the public domain; and (ii) by the Secretary of Agriculture and Natural Resources, by the National Printing Office to the LMB, and in fact, were not among the series used
not by the LMB Director. Section 277 of the said Act, in fact, specifically exempts from its by the LMB on the pertinent dates.88
coverage "land necessary for the public service." As the sale was executed by the LMB Director
covering the property that was reserved for the use of the VRMTC, it, therefore, clearly violated
In sum, we find - based on the facts, the law, and jurisprudence - that the property, at the time
the provisions of Act No. 3038.
of the sale, was a reserved public domain land. Its sale, therefore, and the corresponding title
issued in favor of petitioner NOVAI, is void.
2. The area subject of the sale far exceeded the area that the Director of Lands is authorized to
convey.
WHEREFORE, we hereby DENY the present petition for review on certiorari. No reversible
error attended the decision dated December 28, 2006, and the resolution dated March 28,
Batas Pambansa (B.P.) Blg. 878 which, per the Deed of Sale, purportedly authorized the
78
2007, of the Court of Appeals in CA-G.R. CV No. 85179.
Director of Lands, representing the Republic, to sell the property in favor of NOVAI, limits the
authority of the Director of Lands to sign patents or certificates covering lands to ten (10)
SO ORDERED.
hectares.
chanrobles virtuallawlibrary

In this case, the subject deed of sale covers a total area of 475,009 square meters or 47.5009 Republic of the Philippines
hectares. Obviously, the area covered by the deed of sale and which NOVAI purportedly SUPREME COURT
purchased, far exceeds the area that the Director of Lands is authorized to convey under B.P. Manila
Blg. 878.

3. The evidence on record and the highly suspect circumstances surrounding the sale fully FIRST DIVISION
supports the conclusion that the property's sale to NOVAI is fictitious, thus, void.
G.R. No. 192896 July 24, 2013
We note the following irregularities that attended the sale of the property to NOVAI:

a. The absence, on file with the LMB, of any request for approval of any survey plan or of
DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC., represented by its
an approved survey plan in NOVAI's name covering the property.79 The approved Incumbent President, GREG SERIEGO, Petitioner,
survey plan relating to Lot 3, SWO-13-000183 subject of NOVAI's TCT No. 15387 vs.
pertains to the AFPOVAI under Proclamation No. 461;80 cralawre dnad BASES DEVELOPMENT AUTHORITY, Respondent.

b. The technical description, which the DENR prepared for the property as covered by TCT DECISION
No. T-15387, was issued upon NOVAI's request only for purposes of reference, not for
registration of title, and was based on the approved survey plan of the AFPOVAI;81 cralawrednad

REYES, J.:
c. There is no record of any public land application filed by NOVAI with the LMB or with
the DENR Office for the purchase of the property or of any parcel of land in Metro Before us on Petition for Review1 under Rule 45 of the Rules of Court is the
Manila;82
cralaw rednad

Decision2 dated September 10, 2009 and Resolution3 dated July 13, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 85228 nullifying and setting aside for lack of jurisdiction
d. LMB Dir. Palad categorically denied signing and executing the deed of sale;83
the Resolution4 dated April 28, 2004 of the Commission on the Settlement of Land
c ralawre dnad

e. The findings of the NBI handwriting; expert, detailed in the Questioned Documents Problems (COSLAP) in COS LAP Case No. 99-500. The fallo of the assailed COS LAP
Report No. 815-1093 dated October 29, 1993,84 revealed that the, signature of LMB Resolution reads, as follows:
Director Palad as it appeared on the Deed of Sale and his standard/sample signature as
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the subject property, covering an area of 78,466 square meters, now
being occupied by the members of the Dream Village Neighborhood Association,
Inc. to be outside of Swo-00-0001302 BCDA property.
2. In accordance with the tenets of social justice, members of said association
are advised to apply for sales patent on their respective occupied lots with the
Land Management Bureau, DENR-NCR, pursuant to R.A. Nos. 274 and 730.
3. Directing the Land Management Bureau-DENR-NCR to process the sales
patent application of complainants pursuant to existing laws and regulation.
4. The peaceful possession of actual occupants be respected by the
respondents.
SO ORDERED.5
Antecedent Facts
Petitioner Dream Village Neighborhood Association, Inc. (Dream Village) claims to
represent more than 2,000 families who have been occupying a 78,466-square meter lot
in Western Bicutan, Taguig City since 1985 "in the concept of owners continuously,
exclusively and notoriously."6 The lot used to be part of the Hacienda de Maricaban
(Maricaban), owned by Dolores Casal y Ochoa and registered under a Torrens
title,7 Original Certificate of Title (OCT) No. 291, issued on October 17, 1906 by the
Registry of Deeds of Rizal.8 Maricaban covered several parcels of land with a total area
of over 2,544 hectares spread out over Makati, Pasig, Taguig, Pasay, and Paraaque.9
Following the purchase of Maricaban by the government of the United States of America
(USA) early in the American colonial period, to be converted into the military reservation
known as Fort William Mckinley, Transfer Certificate of Title (TCT) No. 192 was issued in
the name of the USA to cancel OCT No. 291.10 The US government later transferred 30
has. of Maricaban to the Manila Railroad Company, for which TCT No. 192 was
cancelled by TCT Nos. 1218 and 1219, the first in the name of the Manila Railroad
Company for 30 has., and the second in the name of the USA for the rest of the
Maricaban property.11
On January 29, 1914, TCT No. 1219 was cancelled and replaced by TCT No. 1688, and
later that year, on September 15, 1914, TCT No. 1688 was cancelled and replaced by
TCT No. 2288, both times in the name of the USA.12 On December 6, 1956, the USA
formally ceded Fort William Mckinley to the Republic of the Philippines (Republic), and
on September 11, 1958, TCT No. 2288 was cancelled and replaced by TCT No. 61524,
this time in the name of the Republic.13 On July 12, 1957, President Carlos P. Garcia
issued Proclamation No. 423 withdrawing from sale or settlement the tracts of land within
Fort William Mckinley, now renamed Fort Bonifacio, and reserving them for military
purposes.14
On January 7, 1986, President Ferdinand E. Marcos issued Proclamation No. 2476
declaring certain portions of Fort Bonifacio alienable and disposable15 in the manner
provided under Republic Act (R.A.) Nos. 274 and 730, in relation to the Public Land
Act,16 thus allowing the sale to the settlers of home lots in Upper Bicutan, Lower Bicutan,
Signal Village, and Western Bicutan.17
On October 16, 1987, President Corazon C. Aquino issued Proclamation No. 172
amending Proclamation No. 2476 by limiting to Lots 1 and 2 of the survey Swo-13-
000298 the areas in Western Bicutan open for disposition.18
On March 13, 1992, R.A. No. 7227 was passed19 creating the Bases Conversion and
Development Authority (BCDA) to oversee and accelerate the conversion of Clark and
Subic military reservations and their extension camps (John Hay Station, Wallace Air
Station, ODonnell Transmitter Station, San Miguel Naval Communications Station and
Capas Relay Station) to productive civilian uses. Section 820 of the said law provides that
the capital of the BCDA will be provided from sales proceeds or transfers of lots in nine
(9) military camps in Metro Manila, including 723 has. of Fort Bonifacio. The law, thus,
expressly authorized the President of the Philippines "to sell the above lands, in whole or
in part, which are hereby declared alienable and disposable pursuant to the provisions of
existing laws and regulations governing sales of government properties,"21 specifically to
raise capital for the BCDA. Titles to the camps were transferred to the BCDA for this
purpose,22 and TCT No. 61524 was cancelled on January 3, 1995 by TCT Nos. 23888,
23887, 23886, 22460, 23889, 23890, and 23891, now in the name of the BCDA.23
Excepted from disposition by the BCDA are: a) approximately 148.80 has. reserved for
the National Capital Region (NCR) Security Brigade, Philippine Army officers housing
area, and Philippine National Police jails and support services (presently known as Camp
Bagong Diwa); b) approximately 99.91 has. in Villamor Air Base for the Presidential Airlift
Wing, one squadron of helicopters for the NCR and respective security units; c) twenty
one (21) areas segregated by various presidential proclamations; and d) a proposed
30.15 has. as relocation site for families to be affected by the construction of
Circumferential Road 5 and Radial Road 4, provided that the boundaries and technical
description of these exempt areas shall be determined by an actual ground survey.24
Now charging the BCDA of wrongfully asserting title to Dream Village and unlawfully
subjecting its members to summary demolition, resulting in unrest and tensions among
the residents,25 on November 22, 1999, the latter filed a letter-complaint with the
COSLAP to seek its assistance in the verification survey of the subject 78,466-sq m
property, which they claimed is within Lot 1 of Swo-13-000298 and thus is covered by
Proclamation No. 172. They claim that they have been occupying the area for thirty (30)
years "in the concept of owners continuously, exclusively and notoriously for several
years," and have built their houses of sturdy materials thereon and introduced paved
roads, drainage and recreational and religious facilities. Dream Village, thus, asserts that
the lot is not among those transferred to the BCDA under R.A. No. 7227, and therefore
patent applications by the occupants should be processed by the Land Management
Bureau (LMB).
On August 15, 2000, Dream Village formalized its complaint by filing an Amended
Petition26 in the COSLAP. Among the reliefs it sought were:
d. DECLARING the subject property as alienable and disposable by virtue of
applicable laws;
e. Declaring the portion of Lot 1 of subdivision Plan SWO-13-000298, situated in
the barrio of Western Bicutan, Taguig, Metro Manila, which is presently being
occupied by herein petitioner as within the coverage of Proclamation Nos. 2476
and 172 and outside the claim of AFP-RSBS INDUSTRIAL PARK COMPLEX
and/or BASES CONVESION DEVELOPMENT AUTHORITY.
f. ORDERING the Land Management Bureau to process the application of the
ASSOCIATION members for the purchase of their respective lots under the
provisions of Acts Nos. 274 and 730. (Underscoring supplied)
Respondent BCDA in its Answer28 dated November 23, 2000 questioned the jurisdiction
of the COSLAP to hear Dream Villages complaint, while asserting its title to the subject
property pursuant to R.A. No. 7227. It argued that under Executive Order (E.O.) No. 561
which created the COSLAP, its task is merely to coordinate the various government
offices and agencies involved in the settlement of land problems or disputes, adding that
BCDA does not fall in the enumeration in Section 3 of E.O. No. 561, it being neither a
pastureland-lease holder, a timber concessionaire, or a government reservation grantee,
but the holder of patrimonial government property which cannot be the subject of a
petition for classification, release or subdivision by the occupants of Dream Village.
In its Resolution29 dated April 28, 2004, the COSLAP narrated that it called a mediation
conference on March 22, 2001, during which the parties agreed to have a
relocation/verification survey conducted of the subject lot. On April 4, 2001, the COSLAP
wrote to the Department of Environment and Natural Resources (DENR)-Community
Environment and Natural Resources Office-NCR requesting the survey, which would
also include Swo-00-0001302, covering the adjacent AFP-RSBS Industrial Park
established by Proclamation No. 1218 on May 8, 1998 as well as the abandoned
Circumferential Road 5 (C-5 Road).30
On April 1, 2004, the COSLAP received the final report of the verification survey and a
blueprint copy of the survey plan from Atty. Rizaldy Barcelo, Regional Technical Director
for Lands of DENR. Specifically, Item No. 3 of the DENR report states:
3. Lot-1, Swo-000298 is inside Proclamation 172. Dream Village Neighborhood
Association, Inc. is outside Lot-1, Swo-13-000298 and inside Lot-10, 11 & Portion of Lot
13, Swo-00-0001302 with an actual area of 78,466 square meters. Likewise, the area
actually is outside Swo-00-0001302 of BCDA.31 (Emphasis ours and underscoring
supplied)
COSLAP Ruling
On the basis of the DENRs verification survey report, the COSLAP resolved that Dream
Village lies outside of BCDA, and particularly, outside of Swo-00-0001302, and thus
directed the LMB of the DENR to process the applications of Dream Villages members
for sales patent, noting that in view of the length of time that they "have been openly,
continuously and notoriously occupying the subject property in the concept of an owner,
x x x they are qualified to apply for sales patent on their respective occupied lots
pursuant to R.A. Nos. 274 and 730 in relation to the provisions of the Public Land Act."32
On the question of its jurisdiction over the complaint, the COSLAP cited the likelihood
that the summary eviction by the BCDA of more than 2,000 families in Dream Village
could stir up serious social unrest, and maintained that Section 3(2) of E.O. No. 561
authorizes it to "assume jurisdiction and resolve land problems or disputes which are
critical and explosive in nature considering, for instance, the large number of parties
involved, the presence or emergence of social tension or unrest, or other similar critical
situations requiring immediate action," even as Section 3(2)(d) of E.O. No. 561 also
allows it to take cognizance of "petitions for classification, release and/or subdivision of
lands of the public domain," exactly the ultimate relief sought by Dream Village.
Rationalizing that it was created precisely to provide a more effective mechanism for the
expeditious settlement of land problems "in general," the COSLAP invoked as its
authority the 1990 case of Baaga v. COSLAP,33 where this Court said:
It is true that Executive Order No. 561 provides that the COSLAP may take cognizance
of cases which are "critical and explosive in nature considering, for instance, the large
number of parties involved, the presence or emergence of social tension or unrest, or
other similar critical situations requiring immediate action." However, the use of the word
"may" does not mean that the COSLAPs jurisdiction is merely confined to the above
mentioned cases. The provisions of the said Executive Order are clear that the COSLAP
was created as a means of providing a more effective mechanism for the expeditious
settlement of land problems in general, which are frequently the source of conflicts
among settlers, landowners and cultural minorities. Besides, the COSLAP merely took
over from the abolished PACLAP whose functions, including its jurisdiction, power and
authority to act on, decide and resolve land disputes (Sec. 2, P.D. No. 832) were all
assumed by it. The said Executive Order No. 561 containing said provision, being
enacted only on September 21, 1979, cannot affect the exercise of jurisdiction of the
PACLAP Provincial Committee of Koronadal on September 20, 1978. Neither can it
affect the decision of the COSLAP which merely affirmed said exercise of jurisdiction.34
In its Motion for Reconsideration35 filed on May 20, 2004, the BCDA questioned the
validity of the survey results since it was conducted without its representatives present,
at the same time denying that it received a notification of the DENR verification
survey.36 It maintained that there is no basis for the COSLAPs finding that the members
of Dream Village were in open, continuous, and adverse possession in the concept of
owner, because not only is the property not among those declared alienable and
disposable, but it is a titled patrimonial property of the State.37
In the Order38 dated June 17, 2004, the COSLAP denied BCDAs Motion for
Reconsideration, insisting that it had due notice of the verification survey, while also
noting that although the BCDA wanted to postpone the verification survey due to its tight
schedule, it actually stalled the survey when it failed to suggest an alternative survey
date to ensure its presence.
CA Ruling
On Petition for Review39 to the CA, the BCDA argued that the dispute is outside the
jurisdiction of the COSLAP because of the lands history of private ownership and
because it is registered under an indefeasible Torrens title40; that Proclamation No. 172
covers only Lots 1 and 2 of Swo-13-000298 in Western Bicutan, whereas Dream Village
occupies Lots 10, 11 and part of 13 of Swo-00-0001302, which also belongs to the
BCDA 41; that the COSLAP resolution is based on an erroneous DENR report stating that
Dream Village is outside of BCDA, because Lots 10, 11, and portion of Lot 13 of Swo-00-
0001302 are within the DA42; that the COSLAP was not justified in ignoring BCDAs
request to postpone the survey to the succeeding year because the presence of its
representatives in such an important verification survey was indispensable for the
impartiality of the survey aimed at resolving a highly volatile situation43; that the COSLAP
is a mere coordinating administrative agency with limited jurisdiction44; and, that the
present case is not among those enumerated in Section 3 of E.O. No. 56145.
The COSLAP, on the other hand, maintained that Section 3(2)(e) of E.O. No. 561
provides that it may assume jurisdiction and resolve land problems or disputes in "other
similar land problems of grave urgency and magnitude,"46 and the present case is one
such problem.
The CA in its Decision47 dated September 10, 2009 ruled that the COSLAP has no
jurisdiction over the complaint because the question of whether Dream Village is within
the areas declared as available for disposition in Proclamation No. 172 is beyond its
competence to determine, even as the land in dispute has been under a private title
since 1906, and presently its title is held by a government agency, the BCDA, in contrast
to the case of Baaga relied upon by Dream Village, where the disputed land was part of
the public domain and the disputants were applicants for sales patent thereto.
Dream Villages motion for reconsideration was denied in the appellate courts Order48 of
July 13, 2010.
Petition for Review in the Supreme Court
On petition for review on certiorari to this Court, Dream Village interposes the following
issues:
A
IN ANNULLING THE RESOLUTION OF COSLAP IN COSLAP CASE NO. 99-500, THE
HONORABLE CA DECIDED THE CASE IN A MANNER NOT CONSISTENT WITH LAW
AND APPLICABLE DECISIONS OF THIS HONORABLE COURT;
B
THE HONORABLE CA ERRED IN RULING THAT COSLAP HAD NO JURISDICTION
OVER THE CONTROVERSY BETWEEN THE PARTIES HEREIN.49
The Courts Ruling
We find no merit in the petition.
The BCDA holds title to Fort Bonifacio.
That the BCDA has title to Fort Bonifacio has long been decided with finality. In
Samahan ng Masang Pilipino sa Makati, Inc. v. BCDA,50 it was categorically ruled as
follows:
First, it is unequivocal that the Philippine Government, and now the BCDA, has title and
ownership over Fort Bonifacio. The case of Acting Registrars of Land Titles and Deeds of
Pasay City, Pasig and Makati is final and conclusive on the ownership of the then
Hacienda de Maricaban estate by the Republic of the Philippines. Clearly, the issue on
the ownership of the subject lands in Fort Bonifacio is laid to rest. Other than their view
that the USA is still the owner of the subject lots, petitioner has not put forward any claim
of ownership or interest in them.51
The facts in Samahan ng Masang Pilipino sa Makati are essentially not much different
from the controversy below. There, 20,000 families were long-time residents occupying
98 has. of Fort Bonifacio in Makati City, who vainly sought to avert their eviction and the
demolition of their houses by the BCDA upon a claim that the land was owned by the
USA under TCT No. 2288. The Supreme Court found that TCT No. 2288 had in fact
been cancelled by TCT No. 61524 in the name of the Republic, which title was in turn
cancelled on January 3, 1995 by TCT Nos. 23888, 23887, 23886, 22460, 23889, 23890,
and 23891, all in the name of the BCDA. The Court ruled that the BCDAs aforesaid titles
over Fort Bonifacio are valid, indefeasible and beyond question, since TCT No. 61524
was cancelled in favor of BCDA pursuant to an explicit authority under R.A. No. 7227,
the legal basis for BCDAs takeover and management of the subject lots.52
Dream Village sits on the
abandoned C-5 Road, which lies
outside the area declared in
Proclamation Nos. 2476 and 172 as
alienable and disposable.
Pursuant to Proclamation No. 2476, the following surveys were conducted by the Bureau
of Lands to delimit the boundaries of the areas excluded from the coverage of
Proclamation No. 423:
Barangay Survey Plan Date Approved
1. Lower Bicutan SWO-13-000253 October 21, 1986
2. Signal Village SWO-13-000258 May 13, 1986
3. Upper Bicutan SWO-13-000258 May 13, 1986
4. Western Bicutan SWO-13-000298 January 15, 198753
However, the survey plan for Western Bicutan, Swo-13-000298, shows that Lots 3, 4, 5
and 6 thereof are inside the area segregated for the Libingan ng mga Bayani under
Proclamation No. 208, which then leaves only Lots 1 and 2 of Swo-13-000298 as
available for disposition. For this reason, it was necessary to amend Proclamation No.
2476. Thus, in Proclamation No. 172 only Lots 1 and 2 of Swo-13-000298 are declared
alienable and disposable.54
The DENR verification survey report states that Dream Village is not situated in Lot 1 of
Swo-13-000298 but actually occupies Lots 10, 11 and part of 13 of Swo-00-0001302: "x
x x Dream Village is outside Lot1, SWO-13-000298 and inside Lot 10, 11 & portion of Lot
13, SWO-00-0001302 with an actual area of 78466 square meters. The area is actually
is [sic] outside SWO-00-0001302 of BCDA."55 Inexplicably and gratuitously, the DENR
also states that the area is outside of BCDA, completely oblivious that the BCDA holds
title over the entire Fort Bonifacio, even as the BCDA asserts that Lots 10, 11 and 13 of
SWO-00-0001302 are part of the abandoned right-of-way of C-5 Road. This area is
described as lying north of Lot 1 of Swo-13-000298 and of Lots 3, 4, 5 and 6 of Swo-13-
000298 (Western Bicutan) inside the Libingan ng mga Bayani, and the boundary line of
Lot 1 mentioned as C-5 Road is really the proposed alignment of C-5 Road, which was
abandoned when, as constructed, it was made to traverse northward into the Libingan ng
mga Bayani. Dream Village has not disputed this assertion.
The mere fact that the original plan for C-5 Road to cross Swo-00-0001302 was
abandoned by deviating it northward to traverse the southern part of Libingan ng mga
Bayani does not signify abandonment by the government of the bypassed lots, nor that
these lots would then become alienable and disposable. They remain under the title of
the BCDA, even as it is significant that under Section 8(d) of R.A. No. 7227, a relocation
site of 30.5 has. was to be reserved for families affected by the construction of C-5 Road.
It is nowhere claimed that Lots 10, 11 and 13 of Swo-00-0001302 are part of the said
relocation site. These lots border C-5 Road in the south,56making them commercially
valuable to BCDA, a farther argument against a claim that the government has
abandoned them to Dream Village.
While property of the State or any
of its subdivisions patrimonial in
character may be the object of
prescription, those "intended for
some public service or for the
development of the national
wealth" are considered property of
public dominion and therefore not
susceptible to acquisition by
prescription.
Article 1113 of the Civil Code provides that "property of the State or any of its
subdivisions not patrimonial in character shall not be the object of prescription." Articles
420 and 421 identify what is property of public dominion and what is patrimonial property:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
 (2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
Art. 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
One question laid before us is whether the area occupied by Dream Village is
susceptible of acquisition by prescription. In Heirs of Mario Malabanan v. Republic,57 it
was pointed out that from the moment R.A. No. 7227 was enacted, the subject military
lands in Metro Manila
became alienable and disposable. However, it was also clarified that the said lands did
not thereby become patrimonial, since the BCDA law makes the express reservation that
they are to be sold in order to raise funds for the conversion of the former American
bases in Clark and Subic. The Court noted that the purpose of the law can be tied to
either "public service" or "the development of national wealth" under Article 420(2) of the
Civil Code, such that the lands remain property of the public dominion, albeit their status
is now alienable and disposable. The Court then explained that it is only upon their sale
to a private person or entity as authorized by the BCDA law that they become private
property and cease to be property of the public dominion:58
For as long as the property belongs to the State, although already classified as alienable
or disposable, it remains property of the public dominion if when it is "intended for some
public service or for the development of the national wealth."59
Thus, under Article 422 of the Civil Code, public domain lands become patrimonial
property only if there is a declaration that these are alienable or disposable, together with
an express government manifestation that the property is already patrimonial or no
longer retained for public service or the development of national wealth. Only when the
property has become patrimonial can the prescriptive period for the acquisition of
property of the public dominion begin to run. Also under Section 14(2) of Presidential
Decree (P.D.) No. 1529, it is provided that before acquisitive prescription can commence,
the property sought to be registered must not only be classified as alienable and
disposable, it must also be expressly declared by the State that it is no longer intended
for public service or the development of the national wealth, or that the property has
been converted into patrimonial. Absent such an express declaration by the State, the
land remains to be property of public dominion.60
Since the issuance of Proclamation No. 423 in 1957, vast portions of the former
Maricaban have been legally disposed to settlers, besides those segregated for public or
government use. Proclamation No. 1217 (1973) established the Maharlika Village in
Bicutan, Taguig to serve the needs of resident Muslims of Metro Manila; Proclamation
No. 2476 (1986), as amended by Proclamation No. 172 (1987), declared more than 400
has. of Maricaban in Upper and Lower Bicutan, Signal Village, and Western Bicutan as
alienable and disposable; Proclamation No. 518 (1990) formally exempted from
Proclamation No. 423 the Barangays of Cembo, South Cembo, West Rembo, East
Rembo, Comembo, Pembo and Pitogo, comprising 314 has., and declared them open
for disposition.
The above proclamations notwithstanding, Fort Bonifacio remains property of public
dominion of the State, because although declared alienable and disposable, it is
reserved for some public service or for the development of the national wealth, in this
case, for the conversion of military reservations in the country to productive civilian
uses.61Needless to say, the acquisitive prescription asserted by Dream Village has not
even begun to run.
Ownership of a land registered
under a Torrens title cannot be lost
by prescription or adverse
possession.
Dream Village has been unable to dispute BCDAs claim that Lots 10, 11 and part of 13
of Swo-00-0001302 are the abandoned right-of-way of C-5 Road, which is within the vast
titled territory of Fort Bonifacio. We have already established that these lots have not
been declared alienable and disposable under Proclamation Nos. 2476 or 172.
Moreover, it is a settled rule that lands under a Torrens title cannot be acquired by
prescription or adverse possession.62 Section 47 of P.D. No. 1529, the Property
Registration Decree, expressly provides that no title to registered land in derogation of
the title of the registered owner shall be acquired by prescription or adverse possession.
And, although the registered landowner may still lose his right to recover the possession
of his registered property by reason of laches,63 nowhere has Dream Village alleged or
proved laches, which has been defined as such neglect or omission to assert a right,
taken in conjunction with lapse of time and other circumstances causing prejudice to an
adverse party, as will operate as a bar in equity. Put any way, it is a delay in the
assertion of a right which works disadvantage to another because of the inequity founded
on some change in the condition or relations of the property or parties. It is based on
public policy which, for the peace of society, ordains that relief will be denied to a stale
demand which otherwise could be a valid claim.64
The subject property having been
expressly reserved for a specific
public purpose, the COSLAP
cannot exercise jurisdiction over the
complaint of the Dream Village
settlers.
BCDA has repeatedly asserted that the COSLAP has no jurisdiction to hear Dream
Villages complaint. Concurring, the CA has ruled that questions as to the physical
identity of Dream Village and whether it lies in Lots 10, 11 and 13 of Swo-00-0001302, or
whether Proclamation No. 172 has released the disputed area for disposition are issues
which are "manifestly beyond the scope of the COSLAPs jurisdiction vis--vis Paragraph
2, Section 3 of E.O. No. 561,"65 rendering its Resolution a patent nullity and its
pronouncements void. Thus, the CA said, under Section 3 of E.O. No. 561, the
COSLAPs duty would have been to refer the conflict to another tribunal or agency of
government in view of the serious ramifications of the disputed claims:
In fine, it is apparent that the COSLAP acted outside its jurisdiction in taking cognizance
of the case. It would have been more prudent if the COSLAP has [sic] just referred the
controversy to the proper forum in order to fully thresh out the ramifications of the dispute
at bar. As it is, the impugned Resolution is a patent nullity since the tribunal which
rendered it lacks jurisdiction. Thus, the pronouncements contained therein are void. "We
have consistently ruled that a judgment for want of jurisdiction is no judgment at all. It
cannot be the source of any right or the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal effect."66 (Citation omitted)
We add that Fort Bonifacio has been reserved for a declared specific public purpose
under R.A. No. 7227, which unfortunately for Dream Village does not encompass the
present demands of its members. Indeed, this purpose was the very reason why title to
Fort Bonifacio has been transferred to the BCDA, and it is this very purpose which takes
the dispute out of the direct jurisdiction of the COSLAP. A review of the history of the
COSLAP will readily clarify that its jurisdiction is limited to disputes over public lands not
reserved or declared for a public use or purpose.
On July 31, 1970, President Marcos issued E.O. No. 251 creating the Presidential Action
Committee on Land Problems (PACLAP) to expedite and coordinate the investigation
and resolution of all kinds of land disputes between settlers, streamline and shorten
administrative procedures, adopt bold and decisive measures to solve land problems, or
recommend other solutions.67 E.O. No. 305, issued on March 19, 1971, reconstituted the
PACLAP and gave it exclusive jurisdiction over all cases involving public lands and other
lands of the public domain,68 as well as adjudicatory powers phrased in broad terms: "To
investigate, coordinate, and resolve expeditiously land disputes, streamline
administrative proceedings, and, in general, to adopt bold and decisive measures to
solve problems involving public lands and lands of the public domain."69
On November 27, 1975, P.D. No. 832 reorganized the PACLAP and enlarged its
functions and duties. Section 2 thereof even granted it quasi judicial functions, to wit:
Sec. 2. Functions and duties of the PACLAP. The PACLAP shall have the following
functions and duties:
1. Direct and coordinate the activities, particularly the investigation work, of the
various government agencies and agencies involved in land problems or
disputes, and streamline administrative procedures to relieve small settlers and
landholders and members of cultural minorities of the expense and time-
consuming delay attendant to the solution of such problems or disputes;
2. Refer for immediate action any land problem or dispute brought to the attention
of the PACLAP, to any member agency having jurisdiction thereof: Provided,
That when the Executive Committee decides to act on a case, its resolution,
order or decision thereon shall have the force and effect of a regular
administrative resolution, order or decision, and shall be binding upon the parties
therein involved and upon the member agency having jurisdiction thereof;
xxxx
4. Evolve and implement a system of procedure for the speedy investigation and
resolution of land disputes or problems at provincial level, if possible. (Underscoring
supplied)
On September 21, 1979, E.O. No. 561 abolished the PACLAP and created the COSLAP
to be a more effective administrative body to provide a mechanism for the expeditious
settlement of land problems among small settlers, landowners and members of the
cultural minorities to avoid social unrest.70 Paragraph 2, Section 3 of E.O No. 561 now
specifically enumerates the instances when the COSLAP can exercise its adjudicatory
functions:
Sec. 3. Powers and Functions. The Commission shall have the following powers and
functions:
1. Coordinate the activities, particularly the investigation work, of the various
government offices and agencies involved in the settlement of land problems or
disputes, and streamline administrative procedures to relieve small settlers and
landholders and members of cultural minorities of the expense and time
consuming delay attendant to the solution of such problems or disputes;
2. Refer and follow-up for immediate action by the agency having appropriate
jurisdiction any land problem or dispute referred to the Commission: Provided,
That the Commission may, in the following cases, assume jurisdiction and
resolve land problems or disputes which are critical and explosive in nature
considering, for instance, the large number of the parties involved, the presence
or emergence of social tension or unrest, or other similar critical situations
requiring immediate action:
 (a) Between occupants/squatters and pasture lease agreement holders
or timber concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the
public domain; and
(e) Other similar land problems of grave urgency and magnitude.
xxxx
Citing the constant threat of summary eviction and demolition by the BCDA and the
seriousness and urgency of the reliefs sought in its Amended Petition, Dream Village
insists that the COSLAP was justified in assuming jurisdiction of COSLAP Case No. 99-
500. But in Longino v. Atty. General,71 it was held that as an administrative agency,
COSLAPs jurisdiction is limited to cases specifically mentioned in its enabling statute,
E.O. No. 561. The Supreme Court said:
Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction and, as
such, could wield only such as are specifically granted to them by the enabling statutes.
x x x.
xxxx
Under the law, E.O. No. 561, the COSLAP has two options in acting on a land dispute or
problem lodged before it, namely, (a) refer the matter to the agency having appropriate
jurisdiction for settlement/resolution; or (b) assume jurisdiction if the matter is one of
those enumerated in paragraph 2(a) to (e) of the law, if such case is critical and
explosive in nature, taking into account the large number of the parties involved, the
presence or emergence of social tension or unrest, or other similar critical situations
requiring immediate action. In resolving whether to assume jurisdiction over a case or to
refer the same to the particular agency concerned, the COSLAP has to consider the
nature or classification of the land involved, the parties to the case, the nature of the
questions raised, and the need for immediate and urgent action thereon to prevent
injuries to persons and damage or destruction to property. The law does not vest
jurisdiction on the COSLAP over any land dispute or problem.72 (Citation omitted)
The Longino ruling has been consistently cited in subsequent COSLAP cases, among
them Davao New Town Development Corp. v. COSLAP,73 Barranco v. COSLAP,74 NHA
v. COSLAP,75 Cayabyab v. de Aquino,76 Ga, Jr. v. Tubungan,77 Machado v.
Gatdula,78 and Vda. de Herrera v. Bernardo.79
Thus, in Machado, it was held that the COSLAP cannot invoke Section 3(2)(e) of E.O.
No. 561 to assume jurisdiction over "other similar land problems of grave urgency," since
the statutory construction principle of ejusdem generis prescribes that where general
words follow an enumeration of persons or things, by words of a particular and specific
meaning, such general words are not to be construed in their widest extent but are to be
held as applying only to persons or things of the same kind as those specifically
mentioned.80 Following this rule, COSLAPs jurisdiction is limited to disputes involving
lands in which the government has a proprietary or regulatory interest,81 or public lands
covered with a specific license from the government such as a pasture lease
agreements, a timber concessions, or a reservation grants,82 and where moreover, the
dispute is between occupants/squatters and pasture lease agreement holders or timber
concessionaires; between occupants/squatters and government reservation grantees;
and between occupants/squatters and public land claimants or applicants.
In Longino, the parties competed to lease a property of the Philippine National Railways.
The high court rejected COSLAPs jurisdiction, noting that the disputed lot is not public
land, and neither party was a squatter, patent lease agreement holder, government
reservation grantee, public land claimant or occupant, or a member of any cultural
minority, nor was the dispute critical and explosive in nature so as to generate social
tension or unrest, or a critical situation which required immediate action.83
In Davao New Town Development Corp., it was held that the COSLAP has no concurrent
jurisdiction with the Department of Agrarian Reform (DAR) in respect of disputes
concerning the implementation of agrarian reform laws, since "the grant of exclusive and
primary jurisdiction over agrarian reform matters on the DAR implies that no other court,
tribunal, or agency is authorized to resolve disputes properly cognizable by the
DAR."84 Thus, instead of hearing and resolving the case, COSLAP should have simply
referred private respondents complaint to the DAR or DARAB. According to the Court:
The abovementioned proviso Section (3)(2) of E.O. No. 561, which vests COSLAP the
power to resolve land disputes, does not confer upon COSLAP blanket authority to
assume every matter referred to it. Its jurisdiction is confined only to disputes over lands
in which the government has proprietary or regulatory interest. Moreover, the land
dispute in Baaga involved parties with conflicting free patent applications which was
within the authority of PACLAP to resolve, unlike that of the instant case which is
exclusively cognizable by the DAR.85
In Barranco, COSLAP issued a writ to demolish structures encroaching into private
property. The Supreme court ruled that COSLAP may resolve only land disputes
1wphi1
"involving public lands or lands of the public domain or those covered with a specific
license from the government such as a pasture lease agreement, a timber concession, or
a reservation grant."86
In NHA, it was held that COSLAP has no jurisdiction over a boundary dispute between
two local government units, that its decision is an utter nullity correctible by certiorari, that
it can never become final and any writ of execution based on it is void, and all acts
performed pursuant to it and all claims emanating from it have no legal effect.87
In Cayabyab, it was held that "the jurisdiction of COSLAP does not extend to disputes
involving the ownership of private lands, or those already covered by a certificate of title,
as these fall exactly within the jurisdiction of the courts and other administrative
agencies."88
In Ga, Jr., it was reiterated that the COSLAP has no jurisdiction over controversies
relating to ownership and possession of private lands, and thus, the failure of
respondents to properly appeal from the COSLAP decision before the appropriate court
was held not fatal to the petition for certiorari that they eventually filed with the CA. The
latter remedy remained available despite the lapse of the period to appeal from the void
COSLAP decision.89
In Machado, the high court ruled that COSLAP has no jurisdiction in disputes over
private lands between private parties, reiterating the essential rules contained in Section
3 of E.O. No. 561 governing the exercise by COSLAP of its jurisdiction, to wit:
Under these terms, the COSLAP has two different rules in acting on a land dispute or
problem lodged before it, e.g., COSLAP can assume jurisdiction only if the matter is one
of those enumerated in paragraph 2(a) to (e) of the law. Otherwise, it should refer the
case to the agency having appropriate jurisdiction for settlement or resolution. In
resolving whether to assume jurisdiction over a case or to refer it to the particular agency
concerned, the COSLAP considers: (a) the nature or classification of the land involved;
(b) the parties to the case; (c) the nature of the questions raised; and (d) the need for
immediate and urgent action thereon to prevent injury to persons and damage or
destruction to property. The terms of the law clearly do not vest on the COSLAP the
general power to assume jurisdiction over any land dispute or problem. Thus, under EO
561, the instances when the COSLAP may resolve land disputes are limited only to
those involving public lands or those covered by a specific license from the government,
such as pasture lease agreements, timber concessions, or reservation
grants.90 (Citations omitted)
In Vda. de Herrera, the COSLAP assumed jurisdiction over a complaint for "interference,
disturbance, unlawful claim, harassment and trespassing" over a private parcel of land.
The CA ruled that the parties were estopped to question COSLAPs jurisdiction since
they participated actively in the proceedings. The Supreme Court, noting from the
complaint that the case actually involved a claim of title and possession of private land,
ruled that the RTC or the MTC has jurisdiction since the dispute did not fall under Section
3, paragraph 2 (a) to (e) of E.O. No. 561, was not critical and explosive in nature, did not
involve a large number of parties, nor was there social tension or unrest present or
emergent.91
In the case at bar, COSLAP has invoked Baaga to assert its jurisdiction. There,
Guillermo Baaga had filed a free patent application with the Bureau of Lands over a
public land with an area of 30 has. Gregorio Daproza (Daproza) also filed a patent
application for the same property. The opposing claims and protests of the claimants
remained unresolved by the Bureau of Lands, and neither did it conduct an investigation.
Daproza wrote to the COSLAP, which then opted to exercise jurisdiction over the
controversy. The high court sustained COSLAP, declaring that its jurisdiction is not
confined to the cases mentioned in paragraph 2(a) to (e) of E.O. No. 561, but includes
land problems in general, which are frequently the source of conflicts among settlers,
landowners and cultural minorities.
But as the Court has since clarified in Longino and in the other cases aforecited, the land
dispute in Baaga was between private individuals who were free patent applicants over
unregistered public lands. In contrast, the present petition involves land titled to and
managed by a government agency which has been expressly reserved by law for a
specific public purpose other than for settlement. Thus, as we have advised in Longino,
the law does not vest jurisdiction on the COSLAP over any land dispute or problem, but it
has to consider the nature or classification of the land involved, the parties to the case,
the nature of the questions raised, and the need for immediate and urgent action thereon
to prevent injuries to persons and damage or destruction to property.
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15829 December 4, 1967
ROMAN R. SANTOS, petitioner-appellee,
vs.
HON. FLORENCIO MORENO, as Secretary of Public Works and Communications
and JULIAN C. CARGULLO, respondents-appellants.
Gil R. Carlos and Associates for petitioner-appellee.
Office of the Solicitor General for respondents-appellants.
BENGZON, J.P., J.:
THE APPEAL
The Honorable Secretary of Public Works & Communications appeals from the decision
of the Court of First Instance of Manila declaring of private ownership certain creeks
situated in barrio San Esteban, Macabebe, Pampanga.
THE BACKGROUND
The Zobel family of Spain formerly owned vast track of marshland in the municipality of
Macabebe, Pampanga province. Called Hacienda San Esteban, it was administered and
managed by the Ayala y Cia. From the year 1860 to about the year 1924 Ayala y Cia.,
devoted the hacienda to the planting and cultivation of nipa palms from which it gathered
nipa sap or "tuba." It operated a distillery plant in barrio San Esteban to turn nipa tuba
into potable alcohol which was in turn manufactured into liquor.
Accessibility through the nipa palms deep into the hacienda posed as a problem. Ayala y
Cia., therefore dug canals leading towards the hacienda's interior where most of them
interlinked with each other. The canals facilitated the gathering of tuba and the guarding
and patrolling of the hacienda by security guards called "arundines." By the gradual
process of erosion these canals acquired the characteristics and dimensions of rivers.
In 1924 Ayala y Cia shifted from the business of alcohol production to bangus culture. It
converted Hacienda San Esteban from a forest of nipa groves to a web of fishponds. To
do so, it cut down the nipa palm, constructed dikes and closed the canals criss-crossing
the hacienda.
Sometime in 1925 or 1926 Ayala y Cia., sold a portion of Hacienda San Esteban to
Roman Santos who also transformed the swamp land into a fishpond. In so doing, he
closed and built dikes across Sapang Malauling Maragul, Quiorang Silab,
Pepangebunan, Bulacus, Nigui and Nasi.
The closing of the man-made canals in Hacienda San Esteban drew complaints from
residents of the surrounding communities. Claiming that the closing of the canals caused
floods during the rainy season, and that it deprived them of their means of transportation
and fishing grounds, said residents demanded re-opening of those canals. Subsequently,
Mayor Lazaro Yambao of Macabebe, accompanied by policemen and some residents
went to Hacienda San Esteban and opened the closure dikes at Sapang Malauling
Maragul Nigui and Quiorang Silab. Whereupon, Roman Santos filed Civil Case No.
4488 in the Court of First Instance of Pampanga which preliminarily enjoined Mayor
Yambao and others from demolishing the dikes across the canals. The municipal officials
of Macabebe countered by filing a complaint (docketed as Civil Case No. 4527) in the
same court. The Pampanga Court of First Instance rendered judgment in both cases
against Roman Santos who immediately elevated the case to the Supreme Court.
In the meantime, the Secretary of Commerce and Communications1 conducted his own
investigation and found that the aforementioned six streams closed by Roman Santos
were natural, floatable and navigable and were utilized by the public for transportation
since time immemorial. He consequently ordered Roman Santos on November 3, 1930
to demolish the dikes across said six streams. However, on May 8, 1931 the said official
revoked his decision of November 3, 1930 and declared the streams in question privately
owned because they were artificially constructed. Subsequently, upon authority granted
under Act 3982 the Secretary of Commerce and Communications entered into a contract
with Roman Santos whereby the former recognized the private ownership of Sapang
Malauling Maragul, Quiorang Silab, Pepangebunan, Bulacus, Nigui and Nasi and the
latter turned over for public use two artificial canals and bound himself to maintain them
in navigable state. The Provincial Board of Pampanga and the municipal councils of
Macabebe and Masantol objected to the contract. However, the Secretary of Justice, in
his opinion dated March 6, 1934, upheld its legality. Roman Santos withdraw his appeals
in the Supreme Court.
With respect to the portion of Hacienda San Esteban still owned by the Zobel family, the
municipal authorities of Macabebe filed in 1930 an administrative complaint, in the
Bureau of Public Works praying for the opening of the dikes and dams across certain
streams in Hacienda San Esteban. Whereupon, the district engineer of Pampanga and a
representative of the Bureau of Public Works conducted investigations. In the meantime,
the Attorney General, upon a query from the Secretary of Commerce and
Communications, rendered an opinion dated October 11, 1930 sustaining the latter's
power to declare streams as publicly owned under Sec. 4 of Act 2152, as amended by
Act 3208.
On September 29, 1930 the investigator of the Bureau of Public Works, Eliseo Panopio,
submitted his report recommending the removal of the dikes and dams in question. And
on the basis of said report, the Secretary of Commerce and Communications rendered
his decision on November 3, 1930 ordering Ayala y Cia., to demolish the dikes and dams
across the streams named therein situated in Hacienda San Esteban. Ayala y Cia.,
moved for reconsideration, questioning the power of the Secretary of Commerce and
Communications to order the demolition of said dikes.
Days before the Secretary of Commerce and Communications rendered his
aforementioned decision, Ayala y Cia., thru counsel, made representations with the
Director of Public Works for a compromise agreement. In its letter dated October 11,
1930, Ayala y Cia., offered to admit public ownership of the following creeks:
 Antipolo, Batasan Teracan, Biuas or Batasan, Capiz, Carbon, Cutut, Dalayap,
Enrique, Iba, Inaun, Margarita, Malauli or Budbud, Matalaba Palapat, Palipit
Maisao, Panlovenas, Panquitan, Quinapati, Quiorang, Bubong or Malauli Malati,
Salop, Sinubli and Vitas.
provided the rest of the streams were declared private. Acting on said offer, the Director
of Public Works instructed the surveyor in his office, Eliseo Panopio, to proceed to
Pampanga and conduct another investigation.
On January 23, 1931 Panopio submitted his report to the Director of Public Works
recommending that some streams enumerated therein be declared public and some
private on the ground that they were originally dug by the hacienda owners. The private
streams were:
Agape, Atlong, Cruz, Balanga, Batasan, Batasan Matlaue, Balibago, Baliti, Bato,
Buengco Malati, Bungalin, Bungo Malati, Bungo Maragui, Buta-buta, Camastiles,
Catlu, Cauayan or Biabas, Cela, Dampalit, Danlimpu, Dilinquente, Fabian,
Laguzan, Lalap Maburac, Mabutol, Macabacle, Maragul or Macanduli,
Macabacle or Mababo, Maisac, Malande, Malati, Magasawa, Maniup, Manulit,
Mapanlao, Maisac, Maragul Mariablus Malate, Masamaral, Mitulid, Nasi, Nigui or
Bulacus, Palipit, Maragul, Pangebonan, Paumbong, Pasco or Culali, Pilapil,
Pinac Malati, Pinac, Maragul or Macabacle, Quiorang Silab or Malauli Maragul,
Raymundo, Salamin, Salop Maisac, Salop Maragul, Sermon and Sinca or
Mabulog.
He therefore recommended revocation of the decision already mentioned above, dated
November 3, 1930 of the Secretary of Commerce and Communications ordering the
demolition of the dikes closing Malauling Maragul, Quiorang, Silab, Pepangebonan,
Nigui, Bulacus, Nasi, and Pinac. On February 13, 1931 the Director of Public Works
concurred in Panopio's report and forwarded the same the Secretary of Commerce and
Communications.
On February 25, 1935 the municipality of Macabebe and the Zobel family executed an
agreement whereby they recognized the nature of the streams mentioned in Panopio's
report as public or private, depending on the findings in said report. This agreement was
approved by the Secretary of Public Works and Communications on February 27, 1935
and confirmed the next day by the municipal council of Macabebe under Resolution No.
36.
A few months later, that is, on June 12, 1935, the then Secretary of Justice issued an
opinion holding that the contract executed by the Zobel family and the municipality of
Macabebe has no validity for two reasons, namely, (1) the streams although originally
dug by Ayala y Cia., lost their private nature by prescription inasmuch as the public was
allowed to use them for navigation and fishing, citing Mercado vs. Municipality of
Macabebe, 59 Phil. 592; and (2) at the time the Secretary of Commerce and
Communications approved the said contract, he had no more power so to do, because
such power under Sec. 2 of Act 2152 was revoked by the amending Act 4175 which took
effect on December 7, 1934.
Despite the above ruling of the Secretary of Justice, the streams in question remained
closed.
In 1939 administrative investigations were again conducted by various agencies of the
Executive branch of our government culminating in an order of President Manuel Quezon
immediately before the national elections in 1941 requiring the opening of Sapang
Macanduling, Maragul Macabacle, Balbaro and Cansusu. Said streams were again
closed in 1942 allegedly upon order of President Quezon.
THE CASE
Roman Santos acquired in 1940 from the Zobel family a larger portion of Hacienda San
Esteban wherein are located 25 streams which were closed by Ayala y Cia., and are now
the subject matter in the instant controversy.
Eighteen years later, that is in 1958, Congress enacted Republic Act No. 20562 following
a congressional inquiry which was kindled by a speech delivered by Senator Rogelio de
la Rosa in the Senate. On August 15, 1958 Senator de la Rosa requested in writing the
Secretary of Public Works and communications to proceed in pursuance of Republic Act
No. 2056 against fishpond owners in the province of Pampanga who have closed rivers
and appropriated them as fishponds without color of title. On the same day, Benigno
Musni and other residents in the vicinity of Hacienda San Esteban petitioned the
Secretary of Public Works and Communications to open the following streams:
Balbaro, Batasan Matua, Bunga, Cansusu, Macabacle, Macanduling, Maragul,
Mariablus, Malate, Matalabang, Maisac, Nigui, Quiorang Silab, Sapang Maragul
and Sepung Bato.
Thereupon, the Secretary of Public Works and Communications instructed Julian C.
Cargullo to conduct an investigation on the above named streams.
On October 20, 1958 Musni and his co-petitioners amended their petition to include other
streams. The amended petition therefore covered the following streams:
Balbaro, Balili, Banawa, Batasan Matua Bato, Bengco, Bunga, Buta-buta,
Camastiles, Cansusu, Cela, Don Timpo, Mabalanga, Mabutol, Macabacle,
Macabacle qng. Iba, Macanduling, Maragul, Malauli, Magasawa, Mariablus
 Malate Masamaral, Matalabang Maisa, Mariablus,3 Nigui, Pita, Quiorang, Silab,
Sapang Maragul, Sepung Bato, Sinag and Tumbong.
On March 2, 4, 10, 30 and 31, and April 1, 1959, the Secretary of Public Works and
Communications rendered his decisions ordering the opening and restoration of the
channel of all the streams in controversy except Sapang Malauling, Maragul, Quiorang,
Silab, Nigui Pepangebonan, Nasi and Bulacus, within 30 days on the ground that said
streams belong to the public domain.
On April 29, 1959, that is, after receipt of the Secretary's decision dated March 4, 1959,
Roman Santos filed a motion with the Court of First Instance of Man for junction against
the Secretary of Public Works and Communications and Julian C. Cargullo. As prayed
for preliminary injunction was granted on May 8, 1959. The Secretary of Public Work and
Communications answered and alleged as defense that venue was improperly laid; that
Roman Santos failed to exhaust administrative remedies; that the contract between
Ayala y Cia., and the Municipality of Macabebe is null and void; and, that Section 39 of
Act 496 excludes public streams from the operation of the Torrens System.
On April 29 and June 12, 1969, Roman Santos received the decision of the Secretary of
Public Works and Communications dated March 10 and March 30, March 31, and April
1, 1959. Consequently, on June 24, 1959 he asked the court to cite in contempt
Secretary Florendo Moreno, Undersecretary M.D. Bautista and Julian Cargullo for
issuing and serving upon him the said decisions despite the existence of the preliminary
injunction. The Solicitor General opposed the motion alleging that the decisions in
question had long been issued when the petition for injunction was filed, that they were
received after preliminary injunction issued because they were transmitted through the
District Engineer of Pampanga to Roman Santos; that their issuance was for Roman
Santos' information and guidance; and, that the motion did not allege that respondents
took steps to enforce the decision. Acting upon said motion, on July 17, 1959, the trial
court considered unsatisfactory the explanation of the Solicitor General but ruled that
Secretary Florencio Moreno, Undersecretary M.D. Bautista and Julian Cargullo acted in
good faith. Hence, they were merely "admonished to desist from any and further action in
this case, observe the preliminary injunction issued by this Court, with the stern warning,
however, that a repetition of the acts complained of shall be dealt with severely."
On July 18, 1959 the trial court declared all the streams under litigation private, and
rendered the following judgment:
The Writ of preliminary injunction restraining the respondent Secretary of Public
Works & Communications from enforcing the decisions of March 2 And 4, 1959
and all other similar decisions is hereby made permanent.
The Secretary of Public Works and Communication and Julian Cargullo appealed to this
Court from the order of July 17, 1959 issued in connection with Roman Santos' motion
for contempt and from the decision of the lower court on the merits of the case.
ISSUES
The issues are: (1) Did Roman Santos exhaust administrative remedies? (2) Was venue
properly laid? (3) Did the lower court err in conducting a trial de novo of the case and in
admitting evidence not presented during the administrative proceeding? (4) Do the
streams involved in this case belong to the public domain or to the owner of Hacienda
San Esteban according to law and the evidence submitted to the Department of Public
Works and Communications?
DISCUSSION OF THE ISSUES
1. Respondents maintain that Roman Santos resorted to the courts without first
exhausting administrative remedies available to him, namely, (a) motion for
reconsideration of the decisions of the Secretary of Public Works and Communications;
and, (b) appeal to the President of the Philippines.
Whether a litigant, in exhausting available administrative remedies, need move for the
reconsideration of an administrative decision before he can turn to the courts for relief,
would largely depend upon the pertinent law,4 the rules of procedure and the usual
practice followed in a particular office.5
Republic Act No. 2056 does not require the filing of a motion for reconsideration as a
condition precedent to judicial relief. From the context of the law, the intention of the
legislators to forego a motion for reconsideration manifests itself clearly. Republic Act
1aw phil.net
No. 2056 underscores the urgency and summary nature of the proceedings authorized
thereunder. Thus in Section 2 thereof the Secretary of Public Works and
Communications under pain of criminal liability is duty bound to terminate the
proceedings and render his decision within a period not exceeding 90 days from the filing
of the complaint. Under the same section, the party respondent concerned is given not
than 30 days within which to comply with the decision of the Secretary of Public Works
and Communications, otherwise the removal of the dams would be done by the
Government at the expense of said party. Congress has precisely provided for a speedy
and a most expeditious proceeding for the removal of illegal obstructions to rivers and on
the basis of such a provision it would be preposterous to conclude that it had in mind to
require a party to file a motion for reconsideration an additional proceeding which
would certainly lengthen the time towards the final settlement of existing controversies.
The logical conclusion is that Congress intended the decision of the Secretary of Public
Works and Communications to be final and executory subject to a timely review by the
courts without going through formal and time consuming preliminaries.
Moreover, the issues raised during the administrative proceedings of this case are the
same ones submitted to court for resolution. No new matter was introduced during the
proceeding in the court below which the Secretary of Public Works and Communications
had no opportunity to correct under his authority.
Furthermore, Roman Santos assailed the constitutionality of Republic Act No. 2056 and
the jurisdiction of the Secretary of Public Works and Communications to order the
demolition of dams across rivers or streams. Those questions are not within the
competence of said Secretary to decide upon a motion for reconsideration. They are
itc-alf
purely legal questions, not administrative in nature, and should properly be aired before a
competent court as was rightly done by petitioner Roman Santos .
At any rate, there is no showing in the records of this case that the Secretary of Public
Works and Communications adopted rule of procedure in investigations authorized under
Republic Act No. 2056 which require a party litigant to file a motion for the
reconsideration of the Secretary's decision before he can appeal to the courts. Roman
Santos however stated in his brief that the practice is not to entertain motions for
reconsideration for the reason that Republic Act No. 2056 does not expressly or impliedly
allow the Secretary to grant the same. Roman Santos' statement is supported by Opinion
No. 61, Series of 1959, dated April 14, 1959 of the Secretary of Justice.
As to the failure of Roman Santos to appeal from the decision of the Secretary of Public
Works and Communications to the President of the Philippines, suffice it to state that
such appeal could be dispensed with because said Secretary is the alter ego of the
President. The actions of the former are presumed to have the implied sanction of the
itc-alf
latter.6
2. It is contended that if this case were considered as an ordinary civil action, venue was
improperly laid when the same was instituted in the Court of First Instance of Manila for
the reason that the case affects the title of a real property. In fine, the proposition is that
since the controversy dwells on the ownership of or title to the streams located in
Hacienda San Esteban, the case is real action which, pursuant to Sec. 3 of Rule 5 of the
Rules of Court should have been filed in the Court of First Instance of Pampanga.
The mere fact that the resolution of the controversy in this case would wholly rest on the
ownership of the streams involved herein would not necessarily classify it as a real
action. The purpose of this suit is to review the decision of the Secretary of Public Works
and Communications to enjoin him from enforcing them and to prevent him from making
and issuing similar decisions concerning the stream in Hacienda San Esteban. The acts
of the Secretary of Public Works and Communications are the object of the litigation, that
is, petitioner Roman Santos seeks to control them, hence, the suit ought to be filed in the
Court of First Instance whose territorial jurisdiction encompasses the place where the
respondent Secretary is found or is holding office. For the rule is that outside its territorial
limits, the court has no power to enforce its order.7
Section 3 of Rule 5 of the Rules of Court does not apply to determine venue of this
action. Applicable is Sec. 1 the same rule, which states:
Sec. 1. General rule. Civil actions in Courts of First Instance may be
commenced and tried where the defendant any of the defendants residents or
may be found or where the plaintiff or any of the plaintiffs resides, at the election
of the plaintiff.
Accordingly, the Petition for injunction who correctly filed in the Court of First Instance of
Manila. Respondents Secretary of Public Works and Communications and Julian
Cargullo are found and hold office in the City of Manila.
3. The lower court tried this case de novo. Against this procedure respondents objected
and maintained that the action, although captioned as an injunction is really a petition
for certiorari to review the decision of the Secretary of Public Works and
Communications. Therefore they now contend that the court should have confined itself
to reviewing the decisions of the respondent Secretary of Public Works and
Communications only on the basis of the evidence presented in the administrative
proceedings. On the other hand, Roman Santos now, submits that the action is a
proceeding independent and distinct from the administrative investigation; that,
accordingly, the lower court correctly acted in trying the case anew and rendering
judgment upon evidence adduced during the trial.
Whether the action instituted in the Court of First Instance be for mandamus, injunction
or certiorari is not very material. In reviewing the decision of the Secretary of Public
Works and Communications, the Court of First Instance shall confine its inquiry to the
evidence presented during, the administrative proceedings. Evidence not presented
therein shall not be admitted, and considered by the trial court. As aptly by this Court
speaking through Mr. Justice J.B.L. Reyes, in a similar case:
The findings of the Secretary can not be enervated by new evidence not laid
before him, for that would be tantamount to holding a new investigation, and to
substitute for the discretion and judgment of the Secretary the discretion and
judgment of the court, to whom the statute had not entrusted the case. It is
immaterial that the present action should be one for prohibition or injunction and
not one for certiorari; in either event the case must be resolved upon the
evidence submitted to the Secretary, since a judicial review of executive
decisions does not import a trial de novo, but only an ascertainment of whether
the "executive findings are not in violation of the Constitution or of the laws, and
 are free from fraud or imposition, and whether they find reasonable support in the
evidence. . . .8
The case at bar, no matter what the parties call it, is in reality a review of several
administrative decisions of the Secretary of Public Works and Communications. Being
so, it was error for the lower court to conduct a trial de novo. Accordingly, for purposes of
this review, only the evidence presented and admitted in the administrative investigation
will be considered in our determination of whether on the basis thereof the decisions of
the Secretary of Public Works and Communications were correct.
4. We come to the question whether the streams involved in this case belong to the
public domain or to the owner of Hacienda San Esteban. If said streams are public, then
Republic Act 2056 applies, if private, then the Secretary of Public Works and
Communications cannot order demolition of the dikes and dams across them pursuant to
his authority granted by said law.
First, we come to the question of the constitutionality of Republic Act No. 2056. The
lower court held Republic Act No. 2056 constitutional but ruled that it was applied by
respondents unconstitutionally. That is, it held that Roman Santos was being deprived of
his property without due process of law, for the dikes of his fishponds were ordered
demolished through an administrative, instead of a judicial, proceeding. This conclusion
and rationalization of the lower court amount in effect to declaring the law
unconstitutional, stated inversely. Note that the law provides for an expeditious
administrative process to determine whether or not a dam or dike should be declare a
public nuisance and ordered demolished. And to say that such an administrative
process, when put to operation, is unconstitutional is tantamount to saying that the law
itself violates the Constitution. In Lovina vs. Moreno, supra, We held said law
constitutional. We see no reason here to hold otherwise.
Discussing now the applicability of Republic Act 2056, the same applies to two types of
bodies of water, namely (1)public navigable rivers, streams, coastal waters, or
waterways and (b) areas declared as communal fishing grounds, as provided for in
Section 1 thereof:
Sec. 1. . . . the construction or building of dams, dikes or any other works which
encroaches into any public navigable river, stream, coastal waters and any other
navigable public waters or waterways as well as the construction or building of
dams, dikes or any other works in areas declared as communal fishing grounds,
shall be ordered removed as public nuisances or as prohibited constructions as
herein provided: . . .
We are not concerned with communal fishing grounds because the streams here
involved have not been so declared, but with public navigable streams. The question
therefore is: Are the streams in Hacienda San Esteban which are mentioned in the
petition of Benigno Musni and others, public and navigable?
Respondents contend that said streams are public on the following grounds:
(1) Hacienda San Esteban was formerly a marshland and being so, it is not susceptible
to appropriation. It therefore belongs to the State. Respondents rely on Montano vs.
Insular Government, 12 Phil. 572.
(2) The streams in question are natural streams. They are tributaries of public streams.
Cited are the cases of Samson vs. Dionisio, et al., 11 Phil. 538 and Bautista vs. Alarcon,
23 Phil. 636.
(3) The streams have for their source public rivers, therefore they cannot be classified as
canals.
(4) Assuming the streams were artificially made by Ayala y Cia., said titleholder lost
ownership over them by prescription when it allowed the public to use them for
navigation for a long time. Respondents cite Mercado vs. Municipal President of
Macabebe, 59 Phil. 592.
(5) Assuming the streams in question are not mentioned as public in the certificates of
title held by Ayala y Cia., over Hacienda San Esteban, still they cannot be considered as
privately owned for Section 39 of Act 496 expressly excepts public streams from private
ownership.
(6) The Panopio Report, which found the streams in question of private ownership was
nullified by the Secretary of Justice in his opinion dated June 12, 1935. And, the
1aw phil.net
contract between Ayala y Cia., and the Secretary of Commerce and Communications
agreeing on the ownership of the streams in question is ultra vires.
The doctrine in Montano vs. Insular Government, supra, that a marshland which is
inundated by the rise of the tides belongs to the State and is not susceptible to
appropriation by occupation has no application here inasmuch as in said case the
land subject matter of the litigation was not yet titled and precisely Isabelo Montano
sought title thereon on the strength of ten years' occupation pursuant to paragraph 6,
section 54 of Act 926 of the Philippine Commission. Whereas, the subject matter in this
case Hacienda San Esteban is titled land and private ownership thereof by Ayala y
Cia., has been recognized by the King of Spain and later by the Philippine Government
when the same was registered under Act 496.
Respondents further cite Bautista vs. Alarcon, 23 Phil. 631, where the plaintiff sought
injunction against the defendants who allegedly constructed a dam across a public canal
which conveyed water from the Obando River to fishponds belonging to several
persons. The canal was situated within a public land. In sustaining the injunction granted
by the Court of First Instance, this Court said:
No private persons has right to usurp possession of a watercourse, branch of a
river, or lake of the public domain and use, unless it shall have been proved that
he constructed the same within in property of his exclusive ownership, and such
usurpation constitutes a violation of the legal provisions which explicity exclude
such waterways from the exclusive use or possession of a private party.
(Emphasis supplied)
As indicated in the above-cited case, a private person may take possession of a
watercourse if he constructed the same within his property. This puts Us into inquiry
itc-alf
whether the streams in question are natural or artificial. In so doing, We shall examine
only the evidence presented before the Department of Public Works and
Communications and disregard that which was presented for the first time before the
lower court, following our ruling in Lovina vs. Moreno, supra.
(1) Sapang Macanduling Maragul or Macanduli is presently enclosed in Fishpond No. 12
of Roman Santos. Its banks cannot anymore be seen but some traces of them could be
noted by a row of isolated nipa palms. Its water is subject to the rise and fall of the tides
coming from Guagua and Antipolo Rivers and it is navigable by light watercrafts. Its inlet
is Antipolo River; another dike at its outlet along the Palapat River.9 It is closed by four
dikes: One dike at its inlet along the Antipolo River; another dike at its cutlet along the
Palatpat River; and, two dikes in between. Then exist channel at the Palapat River where
the fishpond gate lies has been filled up with dredge spoils from the Pampanga River
Control Project.
(2) Sapang Macabacle is found in Fishpond No. 13. Its banks are still evident. This
stream is about 30 meters wide, two meters deep and one and one-half to two kilometers
long. Its source is Rio Cansusu. Like Macanduli, its channel is obstructed by four dikes.
One of them was constructed by the engineers of the Pampanga River Control Project.
(3) Sapang Balbaro which is found in Fishpond No. 13, runs from Canal Enrique near Rio
Cansusu to Sapang Macabacle, a distance of about one-half kilometer. It is passable by
banca. The closures of this stream consist of two dikes located at each ends on Canal
Enrique and Sapang Macabacle.
(4) Sapang Cansusu is a continuation of the Cansusu River. The Cansusu River opens
at the Guagua River and allegedly ends at the Palanas River in front of Barrio San
Esteban. At a point near the mouth of Sapang Balbaro, the owners of Hacienda San
Esteban built a canal leading straight to one end of Barrio San Esteban. They called this
canal "Canal Enrique." And at the point where Canal Enrique joins Cansusu they built a
dike across Cansusu, thus closing this very portion of the river which extends up to
Palanas River where they built another closure dike. This closed portion, called "Sapang
Cansusu," is now part of Fishpond No. 1.
Sapang Cansusu is half a kilometer long and navigable by banca.
Appellant's witnesses, Beligno Musni, 41, Macario Quiambao, 96, Roman Manansala, 55
and Castor Quiambao, 76, all residents of Barrio San Esteban, testified that prior to their
closure, Sapang Macaduli, Macabacle, Balbaro and Cansusu were used as passageway
and as fishing grounds; that people transported through them tuba,10 wood
and sasa,11 and that the tuba was brought to the distillery in Barrio San Esteban. Macario
Quiambao testified also that said four streams "were created by God for the town
people"; and that if any digging was done it was only to deepen the shallow parts to
make passage easier. According to witness Anastacio Quiambao said streams were
navigable, even Yangco's ship "Cababayan" could pass through. Simplicio Quiambao,
36, and Marcelino Ocampo, 55, stated on direct examination that before closure of the
above named four streams, people from the surrounding towns of Guagua, Bacolor,
Macabebe, Masantol and Sexmoan fished and navigated in them.
Against the aforementioned, testimonial evidence Roman Santos presented the
testimony of Nicanor Donarber, 80, Mariano Guinto, 71, and his own. Donarber, who
started working as an arundin12 testified that Ayala y Cia., dug Sapang Macanduli,
Balbaro and Macabacle; that he worked also in the construction together with other
workers; and, that as an overseer he inspected their work. Mariano Guinto testified that
he worked for Ayala y Cia., as a tuba gatherer; that in order to reach remote nipa groves
by banca, they made canals; and, that he was one of the who worked in the construction
of those canals. Roman Santos also testified that Sapang Macanduli, Macabacle,
Balbaro and Cansusu are artificial canals excavated as far back as 1850 and due to
erosion coupled with the spongy nature of the land, they acquired the proportion of
rivers; that he joined Sapang Balbaro to Sapang Macabacle because the former was a
dying canal; and that Cansusu River is different from Sapang Cansusu Witness Domingo
Yumang likewise testified that Sapang Balbaro man-made.
We observe that witnesses positively stated that Sapang Macanduli, Macabacle and
Balbaro were made by the owners of Hacienda San Esteban. With respect to Sapang
Cansusu none, except Roman Santos himself, testified that Sapang Cansusu is an
artificial canal. It is not one of the streams found and recommended to be declared
private in the Panopio Report. Sapang Cansusu follows a winding course different and,
distinct from that of a canal such as that of Canal Enrique which is straight. Moreover,
Sapang Cansusu is a part of Cansusu River, admittedly a public stream.
(5) Sapang Maragul, Mabalanga and Don Timpo are all part of Fishpond No. 1. Maragul
is 600 meters long and 30 to 35 meters wide. Mabalanga is 250 meters in length and 50
meters in width. Don Timpo is 220 meters long and 20 meters wide. All of them are
navigable by banca. Maragul and Mabalanga open at Guagua River and join each other
inside the hacienda to form one single stream, Sapang Don Timpo, which leads to the
Matalaba River. Maragul, Mabalanga and Don Timpo, formerly ended inside the
hacienda but later Mabalanga was connected to Don Timpo. Maragul was connected to
Mabalanga and Sapang Cela was extended to join Maragul.
Witnesses Nicanor Donarber, Mariano Ocampo and Mariano Guinto testified that
Maragul, Mabalanga and Don Timpo are artificial canals dug by Ayala y Cia., and that
they (Donarber and Mariano Guinto) worked in said excavations.13 Witness Mariano
Guinto clarified that Don Timpo was originally dug but Mabalanga and Maragul were
formerly small non-navigable streams which were deepened into artificial navigable
canals by Ayala y Cia.14
Exhibit F, which is a map showing the streams and rivers in Hacienda San Esteban,
shows that Maragul, Mabalanga and Don Timpo are more or less straight. From the big
rivers (Guagua and Matalaba Rivers) they lead deep into the interior of the hacienda,
thus confirming the testimony that they were built precisely as a means of reaching the
interior of the estate by banca. The weight of evidence, therefore, indicate that said
streams are manmade.
(6) Sapang Bunga, now part of Bunga fishpond, gets its water from Sapanga Iba and
empties at Sta. Cruz River. It is about 300-400 meters long, 5-6 meters wide and 1-1.60
meters deep.
(7) Sapang Batu is found in Capiz Fishpond. About 300-400 meters long, 4-5 meters
wide and 1.50-2.20 meters deep, it starts at Capiz River and ends at Malauling Maragul.
From Capiz River until it intersects Sapang Nigui the stream is called Sapang Batu
Commencing from Sapang Nigui and up to its end at Sapang Malauling Maragul, the
stream is called Sapang Batu. Commencing from Sapang Nigui and up to its end at
Sapang Malauling Maragul, the stream is called Sepong Batu. Sepong Batu is not
among those streams declared in the Panopio Report as private.
(8) Sapang Banawa has one end at Palanas River and the other at Sapang Macabacle.
It is about 300 meters long, 3-4 meters wide and 1.30-1.40 meters deep. Its whole length
is within Fishpond No. 13 of Roman Santos.
(9) Sapang Mabutol is a dead-end stream, that is, it ends inside the hacienda. It opens
along Guagua river. Since its closure, it has become part of Fishpond No. 1.
(10) Sapang Buta-buta, like Mabutol, dies inside the hacienda. It connects with Cansusu
River and is about 100 meters long, 3-4 meters wide and 1.2-1.5 meters deep. It is now a
part of Fishpond No. 13.
(11) Sapang Masamaral, another stream which opens at Cansusu River And ends inside
the hacienda., is 100-200 meters long, 3-4 meters wide and 1.50-2 meters deep. It now
forms part of Fishpond No. 13.
The uncontradicted testimony of Marcos Guinto is that Sapang Bunga, Batu, Sepong
Batu, Banawa, Mabutol, Buta-Buta and Masamaral were constructed by Ayala y Cia., to
gain access to the nipa the, interior of the hacienda. This testimony tallies with the
findings in the Panopio Report which will be discussed herein later. The evidence
adduced in the administrative proceeding conducted before a representative of the
Secretary of Public Works and Communications supports the contention that said
streams are merely canals built by Ayala y Cia., for easy passage into the hinterland of
its hacienda.
(12) Sapang Magasawa consists of two streams running parallel to each other
commencing from Matalaba River and terminating at Mariablus Rivers. About 600-700
meters long, 4-5 meters wide and 1.5-2 meters deep, these two streams are navigable
by banca. They are enclosed within Fishpond No. 1.
(13) Sapang Mariablus Malate, about 3-4 meters wide and 250 meters long, is another
stream that ends inside the hacienda and gets its water from Guagua River. It is no part
of Fishpond No. 1.
(14) Sapang Matalabang Malate or Maisac opens at Guagua River and ends at Sapang
Cela and Matalabang Maragul. This stream, which is about 800 meters long and 18
meters wide, forms part of Fishpond No. 1 of Roman Santos.
(15) Sapang Batasan Matua about 600 meters long, three meters wide and .80 meters
deep at low tide and 1.90 meters deep at high tide crosses the hacienda from Mariablus
River to Cansusu River. It is at present a part of Fishpond No. 1-A.
(16) Sapang Camastiles, a dead end stream of about 200 to 300 meters in length, gets
its water from Biuas River. It is within Fishpond No. 1.
(17) Sapang Cela is within Fishpond No. 1. Its whole length situated inside the hacienda,
it opens at Sapang Matalabang Malate or Maisac and ends at Sapang Malungkot. Latter
Cela was extended to connect with Sapang Maragul. It is about 200 meters long and four
meters wide.
Mariano Guinto, 71, testified without contradiction that Sapang Mariablus Malate and
Matalabang Malate were formerly small and non-navigable streams which were dug by
Ayala y Cia.,15 while Batasan Matua Camastiles, Magasawa and Cela are original canals
made by Ayala y Cia.,16 that he was one of those who worked in the construction of said
canals; and that it took years to construct them. All these streams were recommended in
the Panopio Report for declaration as private streams.
(18) Sapang Sinag, 200 meters long, four to five meters wide, one meter and one and
one-half meters deep at low and high tides, respectively, gets its water from Cutod River
and leads inside the hacienda to connect with Sapang Atlong Cruz, a stream declared
private in the Panopio Report. It is now inside Fishpond No. 14.
(19) Sapang Balili, also found inside Fishpond No. 14, is about 200 meters long, three to
four meters wide and one meter deep at low tide. From its mouth at Cutod River it drifts
into the interior of the hacienda and joins Sapang Bengco.17
(20) Sapang Pita is within Fishpond Capiz. It takes water from Capiz River but dies 250
meters inside the hacienda. It is about four to five meters wide, and one meter deep at
low tide and 1.50 meters deep at high tide.
(21) Sapang Tumbong, situated inside Capiz Fishpond, derives its water from Sapang
Quiorang Silab, a stream declared private by the Secretary of Public Works and
Communications, and ends inside the hacienda.18
(22) Sapang Bengco is found within Fishpond No. 14. Two hundred meters long, five
1aw phil.net
meters wide, and one meter deep at low tide and 1.50 meters deep at high tide it gets
water from Sapang Biabas and connects with Baliling Maisac.19
According to Marcos Guinto, a witness for Roman Santos, Sapang Sinag, Balili, Pita
Tumbong and Bengco were excavated a long time ago by Ayala y Cia.; and that they
have a winding course because when they were made the workers followed the location
of the nipa palms.20 On the other hand, Marcelo Quiambao, testified that Sapang
Tumbong is a natural stream and that the reason he said so is because the stream was
already there as far back as 1910 when he reached the age of ten. No other oral
evidence was presented to contradict the testimony of Marcos Guinto that the said five
streams were artificially made by Ayala y Cia.
To show that the streams involved in this case were used exclusively by the hacienda
personnel and occasionally by members of their families, Roman Santos introduced the
testimony of Eliseo Panopio, Nicanor Donarber, Blas Gaddi, Mariano Ocampo, Mariano
Guinto, Alejandro Manansala and himself. The witnesses categorically testified that the
public was prohibited from using the streams as a means of navigation and that the
prohibition was enforced by guards called arundines.
One and all, the evidence, oral and documentary, presented by Roman Santos in the
administrative proceedings supports the conclusion of the lower court that the streams
involved in this case were originally man-made canals constructed by the former owners
of Hacienda San Esteban and that said streams were not held open for public use. This
same conclusion was reached 27 years earlier by an investigator of the Bureau of Public
Works whose report and recommendations were approved by the Director of Public
Works and submitted to the Secretary of Commerce and Communications.
As stated, pursuant to Act 2152, as amended by Act 3208, the Bureau of Public Works
and the Department of Commerce and Communications locked into and settled the
question of whether or not the streams situated within Hacienda San Esteban are
publicly or privately owned. We refer to the so-called Panopio Report which contains the
findings and recommendations of Eliseo Panopio, a surveyor in the Bureau of Public
Works, who was designated to conduct formal hearings and investigation. Said report
found the following streams, among others, of private ownership:
Camastiles, Cela Balanga, Bato, Batasan, Bengco, Buta-buta, Don Timpo,
Mabutol, Macabacle, Macanduli, Malande Malate (Bunga), Magasawa,
Masamaral, Maragul, Mariablus Malate, Matalaba Malate, Nasi, Nigui,
Pangebonan and Quiorang Silab
on the ground that
The preponderance of the probatory facts, . . ., shows that the rivers, creeks,
esteros and canals listed in (1) have originally been constructed, deepened,
widened, and lengthened by the owners of the Hacienda San Esteban. That they
have been used as means of communication from one place to another and to
the inner most of the nipales, exclusively for the employees, colonos and laborers
of the said Hacienda San Esteban. That they have never been used by the public
for navigation without the express consent of the owners of the said Hacienda.21
Bases for the above-quoted conclusion were "the reliable informations gathered from old
residents of the locality, from outsiders, the sworn statements obtained from different
persons not interested in this case and the comparison of the three plans prepared in
1880, 1906 and 1930.22 The persons referred to are Martin Isip, Hilarion Lobo, Emigdio
Ignacio, Castor Quiambao, Matias Sunga facio Cruz, Inocencio Dayrit, Gabriel
Manansala, Lope Quiambao, Marcelino Bustos and Juan Lara .
On February 13, 1931 the Director of Public Works transmitted the Panopio Report to the
Secretary of Commerce and Communications recommending approval thereof. Later, on
February 27, 1935, Secretary of Public Works and Communications De las Alas
approved the agreement of Ayala y Cia., and the Municipality of Macabebe, concerning
the ownership of the streams in Hacienda San Esteban, for being in conformity with said
Panopio Report.
This agreement of Ayala y Cia and the Municipality of Macabebe which was approved by
the Secretary of Public Works and Communications only on February 27, 1935, could not
however bind the Government because the power of the Secretary of Public Works and
Communication to enter thereto had been suppressed by the Philppine Legislature when
it enacted Act 4175 which effect on December 7, 1934.
Nullity of the aforesaid contract would not of course affect the findings of fact contained
in the Panopio Report.
In weighing the evidence presented before the administrative investigation which
culminated in this appeal, respondent Secretary seemed to have ignored the Panopio
Report and other documentary evidence as well as the testimony of witnesses presented
by petitioner but instead gave credence only to the witnesses of Benigno Musni, et al.
Upon review, however, the lower court, taking into account all the evidence adduced in
the administrative hearing, including the Panopio Report, as well as those presented for
the first time before it, sustained petitioner's averment that the streams in question were
artificially made, hence of private ownership. As stated, this conclusion of the lower court
which is in accord with the findings of Panopio as contained in his report, finds ample
support from the evidence presented and admitted in the administrative investigation.
Accordingly, we see no merit in disturbing the lower court's findings fact.
We next consider the issue of whether under pertinent laws, the streams in question are
public or private.
We quote Articles 339, 407 and 408 of the Spanish Civil Code of 1889:
Art. 339. Property of public ownerships is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, river banks, shores, roadsteads, and that of a
similar character;
Art. 407. The following are of public ownership:
1. Rivers and their natural channels;
Articles 71 and 72 of the Spanish Law of Waters of August 3, 1866 state:
2. Continuous or intermittent waters from springs or brooks running in their
natural channels and the channels themselves.
3. Waters rising continuously or intermittently on lands of public ownership;
4. Lakes and ponds formed by nature, on public lands, and their beds;
5. Rain waters running through ravines or sand beds, the channels of which are
of public ownership;
6. Subterranean waters on public lands;
7. Waters found within the zone of operation of public works, even though
constructed under contract;
8. Waters which flow continuously or intermittently from lands belonging to
private persons, to the State, to provinces, or to towns, from the moment they
leave such lands;
9. The waste waters of fountains, sewers, and public institutions.
Art. 408. The following are of private ownership:
1. Waters, either continuous or intermittent rising on private etates, while they run
through them;
2. Lakes and ponds and their beds when formed by nature on such estates;
3. Subterranean waters found therein;
4. Rain water falling thereon as long as their bounderies.
5. The channels of flowing streams, continuous or intermittent, formed by rain
water, and those of brooks crossing estates which are not of public ownership.
The water, bed, banks, and floodgates of a ditch or aqueduct are deemed to be
an integral part of the estate or building for which the waters are intended. The
owners of estates through or along the boundaries of which the aqueduct passes
can assert no ownership over it, nor any right to make use. of it beds or banks,
unless they base their claims on title deed which specify the right or the
ownership claimed.
Art. 71. The water-beds of all creeks belong to the owners of the estates or lands
over which they flow.
Art. 72. The water-beds on public land, of creeks through which spring waters
run, are a part of the public domain.
 The natural water-beds or channels of rivers are also part of the public domain.
Pursuant to Article 71 of the Spanish Law of Waters of August 3, 1866, and Article
408(5) of the Spanish Civil Code, channels of creeks and brooks belong to the owners of
estates over which they flow. The channels, therefore, of the streams in question which
may be classified creeks, belong to the owners of Hacienda San Esteban.
The said streams, considered as canals, of which they originally were, are of private
ownership in contemplation of Article 339(l) of the Spanish Civil Code. Under Article 339,
canals constructed by the State and devoted to public use are of public ownership.
Conversely, canals constructed by private persons within private lands and devoted
exclusively for private use must be of private ownership.
Our attention has been called to the case of Mercado v. Municipal President of
Macabebe, 59 Phil. 592. There the creek (Batasan-Limasan) involved was originally dug
by the estate's owner who, subsequently allowed said creek to be used by the public for
navigation and fishing purposes for a period of 22 years. Said this Court through Mr.
Justice Diaz:
And even granting that the Batasan-Limasan creek acquired the proportions
which it had, before it was closed, as a result of excavations made by laborers of
the appellant's predecesor in interest, it being a fact that, since the time it was
opened as a water route between the Nasi River and Limasan creek, the owners
thereof as well as strangers, that is, both the residents of the hacienda and those
of other nearby barrios and municipalities, had been using it not only for their
bancas to pass through but also for fishing purposes, and it being also a fact that
such was the condition of the creek at least since 1906 until it was closed in
1928, if the appellant and her predecessors in interest had acquired any right to
the creek in question by virtue of excavations which they had made thereon, they
had such right through prescription, inasmuch as they failed to obtain, and in fact
they have not obtained, the necessary authorization to devote it to their own use
to the exclusion of all others. The use and enjoyment of a creek, as any other
property simceptible of appropriation, may be acquired or lost through
prescription, and the appellant and her predecessors in interest certainly lost
such right through the said cause, and they cannot now claim it exclusively for
themselves after the general public had been openly using the same from 1906
to 1928. . . .
In the cited case, the creek could have been of private ownership had not its builder lost
it by prescription. Applying the principle therein enunciated to the case at bar, the
conclusion would be inevitably in favor of private ownership, considering that the owners
of Hacienda San Esteban held them for their exclusive use and prohibited the public from
using them.
It may be noted that in the opinion, mentioned earlier, issued on June 12, 1935, the
Secretary of Justice answered in the negative the query of the Secretary of Public Works
and Communications whether the latter can declare of private ownership those streams
which "were dug up artificially", because it was assumed that the streams were used "by
the public as fishing ground and in transporting their commerce in bancas or in small
crafts without the objection of the parties who dug" them. Precisely, Mercado v.
Municipality of Macabebe was given application therein. However, the facts, as then
found by the Bureau of Public Works, do not support the factual premise that the streams
in question were used by the public "without the objection of the parties who dug" them.
We cannot therefore take as controlling in determining the merits of this the factual
premises and the legal conclusion contained in said opinion.
The case at bar should be differentiated from those cases where We held illegal the
closing and/or appropriation of rivers or streams by owners of estates through which they
flow for purposes of converting them into fishponds or other works.23 In those cases, the
watercourses which were dammed were natural navigable streams and used habitually
by the public for a long time as a means of navigation. Consequently, they belong to the
public domain either as rivers pursuant to Article 407 (1) of the Spanish Civil Code of
1889 or as property devoted to public use under Article 339 of the same code. Whereas,
the streams involved in this case were artificially made and devoted to the exclusive use
of the hacienda owner.
Finally, Sapang Cansusu, being a natural stream and a continuation of the Cansusu
River, admittedly a public stream, belongs to the public domain. Its closure therefore by
the predecessors of Roman Santos was illegal.
The petition for the opening of Sapang Malauling Maragul, Quiorang Silab, Nigui,
Pepangebunan, Nasi and Bulacus was dismissed by the Secretary of Public Works and
Communications and the case considered closed. The said administrative decision has
not been questioned in this appeal by either party. Hence, they are deemed excluded
herein.
All the other streams, being artificial and devoted exclusively for the use of the hacienda
owner and his personnel, are declared of private ownership. Hence, the dams across
them should not he ordered demolished as public nuisances.
With respect to the issue of contempt of court on the part of the Secretary of Public
Works and Communications and Julian Cargullo for the alleged issuance of a
administrative decisions ordering demolition of dikes involved in this case after the writ of
injunction was granted and served, suffice it to state that the lower court made no finding
of contempt of court. Necessarily, there is no conviction for contempt reviewable by this
Court and any discussion on the matter would be academic.
WHEREFORE, the decision appealed from is affirmed, except as to Sapang Cansusu
which is hereby declared public and as to which the judgment of the lower court is
reversed. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal. Zaldivar, Sanchez, Castro, Angeles
and Fernando, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 163767 March 10, 2014
REPUBLIC OF THE PHILIPPINES, represented by THE DIRECTOR OF
LANDS, Petitioner,
vs.
ROSARIO DE GUZMAN VDA. DE JOSON, Respondent.
DECISION
BERSAMIN, J.:
This case concerns the discharge of the burden of proof by the applicant in proceedings
for the registration of land under Section 14 (1) and (2) of Presidential Decree No. 1529
(Property Registration Decree).
The Republic appeals the adverse decision promulgated on January 30, 2004,1 whereby
the Court of Appeals (CA) affirmed the judgment rendered on August 10, 1981 by the
erstwhile Court of First Instance (CFI) of Bulacan (now the Regional Trial Court) in
Registration Case No. 3446-M granting the application of the respondent for the
registration of her title covering a parcel of land situated in San Isidro, Paombong,
Bulacan.2
The respondent filed her application for land registration in the CFI in Bulacan.3 The
jurisdictional requirements were met when the notice of initial hearing was published in
the Official Gazette for two successive weeks,4 as evidenced by a certification of
publication.5 The notice of initial hearing was also posted by the Provincial Sheriff of
Bulacan in a conspicuous place in the municipal building of Paombong, Bulacan as well
as on the property itself.6 On June 2, 1977, at the initial hearing of the application, Fiscal
Liberato L. Reyes interposed an opposition in behalf of the Director of Lands and the
Bureau of Public Works. Upon motion by the respondent and without objection from
Fiscal Reyes, the CFI commissioned the Acting Deputy Clerk of Court to receive
evidence in the presence of Fiscal Reyes.7
The records show that the land subject of the application was a riceland with an area of
12,342 square meters known as Lot 2633, Cad-297, Paombong, Bulacan, and covered
by plan Ap-03-001603;8 that the riceland had been originally owned and possessed by
one Mamerto Dionisio since 1907;9 that on May 13, 1926, Dionisio, by way of a deed of
sale,10 had sold the land to Romualda Jacinto; that upon the death of Romualda Jacinto,
her sister Maria Jacinto (mother of the respondent) had inherited the land; that upon the
death of Maria Jacinto in 1963, the respondent had herself inherited the land, owning
and possessing it openly, publicly, uninterruptedly, adversely against the whole world,
and in the concept of owner since then; that the land had been declared in her name for
taxation purposes; and that the taxes due thereon had been paid, as shown in Official
Receipt No. H-7100234.11
In their opposition filed by Fiscal Reyes,12 the Director of Lands and the Director of Forest
Development averred that whatever legal and possessory rights the respondent had
acquired by reason of any Spanish government grants had been lost, abandoned or
forfeited for failure to occupy and possess the land for at least 30 years immediately
preceding the filing of the application;13 and that the land applied for, being actually a
portion of the Labangan Channel operated by the Pampanga River Control System,
could not be subject of appropriation or land registration.14
The Office of the Solicitor General (OSG) also filed in behalf of the Government an
opposition to the application,15insisting that the land was within the unclassified region of
Paombong, Bulacan, as indicated in BF Map LC No. 637 dated March 1, 1927; that
areas within the unclassified region were denominated as forest lands and thus fell under
the exclusive jurisdiction, control and authority of the Bureau of Forest Development
(BFD);16 and that the CFI did not acquire jurisdiction over the application considering that:
(1) the land was beyond the commerce of man; (2) the payment of taxes vested no title
or ownership in the declarant or taxpayer.17
Ruling ofthe CFI
On August 10, 1981, the CFI rendered its decision,18 ordering the registration of the land
in favor of the respondent on the ground that she had sufficiently established her open,
public, continuous, and adverse possession in the concept of an owner for more than 30
years, to wit:
Since it has been established that the applicants and her predecessors-in-interest have
been in the open, public, continuous, and adverse possession of the said parcel of land
in the concept of an owner for more than thirty (30) years, that it, since 1926 up to the
present time, applicant therefore is entitled to the registration thereof under the
provisions od Act No. 496, in relation to Commonwealth Act No. 141 as amended by
Republic Act No. 6236 and other existing laws.
WHEREFORE, confirming the order of general default issued in this case, the Court
hereby orders the registration of this parcel of land Lot 2633, Cad 297. Case 5,
Paombong Cadastre[)] described in plan Ap-03-001603 (Exhibit D, page 7 of records)
and in the technical description (Exhibit F, page 5 of records) in favor of Rosario de
Guzman Vda de Joson, of legal age, Filipino, widow and resident of Malolos, Bulacan.
After the decision shall have become final, let the corresponding decree be issued,
SO ORDERED19.
The Republic, through the OSG, appealed to the CA, contending that the trial court had
erred in granting the application for registration despite the land not being the subject of
land registration due to its being part of the unclassified region denominated as forest
land of Paombong, Bulacan.20
Judgment of the CA
On January 30, 2004, the CA promulgated its assailed judgment,21 affirming the decision
of the trial court upon the following ratiocination:
The foregoing documentary and testimonial evidence stood unrebutted and
uncontroverted by the oppositor-appellant and they should serve as proof of the paucity
of the claim of the applicant-appellee over the subject property.
Upon the other hand, oppositor-appellant, in a lackluster fashion, advanced pro forma
theories and arguments in its Opposition which naturally failed to merit any consideration
from the court a quo and also from this Court. The indorsement from the Bureau of
Forest Development, San Fernando, Pampanga to the effect that the subject area is
within the unclassified region of Paombong, Bulacan does not warrant any evidentiary
weight since the same had never been formally offered as evidence by the oppositor-
appellant. All the other allegations in the Opposition field (sic) by the oppositor-appellant
failed to persuade this Court as to the veracity thereof considering that no evidence was
ever presented to prove the said allegations.
Such being the case, this Court is not inclined to have the positive proofs of her
registrable rights over the subject property adduced by the applicant-appellee be
defeated by the bare and unsubstantiated allegations of the oppositor-appellant.
WHEREFORE, PREMISES CONSIDERED, the assailed Decision is hereby AFFIRMED
IN TOTO.
SO ORDERED.22
Hence, the Republic appeals by petition for review on certiorari.
Issue
(1) WHETHER OR NOT THE LAND SUBJECT OF THE APPLICATION FOR
REGISTRATION IS SUSCEPTIBLE OF PRIVATE ACQUISITION; and
(2) WHETHER OR NOT THE TRIAL COURT, AS WELL AS THE COURT OF
APPEALS, ERRED IN GRANTING THE APPLICATION FOR REGISTRATION.23
Ruling
The appeal is impressed with merit.
Section 14 (1) and (2) of the Property Registration Decree state:
Section 14. Who may apply. The following persons may file in the proper [Regional
Trial Court] an application for registration of title to land, whether personally or through
their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation of
alienable and disposable lands of the public domain under a bona fide claim of
ownership since June 12, 1945, or earlier.
(2) Those who have acquired ownership of private lands by prescription under
the provision of existing laws.
xxxx
Section 14(1) deals with possession and occupation in the concept of an owner while
Section 14(2) involves prescription as a mode of acquiring ownership. In Heirs of Mario
Malabanan v. Republic,24 the Court set the guidelines concerning land registration
proceedings brought under these provisions of the Property Registration Decree in order
provide clarity to the application and scope of said provisions.
The respondent sought to have the land registered in her name by alleging that she and
her predecessors-in-interest had been in open, peaceful, continuous, uninterrupted and
adverse possession of the land in the concept of owner since time immemorial. However,
the Republic counters that the land was public land; and that it could not be acquired by
prescription. The determination of the issue hinges on whether or not the land was
public; if so, whether the respondent satisfactorily proved that the land had already been
declared as alienable and disposable land of the public domain; and that she and her
predecessors-in-interest had been in open, peaceful, continuous, uninterrupted and
adverse possession of the land in the concept of owner since June 12, 1945, or earlier.
In Republic vs. Tsai,25 the Court summarizes the amendments that have shaped the
current phraseology of Section 14(1), to wit:
Through the years, Section 48(b) of the CA 141 has been amended several times. The
Court of Appeals failed to consider the amendment introduced by PD 1073. In Republic
v. Doldol, the Court provided a summary of these amendments:
The original Section 48(b) of C.A. No.141 provided for possession and occupation of
lands of the public domain since July 26, 1894. This was superseded by R.A. No. 1942,
which provided for a simple thirty-year prescriptive period of occupation by an applicant
for judicial confirmation of imperfect title. The same, however, has already been
amended by Presidential Decree No. 1073, approved on January 25, 1977. As amended,
Section 48(b) now reads:
(b) Those who by themselves or through their predecessors in interest have been in
open, continuous, exclusive, and notorious possession and occupation of agricultural
lands of the public domain, under a bona fide claim of acquisition of ownership, since
June 12, 1945, or earlier, immediately preceding the filing of the application for
confirmation of title, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government
grant and shall be entitled to a certificate of title under the provisions of this chapter.
(Emphasis supplied)
As the law now stands, a mere showing of possession and occupation for 30 years or
more is not sufficient. Therefore, since the effectivity of PD 1073 on 25 January 1977, it
must now be shown that possession and occupation of the piece of land by the applicant,
by himself or through his predecessors-in-interest, started on 12 June 1945 or earlier.
This provision is in total conformity with Section 14(1) of PD 1529.26
Under Section 14(1), therefore, the respondent had to prove that: (1) the land formed
part of the alienable and disposable land of the public domain; and (2) she, by herself or
through her predecessors-in-interest, had been in open, continuous, exclusive, and
notorious possession and occupation of the subject land under a bona fide claim of
ownership from June 12, 1945, or earlier.27 It is the applicant who carries the burden of
proving that the two requisites have been met. Failure to do so warrants the dismissal of
the application.
The respondent unquestionably complied with the second requisite by virtue of her
having been in open, continuous, exclusive and notorious possession and occupation of
the land since June 12, 1945, or earlier. She testified on how the land had been passed
on to her from her predecessors-in-interest; and tendered documentary evidence like: (1)
the Deed of Sale evidencing the transfer of the property from Mamerto Dionisio to
Romualda Jacinto in 1926;28 (2) Tax Declaration No. 4547 showing that she had declared
the property for taxation purposes in 1976;29 and (3) Official Receipt No. H-7100234
indicating that she had been paying taxes on the land since 1977.30 The CFI found her
possession of the land and that of her predecessors-in-interest to have been open,
public, continuous, and adverse in the concept of an owner since 1926 until the present
time, or for more than 30 years, entitling her to the registration under the provisions of
Act No. 496, in relation to Commonwealth Act No. 141, as amended by Republic Act No.
6236 and other existing laws.31 On its part, the CA ruled that the documentary and
testimonial evidence stood unrebutted and uncontroverted by the Republic.32
Nonetheless, what is left wanting is the fact that the respondent did not discharge her
burden to prove the classification of the land as demanded by the first requisite. She did
not present evidence of the land, albeit public, having been declared alienable and
disposable by the State. During trial, she testified that the land was not within any military
or naval reservation, and Frisco Domingo, her other witness, corroborated her. Although
the Republic countered that the verification made by the Bureau of Forest Development
showed that the land was within the unclassified region of Paombong, Bulacan as per BF
Map LC No. 637 dated March 1, 1927,33 such showing was based on the 1st Indorsement
dated July 22, 1977 issued by the Bureau of Forest Development,34 which the CA did not
accord any evidentiary weight to for failure of the Republic to formally offer it in evidence.
Still, Fiscal Reyes, in the opposition he filed in behalf of the Government, argued that the
land was a portion of the Labangan Channel operated by the Pampanga River Control
System, and could not be the subject of appropriation or land registration. Thus, the
respondent as the applicant remained burdened with proving her compliance with the
first requisite.
Belatedly realizing her failure to prove the alienable and disposable classification of the
land, the petitioner attached as Annex A to her appellees brief35 the certification dated
March 8, 2000 issued by the Department of Environment and Natural Resources
Community Environment and Natural Resources Office (DENR-CENRO),36 viz:
THIS IS TO CERTIFY that the parcel of land described on lot 2633 located at San Isidro,
Paombong, Bulacan as shown in the sketch plan surveyed by Geodetic Engineer Carlos
G. Reyes falls within the Alienable or Disposable Land Project No. 19 of Paombong,
Bulacan per Land Classification Map No. 2934 certified on October 15, 1980.
However, in its resolution of July 31, 2000,37 the CA denied her motion to admit the
appellees brief, and expunged the appellees brief from the records. Seeing another
opportunity to make the certification a part of the records, she attached it as Annex A of
her comment here.38 Yet, that attempt to insert would not do her any good because only
evidence that was offered at the trial could be considered by the Court.
Even had the respondents effort to insert the certification been successful, the same
would nonetheless be vain and ineffectual. In Menguito v. Republic,39 the Court
pronounced that a survey conducted by a geodetic engineer that included a certification
on the classification of the land as alienable and disposable was not sufficient to
overcome the presumption that the land still formed part of the inalienable public domain,
to wit:
To prove that the land in question formed part of the alienable and disposable lands of
the public domain, petitioners relied on the printed words which read: "This survey plan is
inside Alienable and Disposable Land Area, Project No. 27-B as per L.C. Map No. 2623,
certified by the Bureau of Forestry on January 3, 1968," appearing on Exhibit "E" (Survey
Plan No. Swo-13-000227).
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides: "All
lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. x x x." (Emphasis supplied.)
For the original registration of title, the applicant (petitioners in this case) must overcome
the presumption that the land sought to be registered forms part of the public domain.
Unless public land is shown to have been reclassified or alienated to a private person by
the State, it remains part of the inalienable public domain. Indeed, "occupation thereof in
the concept of owner, no matter how long, cannot ripen into ownership and be registered
as a title." To overcome such presumption, incontrovertible evidence must be shown by
the applicant. Absent such evidence, the land sought to be registered remains
inalienable.
In the present case, petitioners cite a surveyor-geodetic engineers notation in Exhibit "E"
indicating that the survey was inside alienable and disposable land. Such notation does
not constitute a positive government act validly changing the classification of the land in
question. Verily, a mere surveyor has no authority to reclassify lands of the public
domain. By relying solely on the said surveyors assertion, petitioners have not
sufficiently proven that the land in question has been declared alienable.40
We reiterate the standing doctrine that land of the public domain, to be the subject of
appropriation, must be declared alienable and disposable either by the President or the
Secretary of the DENR. In Republic v. T.A.N. Properties, Inc.,41 we explicitly ruled:
The applicant for land registration must prove that the DENR Secretary had approved the
land classification and released the land of the public domain as alienable and
disposable, and that the land subject of the application for registration falls within the
approved area per verification through survey by the PENRO or CENRO. In addition, the
applicant for land registration must present a copy of the original classification approved
by the DENR Secretary and certified as a true copy by the legal custodian of the official
records. These facts must be established to prove that the land is alienable and
disposable.42
This doctrine unavoidably means that the mere certification issued by the CENRO or
PENRO did not suffice to support the application for registration, because the applicant
must also submit a copy of the original classification of the land as alienable and
disposable as approved by the DENR Secretary and certified as a true copy by the legal
custodian of the official records. As the Court said in Republic v. Bantigue Point
Development Corporation:43
The Regalian doctrine dictates that all lands of the public domain belong to the State.
The applicant for land registration has the burden of overcoming the presumption of
State ownership by establishing through incontrovertible evidence that the land sought to
be registered is alienable or disposable based on a positive act of the government. We
held in Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient to
prove the alienable and disposable character of the land sought to be registered. The
applicant must also show sufficient proof that the DENR Secretary has approved the land
classification and released the land in question as alienable and disposable.
Thus, the present rule is that an application for original registration must be accompanied
by (1) a CENRO or PENRO Certification; and (2) a copy of the original classification
approved by the DENR Secretary and certified as a true copy by the legal custodian of
the official records.
Here, respondent Corporation only presented a CENRO certification in support of its
application. Clearly, this falls short of the requirements for original registration.44
Yet, even assuming that the DENR-CENRO certification alone would have sufficed, the
respondents application would still be denied considering that the reclassification of the
land as alienable or disposable came only after the filing of the application in court in
1976. The certification itself indicated that the land was reclassified as alienable or
disposable only on October 15, 1980. The consequence of this is fittingly discussed in
Heirs of Mario Malabanan v. Republic, to wit:
We noted in Naguit that it should be distinguished from Bracewell v. Court of Appeals
since in the latter, the application for registration had been filed before the land was
declared alienable or disposable. The dissent though pronounces Bracewell as the better
rule between the two. Yet two years after Bracewell, its ponente, the esteemed Justice
Consuelo Ynares-Santiago, penned the ruling in Republic v. Ceniza, which involved a
claim of possession that extended back to 1927 over a public domain land that was
declared alienable and disposable only in 1980. Ceniza cited Bracewell, quoted
extensively from it, and following the mindset of the dissent, the attempt at registration in
Ceniza should have failed. Not so.
To prove that the land subject of an application for registration is alienable, an applicant
must establish the existence of a positive act of the government such as a presidential
proclamation or an executive order; an administrative action; investigation reports of
Bureau of Lands investigators; and a legislative act or a statute.
In this case, private respondents presented a certification dated November 25, 1994,
issued by Eduardo M. Inting, the Community Environment and Natural Resources Officer
in the Department of Environment and Natural Resources Office in Cebu City, stating
that the lots involved were "found to be within the alienable and disposable (sic) Block-I,
Land Classification Project No. 32-A, per map 2962 4-I555 dated December 9, 1980."
This is sufficient evidence to show the real character of the land subject of private
respondents application. Further, the certification enjoys a presumption of regularity in
the absence of contradictory evidence, which is true in this case. Worth noting also was
the observation of the Court of Appeals stating that:
[n]o opposition was filed by the Bureaus of Lands and Forestry to contest the application
of appellees on the ground that the property still forms part of the public domain. Nor is
there any showing that the lots in question are forestal land...."
Thus, while the Court of Appeals erred in ruling that mere possession of public land for
the period required by law would entitle its occupant to a confirmation of imperfect title, it
did not err in ruling in favor of private respondents as far as the first requirement in
Section 48(b) of the Public Land Act is concerned, for they were able to overcome the
burden of proving the alienability of the land subject of their application.
As correctly found by the Court of Appeals, private respondents were able to prove their
open, continuous, exclusive and notorious possession of the subject land even before
the year 1927. As a rule, we are bound by the factual findings of the Court of Appeals.
Although there are exceptions, petitioner did not show that this is one of them."
Why did the Court in Ceniza, through the same eminent member who authored
Bracewell, sanction the registration under Section 48(b) of public domain lands declared
alienable or disposable thirty-five (35) years and 180 days after 12 June 1945? The
telling difference is that in Ceniza, the application for registration was filed nearly six (6)
years after the land had been declared alienable or disposable, while in Bracewell, the
application was filed nine (9) years before the land was declared alienable or disposable.
That crucial difference was also stressed in Naguit to contradistinguish it from Bracewell,
a difference which the dissent seeks to belittle.45 (citations omitted)
On the other hand, under Section 14(2), ownership of private lands acquired through
prescription may be registered in the owners name. Did the respondent then acquire the
land through prescription considering that her possession and occupation of the land by
her and her predecessors-in-interest could be traced back to as early as in 1926, and
that the nature of their possession and occupation was that of a bona fide claim of
ownership for over 30 years?
Clearly, the respondent did not. Again, Heirs of Mario Malabanan v. Republic is
enlightening, to wit:
It is clear that property of public dominion, which generally includes property belonging to
the State, cannot be the object of prescription or, indeed, be subject of the commerce of
man. Lands of the public domain, whether declared alienable and disposable or not, are
property of public dominion and thus insusceptible to acquisition by prescription.
Let us now explore the effects under the Civil Code of a declaration by the President or
any duly authorized government officer of alienability and disposability of lands of the
public domain. Would such lands so declared alienable and disposable be converted,
under the Civil Code, from property of the public dominion into patrimonial property?
After all, by connotative definition, alienable and disposable lands may be the object of
the commerce of man; Article 1113 provides that all things within the commerce of man
are susceptible to prescription; and the same provision further provides that patrimonial
property of the State may be acquired by prescription.
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public dominion,
when no longer intended for public use or for public service, shall form part of the
patrimonial property of the State." It is this provision that controls how public dominion
property may be converted into patrimonial property susceptible to acquisition by
prescription. After all, Article 420 (2) makes clear that those property "which belong to the
State, without being for public use, and are intended for some public service or for the
development of the national wealth" are public dominion property. For as long as the
property belongs to the State, although already classified as alienable or disposable, it
remains property of the public dominion if when it is "intended for some public service or
for the development of the national wealth". 1wphi 1
Accordingly, there must be an express declaration by the State that the public dominion
property is no longer intended for public service or the development of the national
wealth or that the property has been converted into patrimonial. Without such express
declaration, the property, even if classified as alienable or disposable, remains property
of the public dominion, pursuant to Article 420(2), and thus incapable of acquisition by
prescription. It is only when such alienable and disposable lands are expressly declared
by the State to be no longer intended for public service or for the development of the
national wealth that the period of acquisitive prescription can begin to run. Such
declaration shall be in the form of a law duly enacted by Congress or a Presidential
Proclamation in cases where the President is duly authorized by law.
It is comprehensible with ease that this reading of Section 14(2) of the Property
Registration Decree limits its scope and reach and thus affects the registrability even of
lands already declared alienable and disposable to the detriment of the bona fide
possessors or occupants claiming title to the lands. Yet this interpretation is in accord
with the Regalian doctrine and its concomitant assumption that all lands owned by the
State, although declared alienable or disposable, remain as such and ought to be used
only by the Government.
Recourse does not lie with this Court in the matter. The duty of the Court is to apply the
1wphi1
Constitution and the laws in accordance with their language and intent. The remedy is to
change the law, which is the province of the legislative branch. Congress can very well
be entreated to amend Section 14(2) of the Property Registration Decree and pertinent
provisions of the Civil Code to liberalize the requirements for judicial confirmation of
imperfect or incomplete titles.46
The period of possession prior to the reclassification of the land as alienable and
disposable land of the public domain is not considered in reckoning the prescriptive
period in favor of the possessor. As pointedly clarified also in Heirs of Mario Malabanan
v. Republic:47
Should public domain lands become patrimonial because they are declared as such in a
duly enacted law or duly promulgated proclamation that they are no longer intended for
public service or for the development of the national wealth, would the period of
possession prior to the conversion of such public dominion into patrimonial be reckoned
in counting the prescriptive period in favor of the possessors? We rule in the negative.
The limitation imposed by Article 1113 dissuades us from ruling that the period of
possession before the public domain land becomes patrimonial may be counted for the
purpose of completing the prescriptive period. Possession of public dominion property
before it becomes patrimonial cannot be the object of prescription according to the Civil
Code. As the application for registration under Section 14(2) falls wholly within the
framework of prescription under the Civil Code, there is no way that possession during
the time that the land was still classified as public dominion property can be counted to
meet the requisites of acquisitive prescription and justify registration.48
In other words, the period of possession prior to the reclassification of the land, no matter
how long, was irrelevant because prescription did not operate against the State before
then.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of
Appeals promulgated on January 30, 2004; DISMISSES the application for land
registration of respondent Rosario de Guzman Vda. De Joson respecting Lot 2633, Cad-
297 with a total area of 12,342 square meters, more or less, situated in San Isidro,
Paombong, Bulacan; and DIRECTS the respondent to pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-66575 September 30, 1986
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES,
TEODORO and MYRNA, all surnamed MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO
CASTRO, SALOME RODRIGUEZ, EDUCARDO CUISON, FERNANDO ZARCILLA,
MARIANO GABRIEL, NICOMEDES CORDERO, CLETO PEDROZO, FELIX SALARY
and JOSE PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.
FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the then Court of First Instance of
Pangasinan, Branch XI a complaint for quieting of title over a certain fishpond located
within the four [41 parcels of land belonging to them situated in Barrio Salomague,
Bugallon, Pangasinan, and the annulment of Resolutions Nos. 38 and 95 of the
Municipal Council of Bugallon Pangasinan. The trial court dismissed the complaint in a
decision dated August 15, 1975 upon a finding that the body of water traversing the titled
properties of petitioners is a creek constituting a tributary of the Agno River; therefore
public in nature and not subject to private appropriation. The lower court likewise held
that Resolution No. 38, ordering an ocular inspection of the Cayangan Creek situated
between Barrios Salomague Sur and Salomague Norte, and Resolution No. 95
authorizing public bidding for the lease of all municipal ferries and fisheries, including the
fishpond under consideration, were passed by respondents herein as members of the
Municipal Council of Bugallon, Pangasinan in the exercise of their legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court, which affirmed
the same on April 29, 1983. Hence, this petition for review on certiorari.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise
Agreement and declare the same null and void for being contrary to law and public
policy. The Court further resolved to DISMISS the instant petition for lack of merit.
SO ORDERED.

Acting on the petition, the Court required the respondents to comment thereon. However, Republic of the Philippines
before respondents could do so, petitioners manifested that for lack of interest on the SUPREME COURT
part of respondent Alfredo Maza, the awardee in the public bidding of the fishpond, the Manila
parties desire to amicably settle the case by submitting to the Court a Compromise
Agreement praying that judgment be rendered recognizing the ownership of petitioners THIRD DIVISION
over the land the body of water found within their titled properties, stating therein, among
other things, that "to pursue the case, the same will not amount to any benefit of the G.R. No. 152115 January 26, 2005
parties, on the other hand it is to the advantage and benefit of the municipality if the
ownership of the land and the water found therein belonging to petitioners be recognized
NIMFA USERO, petitioner,
in their favor as it is now clear that after the National Irrigation Administration [NIA] had
vs.
built the dike around the land, no water gets in or out of the land. 1
COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
The stipulations contained in the Compromise Agreement partake of the nature of an
x--------------------------------x
adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which,
as clearly found by the lower and appellate courts, was originally a creek forming a
tributary of the Agno River. Considering that as held in the case of Mercado vs. Municipal G.R. No. 155055 January 26, 2005
President of Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm
extending from a river and participating in the ebb and flow of the sea, is a property LUTGARDA R. SAMELA, petitioner,
belonging to the public domain which is not susceptible to private appropriation and vs.
acquisitive prescription, and as a public water, it cannot be registered under the Torrens COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
System in the name of any individual [Diego v. Court of Appeals, 102 Phil. 494;
Mangaldan v. Manaoag, 38 Phil. 4551; and considering further that neither the mere DECISION
construction of irrigation dikes by the National Irrigation Administration which prevented
the water from flowing in and out of the subject fishpond, nor its conversion into a CORONA, J.:
fishpond, alter or change the nature of the creek as a property of the public domain, the
Court finds the Compromise Agreement null and void and of no legal effect, the same Before this Court are two consolidated petitions for review on certiorari under Rule 45 of
being contrary to law and public policy. the Rules of Court. The first petition, docketed as G.R. No. 152115, filed by Nimfa Usero,
assails the September 19, 2001 decision1 of the Court of Appeals in CA-GR SP No.
The finding that the subject body of water is a creek belonging to the public domain is a 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela,
factual determination binding upon this Court. The Municipality of Bugallon, acting thru its assails the January 11, 2002 decision2 of the Court of Appeals in CA-GR SP NO. 64181.
duly-constituted municipal council is clothed with authority to pass, as it did the two
resolutions dealing with its municipal waters, and it cannot be said that petitioners were The undisputed facts follow.
deprived of their right to due process as mere publication of the notice of the public
bidding suffices as a constructive notice to the whole world. Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1
and 2, Block 5, Golden Acres Subdivision, Barrio Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of land at no.
18 Anahaw St., Pilar Village, Las Pias City, behind the lots of petitioners Samela and
Usero.
Situated between the lots of the parties is a low-level strip of land, with a stagnant body
of water filled with floating water lilies; abutting and perpendicular to the lot of petitioner
Samela, the lot of the Polinars and the low-level strip of land is the perimeter wall of Pilar
Village Subdivision.
Apparently, every time a storm or heavy rains occur, the water in said strip of land rises
and the strong current passing through it causes considerable damage to the house of
respondent Polinars. Frustrated by their predicament, private respondent spouses, on
July 30, 1998, erected a concrete wall on the bank of the low-level strip of land about
three meters from their house and rip-rapped the soil on that portion of the strip of land.
Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded
that the spouses Apolinar stop their construction but the spouses paid no heed, believing
the strip to be part of a creek. Nevertheless, for the sake of peace, the Polinars offered to
pay for the land being claimed by petitioners Samela and Usero. However, the parties
failed to settle their differences.
On November 9, 1998, petitioners filed separate complaints for forcible entry against the
Polinars at the Metropolitan Trial Court of Las Pias City. The case filed by petitioner
Samela was docketed as Civil Case No. 5242, while that of petitioner Usero was
docketed as Civil Case No. 5243.
In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer
Certificate of Title, plan of consolidation, subdivision survey, the tax declaration in her
name, and affidavits of petitioner Usero and a certain Justino Gamela whose property
was located beside the perimeter wall of Pilar Village.
The spouses Polinar, on the other hand, presented in evidence their own TCT; a
barangay certification as to the existence of the creek; a certification from the district
engineer that the western portion of Pilar Village is bound by a tributary of Talon Creek
throughout its entire length; boundary and index map of Pilar Village showing that the
village is surrounded by a creek and that the Polinar property is situated at the edge of
said creek; and pictures of the subject strip of land filled with water lilies.
On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:
WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate
and remove at their expense the improvements made on the subject lot; ordering the
defendants to pay the plaintiff P1,000.00 a month as reasonable compensation for the
use of the portion encroached from the filing of the complaint until the same is finally
vacated; and to pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of
suit.3
1vvphi1.nt
In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an
order on February 29, 2000, directing petitioner Usero and the Polinar spouses to
commission a professional geodetic engineer to conduct a relocation survey and to
submit the report to the trial court.
On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation
survey of Useros property covered by TCT No. T- 29545. The result of the said
relocation survey, as stated in his affidavit, was as follows:
1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463
covered by TCT No. T-29545 registered in the name of Nimfa O. Usero;
2. That according to my survey, I found out that there is no existing creek on the
boundary of the said lot;
3. That based on the relocation plan surveyed by the undersigned, attached
herewith, appearing is the encroachment on the above-mentioned lot by Spouses
Herminigildo and Cecilia Polinar with an area of FORTY THREE (43) SQUARE
METERS;
4. That this affidavit was made in compliance with Court Order dated February
23, 2000 of Metropolitan Trial Court, Las Pias City, Branch LXXIX.4
On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants ordering them:
a) To vacate and remove at their expense the improvement made on the subject
lot;
b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the
portion encroached from the time of the filing of the complaint until the same is
finally vacated;
c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.
SO ORDERED.5
The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the
Regional Trial Court of Las Pias, Branch 253 which heard the appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed
the decision of the trial court and ordered the dismissal of the complaint. It confirmed the
existence of the creek between the northwestern portion of the lot of petitioner Samela
and the southwestern portion of the lot of the spouses Polinar:
Finding the existence of a creek between the respective properties of the parties,
plaintiff-appellee cannot therefore lay claim of lawful ownership of that portion because
the same forms part of public dominion. Consequently, she cannot legally stop the
1a\^/phi 1.net
defendants-appellants from rip-rapping the bank of the creek to protect the latters
property from soil erosion thereby avoiding danger to their lives and damage to property.
Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot,
defendants-appellants are not duty bound to pay the former compensation for the use of
the same. As a result, they may maintain the said improvements introduced thereon
subject to existing laws, rules and regulations and/or ordinances appurtenant thereto.
WHEREFORE, premises considered, the Decision rendered by Branch 79 of the
Metropolitan Trial Court, Las Pias is REVERSED. Accordingly, the instant complaint is
DISMISSED.
SO ORDERED.6
On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the
finding of the Municipal Trial Court:
From the foregoing, defendants-appellants may maintain the improvements introduced
on the subject portion of the lot subject to existing laws, rules and regulations and/or
ordinances pertaining thereto. Consequently, no compensation may be awarded in favor
of the plaintiff-appellee.
WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch
79 of the Las Pias City Metropolitan Trial Court is REVERSED. Accordingly, the instant
complaint is DISMISSED.
From the adverse decisions of the Regional Trial Court, petitioners filed their respective
petitions for review on certiorari to the Court of Appeals. Petitioner Samelas case was
docketed as CA-G.R. SP 64181 while that of petitioner Usero was docketed as CA-G.R.
SP 64718. 1aw phi 1.nt
Both petitions failed in the CA. Thus the instant consolidated petitions.
The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly
encroached upon by the spouses Polinar, is the private property of petitioners or part of
the creek and therefore part of the public domain. Clearly this an issue which calls for a
review of facts already determined by the Court of Appeals.
The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the
Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual
findings complained of are devoid of support by the evidence on record or the assailed
judgment is based on a misapprehension of facts.7 This is obviously not the case here.
A careful scrutiny of the records reveals that the assailed decisions are founded on
sufficient evidence. That the subject strip of land is a creek is evidenced by: (1) a
barangay certification that a creek exists in the disputed strip of land; (2) a certification
from the Second Manila Engineering District, NCR-DPWH, that the western portion of
Pilar Village where the subject strip of land is located is bounded by a tributary of Talon
Creek and (3) photographs showing the abundance of water lilies in the subject strip of
land. The Court of Appeals was correct: the fact that water lilies thrive in that strip of land
can only mean that there is a permanent stream of water or creek there.
In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners
presented the TCTs of their respective lots to prove that there is no creek between their
properties and that of the Polinars. However, an examination of said TCTs reveals that
the descriptions thereon are incomplete. In petitioner Samelas TCT No. T-30088, there
is no boundary description relative to the northwest portion of the property pertaining to
the site of the creek. Likewise in TCT No. T-22329-A of the spouses Polinar, the
southeast portion which pertains to the site of the creek has no described boundary.
Moreover the tax declaration presented by petitioner is devoid of any entry on the "west
boundary" vis-a-vis the location of the creek. All the pieces of evidence taken together,
we can only conclude that the adjoining portion of these boundaries is in fact a creek and
belongs to no one but the state.
Property is either of public dominion or of private ownership.8 Concomitantly, 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;
The phrase "others of similar character" includes a creek which is a recess or an arm of a
river. It is property belonging to the public domain which is not susceptible to private
ownership.9 Being public water, a creek cannot be registered under the Torrens System
in the name of any individual10 .
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to
prevent the erosion of their property.
WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of
the Court of Appeals in CA-G.R. SP 64181 and CA-G.R. SP 64718 are affirmed in toto.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 178411 June 23, 2010
OFFICE OF THE CITY MAYOR OF PARAAQUE CITY, OFFICE OF THE CITY
ADMINISTRATOR OF PARAAQUE CITY, OFFICE OF THE CITY ENGINEER OF
PARAAQUE CITY, OFFICE OF THE CITY PLANNING AND DEVELOPMENT
COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN AND SANGGUNIANG
PAMBARANGAY OF BARANGAY VITALEZ, PARAAQUE CITY, TERESITA A.
GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M.
ARGOTE, CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L.
GONZALES, ESTER C. ASEHAN, MANUEL A. FUENTES, and MYRNA P.
ROSALES, Petitioners,
vs.
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO, EDUARDO
V. EBIO, RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL
V. EBIO, Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the January 31, 2007 Decision1 and June 8, 2007
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being
contrary to law and jurisprudence. The CA had reversed the Order3 of the Regional Trial
Court (RTC) of Paraaque City, Branch 196, issued on April 29, 2005 in Civil Case No.
05-0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land consisting of
406 square meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez,
Paraaque City and covered by Tax Declaration Nos. 01027 and 01472 in the name of
respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek. Respondents
assert that the original occupant and possessor of the said parcel of land was their great
grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land to his son, Pedro
Vitalez. From then on, Pedro continuously and exclusively occupied and possessed the
said lot. In 1966, after executing an affidavit declaring possession and occupancy,4 Pedro
was able to obtain a tax declaration over the said property in his name.5 Since then,
respondents have been religiously paying real property taxes for the said property.6
Meanwhile, in 1961, respondent Mario Ebio married Pedros daughter, Zenaida. Upon
Pedros advice, the couple established their home on the said lot. In April 1964 and in
October 1971, Mario Ebio secured building permits from the Paraaque municipal office
for the construction of their house within the said compound.7 On April 21, 1987, Pedro
executed a notarized Transfer of Rights8 ceding his claim over the entire parcel of land in
favor of Mario Ebio. Subsequently, the tax declarations under Pedros name were
cancelled and new ones were issued in Mario Ebios name.9
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed
Resolution No. 08, series of 199910seeking assistance from the City Government of
Paraaque for the construction of an access road along Cut-cut Creek located in the said
barangay. The proposed road, projected to be eight (8) meters wide and sixty (60)
meters long, will run from Urma Drive to the main road of Vitalez Compound11 traversing
the lot occupied by the respondents. When the city government advised all the affected
residents to vacate the said area, respondents immediately registered their opposition
thereto. As a result, the road project was temporarily suspended.12
In January 2003, however, respondents were surprised when several officials from the
barangay and the city planning office proceeded to cut eight (8) coconut trees planted on
the said lot. Respondents filed letter-complaints before the Regional Director of the
Bureau of Lands, the Department of Interior and Local Government and the Office of the
Vice Mayor.13 On June 29, 2003, the Sangguniang Barangay of Vitalez held a meeting to
discuss the construction of the proposed road. In the said meeting, respondents asserted
their opposition to the proposed project and their claim of ownership over the affected
property.14 On November 14, 2003, respondents attended another meeting with officials
from the city government, but no definite agreement was reached by and among the
parties.15
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents
ordering them to vacate the area within the next thirty (30) days, or be physically evicted
from the said property.16 Respondents sent a letter to the Office of the City Administrator
asserting, in sum, their claim over the subject property and expressing intent for a further
dialogue.17 The request remained unheeded. 1avvphi1
Threatened of being evicted, respondents went to the RTC of Paraaque City on April
21, 2005 and applied for a writ of preliminary injunction against petitioners.18 In the
course of the proceedings, respondents admitted before the trial court that they have a
pending application for the issuance of a sales patent before the Department of
Environment and Natural Resources (DENR).19
On April 29, 2005, the RTC issued an Order20 denying the petition for lack of merit. The
trial court reasoned that respondents were not able to prove successfully that they have
an established right to the property since they have not instituted an action for
confirmation of title and their application for sales patent has not yet been granted.
Additionally, they failed to implead the Republic of the Philippines, which is an
indispensable party.
Respondents moved for reconsideration, but the same was denied.21
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31,
2007, the Court of Appeals issued its Decision in favor of the respondents. According to
the Court of Appeals--
The issue ultimately boils down to the question of ownership of the lands adjoining
Cutcut Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion
beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of 291
square meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-62176. The
same RL 8 appears to have been donated by the Guaranteed Homes to the City
Government of Paraaque on 22 March 1966 and which was accepted by the then
Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence however, when RL
8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed the
accreted property since 1930 per his Affidavit dated 21 March 1966 for the purpose of
declaring the said property for taxation purposes. The property then became the subject
of Tax Declaration No. 20134 beginning the year 1967 and the real property taxes
therefor had been paid for the years 1966, 1967, 1968, 1969, 1970, 1972, 1973, 1974,
1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, and 2004.
Sometime in 1964 and 1971, construction permits were issued in favor of Appellant
MARIO EBIO for the subject property. On 21 April 1987, PEDRO VITALEZ transferred
his rights in the accreted property to MARIO EBIO and his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary evidence,
it could be concluded that Guaranteed Homes is the owner of the accreted property
considering its ownership of the adjoining RL 8 to which the accretion attached.
However, this is without the application of the provisions of the Civil Code on acquisitive
prescription which is likewise applicable in the instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion which
[was] duly proven by the Appellants. It is clear that since 1930, Appellants together with
their predecessor-in-interest, PEDRO VITALEZ[,] have been in exclusive possession of
the subject property and starting 1964 had introduced improvements thereon as
evidenced by their construction permits. Thus, even by extraordinary acquisitive
prescription[,] Appellants have acquired ownership of the property in question since 1930
even if the adjoining RL 8 was subsequently registered in the name of Guaranteed
Homes. x x x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8 registered in
its name, which is almost fifty years from the time PEDRO VITALEZ occupied the
adjoining accreted property in 1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants which
bolster their right over the subject property. x x x.
xxxx
In sum, We are fully convinced and so hold that the Appellants [have] amply proven their
right over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The
challenged Order of the court a quo is REVERSED and SET ASIDE.
SO ORDERED.22
On June 8, 2007, the appellate court denied petitioners motion for reconsideration.
Hence, this petition raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE
COURT OF APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN
ACCORD WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE
COURT OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE
PRESCRIPTION IS IN ACCORD WITH THE LAW AND ESTABLISHED
JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE
COMPLAINT FILED BY RESPONDENTS IN THE LOWER COURT.23
The issues may be narrowed down into two (2): procedurally, whether the State is an
indispensable party to respondents action for prohibitory injunction; and substantively,
whether the character of respondents possession and occupation of the subject property
entitles them to avail of the relief of prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically to restrain or command the performance of
an act.24 It is distinct from the ancillary remedy of preliminary injunction, which cannot
exist except only as part or as an incident to an independent action or proceeding.
Moreover, in an action for injunction, the auxiliary remedy of a preliminary prohibitory or
mandatory injunction may issue.25
In the case at bar, respondents filed an action for injunction to prevent the local
government of Paraaque City from proceeding with the construction of an access road
that will traverse through a parcel of land which they claim is owned by them by virtue of
acquisitive prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is
classified as part of the public domain, any land that may have formed along its banks
through time should also be considered as part of the public domain. And respondents
should have included the State as it is an indispensable party to the action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial deposits that
have gradually settled along the banks of Cut-cut creek. This being the case, the law that
governs ownership over the accreted portion is Article 84 of the Spanish Law of Waters
of 1866, which remains in effect,26 in relation to Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over
alluvial deposits along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams,
rivers, and lakes, by accessions or sediments from the waters thereof, belong to the
owners of such lands.27
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which
they gradually receive from the effects of the current of the waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks
of a creek do not form part of the public domain as the alluvial property automatically
belongs to the owner of the estate to which it may have been added. The only restriction
provided for by law is that the owner of the adjoining property must register the same
under the Torrens system; otherwise, the alluvial property may be subject to acquisition
through prescription by third persons.28
In contrast, properties of public dominion cannot be acquired by prescription. No matter
how long the possession of the properties has been, there can be no prescription against
the State regarding property of public domain.29 Even a city or municipality cannot
acquire them by prescription as against the State.30
Hence, while it is true that a creek is a property of public dominion,31 the land which is
formed by the gradual and imperceptible accumulation of sediments along its banks does
not form part of the public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such that a
final decree would necessarily affect his/her right, so that the court cannot proceed
without their presence.32 In contrast, a necessary party is one whose presence in the
proceedings is necessary to adjudicate the whole controversy but whose interest is
separable such that a final decree can be made in their absence without affecting them.33
In the instant case, the action for prohibition seeks to enjoin the city government of
Paraaque from proceeding with its implementation of the road construction project. The
State is neither a necessary nor an indispensable party to an action where no positive
act shall be required from it or where no obligation shall be imposed upon it, such as in
the case at bar. Neither would it be an indispensable party if none of its properties shall
be divested nor any of its rights infringed.
We also find that the character of possession and ownership by the respondents over the
contested land entitles them to the avails of the action.
patent application should instead be considered as a mere superfluity particularly since
ownership over the land, which they seek to buy from the State, is already vested upon
them by virtue of acquisitive prescription. Moreover, the State does not have any
authority to convey a property through the issuance of a grant or a patent if the land is no
longer a public land.39

A right in esse means a clear and unmistakable right.34 A party seeking to avail of an Nemo dat quod dat non habet. No one can give what he does not have. Such principle is
injunctive relief must prove that he or she possesses a right in esse or one that is actual equally applicable even against a sovereign entity that is the State.
or existing.35 It should not be contingent, abstract, or future rights, or one which may
never arise.36 WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision,
as well as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, are hereby AFFIRMED.
had occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario
Ebio secured a permit from the local government of Paraaque for the construction of With costs against petitioners.
their family dwelling on the said lot. In 1966, Pedro executed an affidavit of possession
and occupancy allowing him to declare the property in his name for taxation purposes. SO ORDERED.
Curiously, it was also in 1966 when Guaranteed Homes, Inc., the registered owner of
Road Lot No. 8 (RL 8) which adjoins the land occupied by the respondents, donated RL Republic of the Philippines
8 to the local government of Paraaque. SUPREME COURT
Manila
From these findings of fact by both the trial court and the Court of Appeals, only one
conclusion can be made: that for more than thirty (30) years, neither Guaranteed Homes, EN BANC
Inc. nor the local government of Paraaque in its corporate or private capacity sought to
register the accreted portion. Undoubtedly, respondents are deemed to have acquired
G.R. No. 133250 July 9, 2002
ownership over the subject property through prescription. Respondents can assert such
right despite the fact that they have yet to register their title over the said lot. It must be
remembered that the purpose of land registration is not the acquisition of lands, but only FRANCISCO I. CHAVEZ, petitioner,
the registration of title which the applicant already possessed over the land. Registration vs.
was never intended as a means of acquiring ownership.37 A decree of registration merely PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
confirms, but does not confer, ownership.38 CORPORATION, respondents.

Did the filing of a sales patent application by the respondents, which remains pending CARPIO, J.:
before the DENR, estop them from filing an injunction suit?
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction
We answer in the negative. and a temporary restraining order. The petition seeks to compel the Public Estates
Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations
with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim
Confirmation of an imperfect title over a parcel of land may be done either through
portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new
judicial proceedings or through administrative process. In the instant case, respondents
agreement with AMARI involving such reclamation.
admitted that they opted to confirm their title over the property administratively by filing
an application for sales patent.
The Facts
Respondents application for sales patent, however, should not be used to prejudice or
derogate what may be deemed as their vested right over the subject property. The sales
On November 20, 1973, the government, through the Commissioner of Public Highways,
signed a contract with the Construction and Development Corporation of the Philippines
("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The
contract also included the construction of Phases I and II of the Manila-Cavite Coastal
Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of
the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree
No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore
and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and
all kinds of lands."1 On the same date, then President Marcos issued Presidential Decree
No. 1085 transferring to PEA the "lands reclaimed in the foreshore and offshore of the
Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to
amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be
funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of
Agreement dated December 29, 1981, which stated:
"(i) CDCP shall undertake all reclamation, construction, and such other works in
the MCCRRP as may be agreed upon by the parties, to be paid according to
progress of works on a unit price/lump sum basis for items of work to be agreed
upon, subject to price escalation, retention and other terms and conditions
provided for in Presidential Decree No. 1594. All the financing required for such
works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to
cede and transfer in favor of PEA, all of the rights, title, interest and participation
of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of
December 30, 1981 which have not yet been sold, transferred or otherwise
disposed of by CDCP as of said date, which areas consist of approximately
Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in
the Financial Center Area covered by land pledge No. 5 and approximately Three
Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight
(3,382,888) square meters of reclaimed areas at varying elevations above Mean
Low Water Level located outside the Financial Center Area and the First
Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No.
3517, granting and transferring to PEA "the parcels of land so reclaimed under the
Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total area
of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894)
square meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality
of Paraaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the
name of PEA, covering the three reclaimed islands known as the "Freedom Islands"
located at the southern portion of the Manila-Cavite Coastal Road, Paraaque City. The
Freedom Islands have a total land area of One Million Five Hundred Seventy Eight
Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with
AMARI, a private corporation, to develop the Freedom Islands. The JVA also required
the reclamation of an additional 250 hectares of submerged areas surrounding these
islands to complete the configuration in the Master Development Plan of the Southern
Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through
negotiation without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in
its Resolution No. 1245, confirmed the JVA.5 On June 8, 1995, then President Fidel V.
Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege
speech in the Senate and denounced the JVA as the "grandmother of all scams." As a
result, the Senate Committee on Government Corporations and Public Enterprises, and
the Committee on Accountability of Public Officers and Investigations, conducted a joint
investigation. The Senate Committees reported the results of their investigation in
Senate Committee Report No. 560 dated September 16, 1997.7 Among the conclusions
of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the
JVA are lands of the public domain which the government has not classified as alienable
lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering
the Freedom Islands are thus void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative
Order No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA
in view of Senate Committee Report No. 560. The members of the Legal Task Force
were the Secretary of Justice,8 the Chief Presidential Legal Counsel,9 and the
Government Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA,
contrary to the conclusions reached by the Senate Committees.11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that
there were on-going renegotiations between PEA and AMARI under an order issued by
then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw,
PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the
negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with
Application for the Issuance of a Temporary Restraining Order and Preliminary
Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed
the petition "for unwarranted disregard of judicial hierarchy, without prejudice to the
refiling of the case before the proper court."12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed
the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary
Injunction and Temporary Restraining Order. Petitioner contends the government stands
to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner
prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking
Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the
people to information on matters of public concern. Petitioner assails the sale to AMARI
of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987
Constitution prohibiting the sale of alienable lands of the public domain to private
corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of
pesos in properties of the State that are of public dominion.
After several motions for extension of time,13 PEA and AMARI filed their Comments on
October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998,
petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the
renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and
(c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated
June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and
required the parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement
("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the
administration of then President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner now
prays that on "constitutional and statutory grounds the renegotiated contract be declared
null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE
MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO
OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION
OF ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES
OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE
AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS,
RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987
CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE
ISSUE OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS
GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and
academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going
negotiations for a new agreement." The petition also prays that the Court enjoin PEA
from "privately entering into, perfecting and/or executing any new agreement with
AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished
petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and
conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer
for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the
signing of the Amended JVA is now moot because PEA and AMARI have already signed
the Amended JVA on March 30, 1999. Moreover, the Office of the President has
approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply
fast-tracking the signing and approval of the Amended JVA before the Court could act on
the issue. Presidential approval does not resolve the constitutional issue or remove it
from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the
President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA
and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of
the Amended JVA on constitutional grounds necessarily includes preventing its
implementation if in the meantime PEA and AMARI have signed one in violation of the
Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its
violation of Section 3, Article XII of the Constitution, which prohibits the government from
alienating lands of the public domain to private corporations. If the Amended JVA indeed
violates the Constitution, it is the duty of the Court to enjoin its implementation, and if
already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks
to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged
areas of Manila Bay to a single private corporation. It now becomes more compelling
for the Court to resolve the issue to insure the government itself does not violate a
provision of the Constitution intended to safeguard the national patrimony. Supervening
events, whether intended or accidental, cannot prevent the Court from rendering a
decision if there is a grave violation of the Constitution. In the instant case, if the
Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of
title and ownership of alienable lands of the public domain in the name of AMARI. Even
in cases where supervening events had made the cases moot, the Court did not hesitate
to resolve the legal or constitutional issues raised to formulate controlling principles to
guide the bench, bar, and the public.17
Also, the instant petition is a case of first impression. All previous decisions of the Court
involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the
1973 Constitution,18 covered agricultural lands sold to private corporations which
acquired the lands from private parties. The transferors of the private corporations
claimed or could claim the right to judicial confirmation of their imperfect
titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant
case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and
submerged areas for non-agricultural purposes by purchase under PD No. 1084
(charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the
Amended JVA constitute the consideration for the purchase. Neither AMARI nor PEA
can claim judicial confirmation of their titles because the lands covered by the Amended
JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title
requires open, continuous, exclusive and notorious occupation of agricultural lands of the
public domain for at least thirty years since June 12, 1945 or earlier. Besides, the
deadline for filing applications for judicial confirmation of imperfect title expired on
December 31, 1987.20
Lastly, there is a need to resolve immediately the constitutional issue raised in this
petition because of the possible transfer at any time by PEA to AMARI of title and
ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is obligated
to transfer to AMARI the latter's seventy percent proportionate share in the reclaimed
areas as the reclamation progresses. The Amended JVA even allows AMARI to
mortgage at any time the entire reclaimed area to raise financing for the reclamation
project.21
Second issue: whether the petition merits dismissal for failing to observe the
principle governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly
from the Court. The principle of hierarchy of courts applies generally to cases involving
factual questions. As it is not a trier of facts, the Court cannot entertain cases involving
factual issues. The instant case, however, raises constitutional issues of transcendental
importance to the public.22 The Court can resolve this case without determining any
factual issue related to the case. Also, the instant case is a petition for mandamus which
falls under the original jurisdiction of the Court under Section 5, Article VIII of the
Constitution. We resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of
administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose
publicly certain information without first asking PEA the needed information. PEA claims
petitioner's direct resort to the Court violates the principle of exhaustion of administrative
remedies. It also violates the rule that mandamus may issue only if there is no other
plain, speedy and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v. Tuvera23 where the Court granted the
petition for mandamus even if the petitioners there did not initially demand from the
Office of the President the publication of the presidential decrees. PEA points out that in
Taada, the Executive Department had an affirmative statutory duty under Article 2 of
the Civil Code24 and Section 1 of Commonwealth Act No. 63825 to publish the presidential
decrees. There was, therefore, no need for the petitioners in Taada to make an initial
demand from the Office of the President. In the instant case, PEA claims it has no
affirmative statutory duty to disclose publicly information about its renegotiation of the
JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of
administrative remedies to the instant case in view of the failure of petitioner here to
demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government
corporation. Under Section 79 of the Government Auditing Code,26 the disposition of
government lands to private parties requires public bidding. PEA was under a positive
legal duty to disclose to the public the terms and conditions for the sale of its
lands. The law obligated PEA to make this public disclosure even without demand from
petitioner or from anyone. PEA failed to make this public disclosure because the original
JVA, like the Amended JVA, was the result of a negotiated contract, not of a public
bidding. Considering that PEA had an affirmative statutory duty to make the public
disclosure, and was even in breach of this legal duty, petitioner had the right to seek
direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of
administrative remedies does not apply when the issue involved is a purely legal or
constitutional question.27 The principal issue in the instant case is the capacity of AMARI
to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of
lands of the public domain to private corporations. We rule that the principle of
exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to
enforce his constitutional right to information without a showing that PEA refused to
perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that
petitioner has not shown that he will suffer any concrete injury because of the signing or
implementation of the Amended JVA. Thus, there is no actual controversy requiring the
exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to
compel PEA to comply with its constitutional duties. There are two constitutional issues
involved here. First is the right of citizens to information on matters of public concern.
Second is the application of a constitutional provision intended to insure the equitable
distribution of alienable lands of the public domain among Filipino citizens. The thrust of
the first issue is to compel PEA to disclose publicly information on the sale of
government lands worth billions of pesos, information which the Constitution and
statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA
from alienating hundreds of hectares of alienable lands of the public domain in violation
of the Constitution, compelling PEA to comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public.
In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on
matters of transcendental importance to the public, thus -
"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of
the Marcoses is an issue of 'transcendental importance to the public.' He asserts
that ordinary taxpayers have a right to initiate and prosecute actions questioning
the validity of acts or orders of government agencies or instrumentalities, if the
issues raised are of 'paramount public interest,' and if they 'immediately affect the
social, economic and moral well being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of personal
interest, when the proceeding involves the assertion of a public right, such as in
this case. He invokes several decisions of this Court which have set aside the
procedural matter of locus standi, when the subject of the case involved public
interest.
xxx
In Taada v. Tuvera, the Court asserted that when the issue concerns a public
right and the object of mandamus is to obtain the enforcement of a public duty,
the people are regarded as the real parties in interest; and because it is sufficient
that petitioner is a citizen and as such is interested in the execution of the laws,
he need not show that he has any legal or special interest in the result of the
action. In the aforesaid case, the petitioners sought to enforce their right to be
informed on matters of public concern, a right then recognized in Section 6,
Article IV of the 1973 Constitution, in connection with the rule that laws in order to
be valid and enforceable must be published in the Official Gazette or otherwise
effectively promulgated. In ruling for the petitioners' legal standing, the Court
declared that the right they sought to be enforced 'is a public right recognized by
no less than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Taada, further declared
that 'when a mandamus proceeding involves the assertion of a public right, the
requirement of personal interest is satisfied by the mere fact that petitioner is a
citizen and, therefore, part of the general 'public' which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may
not have been involved under the questioned contract for the development,
management and operation of the Manila International Container Terminal,
'public interest [was] definitely involved considering the important role [of the
subject contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved.' We concluded that, as a
consequence, the disclosure provision in the Constitution would constitute
sufficient authority for upholding the petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information
and access to official records, documents and papers a right guaranteed
under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor
general, is a Filipino citizen. Because of the satisfaction of the two basic
requisites laid down by decisional law to sustain petitioner's legal standing, i.e.
(1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule
that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of
constitutional rights - to information and to the equitable diffusion of natural resources -
matters of transcendental public importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official
information on on-going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on
matters of public concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law."
(Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces
the people's right to information on matters of public concern. This State policy is
expressed in Section 28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts
and implements a policy of full public disclosure of all its transactions
involving public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making
and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose
its official acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at all times x x x accountable to the
people,"29 for unless citizens have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information, citizens can participate in
public discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper functioning
of any democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30
"An essential element of these freedoms is to keep open a continuing dialogue or
process of communication between the government and the people. It is in the
interest of the State that the channels for free political discussion be maintained
to the end that the government may perceive and be responsive to the people's
will. Yet, this open dialogue can be effective only to the extent that the citizenry is
informed and thus able to formulate its will intelligently. Only when the
participants in the discussion are aware of the issues and have access to
information relating thereto can such bear fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to
information is limited to "definite propositions of the government." PEA maintains the right
does not include access to "intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the process of
being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage
or before the closing of the transaction. To support its contention, AMARI cites the
following discussion in the 1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished from
contracts, agreements, or treaties or whatever, does the Gentleman refer to the
steps leading to the consummation of the contract, or does he refer to the
contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore,
it can cover both steps leading to a contract and already a consummated
contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the
consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national
interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke
the right. Requiring government officials to reveal their deliberations at the pre-decisional
stage will degrade the quality of decision-making in government agencies. Government
officials will hesitate to express their real sentiments during deliberations if there is
immediate public dissemination of their discussions, putting them under all kinds of
pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to
disclose publicly, and information the constitutional right to information requires PEA to
release to the public. Before the consummation of the contract, PEA must, on its own
and without demand from anyone, disclose to the public matters relating to the
disposition of its property. These include the size, location, technical description and
nature of the property being disposed of, the terms and conditions of the disposition, the
parties qualified to bid, the minimum price and similar information. PEA must prepare all
these data and disclose them to the public at the start of the disposition process, long
before the consummation of the contract, because the Government Auditing Code
requires public bidding. If PEA fails to make this disclosure, any citizen can demand
from PEA this information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being
undertaken by the bidding or review committee is not immediately accessible under the
right to information. While the evaluation or review is still on-going, there are no "official
acts, transactions, or decisions" on the bids or proposals. However, once the committee
makes its official recommendation, there arises a "definite proposition" on the part of
the government. From this moment, the public's right to information attaches, and any
citizen can access all the non-proprietary information leading to such definite proposition.
In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that it is
incumbent upon the PCGG and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed
settlement they have decided to take up with the ostensible owners and holders
of ill-gotten wealth. Such information, though, must pertain to definite
propositions of the government, not necessarily to intra-agency or inter-
agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the "exploratory"
stage. There is need, of course, to observe the same restrictions on disclosure of
information in general, as discussed earlier such as on matters involving
national security, diplomatic or foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional
Commission understood that the right to information "contemplates inclusion of
negotiations leading to the consummation of the transaction."Certainly, a
consummated contract is not a requirement for the exercise of the right to information.
Otherwise, the people can never exercise the right if no contract is consummated, and if
one is consummated, it may be too late for the public to expose its defects. 1wphi1.nt
Requiring a consummated contract will keep the public in the dark until the contract,
which may be grossly disadvantageous to the government or even illegal, becomes a fait
accompli. This negates the State policy of full transparency on matters of public concern,
a situation which the framers of the Constitution could not have intended. Such a
requirement will prevent the citizenry from participating in the public discussion of
any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights.
We can allow neither an emasculation of a constitutional right, nor a retreat by the State
of its avowed "policy of full disclosure of all its transactions involving public interest."
The right covers three categories of information which are "matters of public concern,"
namely: (1) official records; (2) documents and papers pertaining to official acts,
transactions and decisions; and (3) government research data used in formulating
policies. The first category refers to any document that is part of the public records in the
custody of government agencies or officials. The second category refers to documents
and papers recording, evidencing, establishing, confirming, supporting, justifying or
explaining official acts, transactions or decisions of government agencies or officials. The
third category refers to research data, whether raw, collated or processed, owned by the
government and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes
evaluation reports, recommendations, legal and expert opinions, minutes of meetings,
terms of reference and other documents attached to such reports or minutes, all relating
to the JVA. However, the right to information does not compel PEA to prepare lists,
abstracts, summaries and the like relating to the renegotiation of the JVA.34 The right only
affords access to records, documents and papers, which means the opportunity to
inspect and copy them. One who exercises the right must copy the records, documents
and papers at his expense. The exercise of the right is also subject to reasonable
regulations to protect the integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to conduct the inspection
and copying.35
The right to information, however, does not extend to matters recognized as privileged
information under the separation of powers.36 The right does not also apply to information
on military and diplomatic secrets, information affecting national security, and information
on investigations of crimes by law enforcement agencies before the prosecution of the
accused, which courts have long recognized as confidential.37 The right may also be
subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged
information rooted in the separation of powers. The information does not cover
Presidential conversations, correspondences, or discussions during closed-door Cabinet
meetings which, like internal deliberations of the Supreme Court and other collegiate
courts, or executive sessions of either house of Congress,38 are recognized as
confidential. This kind of information cannot be pried open by a co-equal branch of
government. A frank exchange of exploratory ideas and assessments, free from the glare
of publicity and pressure by interested parties, is essential to protect the independence of
decision-making of those tasked to exercise Presidential, Legislative and Judicial
power.39 This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information
on on-going negotiationsbefore a final contract. The information, however, must
constitute definite propositions by the government and should not cover recognized
exceptions like privileged information, military and diplomatic secrets and similar matters
affecting national security and public order.40 Congress has also prescribed other
limitations on the right to information in several legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of
lands, reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the
Regalian doctrine which holds that the State owns all lands and waters of the public
domain. Upon the Spanish conquest of the Philippines, ownership of all "lands, territories
and possessions" in the Philippines passed to the Spanish Crown.42 The King, as the
sovereign ruler and representative of the people, acquired and owned all lands and
territories in the Philippines except those he disposed of by grant or sale to private
individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting,
however, the State, in lieu of the King, as the owner of all lands and waters of the public
domain. The Regalian doctrine is the foundation of the time-honored principle of land
ownership that "all lands that were not acquired from the Government, either by
purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code of
1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian
doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership
and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine
Commission enacted Act No. 1654 which provided for the lease, but not the sale, of
reclaimed lands of the government to corporations and individuals. Later, on
November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land
Act, which authorized the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. On November 7, 1936, the National
Assembly passed Commonwealth Act No. 141, also known as the Public Land Act,
which authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. CA No. 141 continues to this day as the general law
governing the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters
within the maritime zone of the Spanish territory belonged to the public domain for public
use.44 The Spanish Law of Waters of 1866 allowed the reclamation of the sea under
Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by
the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such works,
unless otherwise provided by the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party
undertaking the reclamation, provided the government issued the necessary permit and
did not reserve ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, riverbanks, shores, roadsteads, and that of a
similar character;
2. That belonging exclusively to the State which, without being of general public
use, is employed in some public service, or in the development of the national
wealth, such as walls, fortresses, and other works for the defense of the territory,
and mines, until granted to private individuals."
Property devoted to public use referred to property open for use by the public. In
contrast, property devoted to public service referred to property used for some specific
public service and open only to those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but also
to property not so used but employed to develop the national wealth. This class of
property constituted property of public dominion although employed for some economic
or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public
dominion into private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public use or to
the defense of the territory, shall become a part of the private property of the
State."
This provision, however, was not self-executing. The legislature, or the executive Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866.
department pursuant to law, must declare the property no longer needed for public use Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under
or territorial defense before the government could lease or alienate the property to Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties
private parties.45 with government permission remained private lands.

Act No. 1654 of the Philippine Commission Act No. 2874 of the Philippine Legislature

On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the
lease of reclaimed and foreshore lands. The salient provisions of this law were as
follows:
"Section 1. The control and disposition of the foreshore as defined in existing
law, and the title to all Government or public lands made or reclaimed by the
Government by dredging or filling or otherwise throughout the Philippine
Islands, shall be retained by the Government without prejudice to vested rights
and without prejudice to rights conceded to the City of Manila in the Luneta
Extension.
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public
Land Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the recommendation of the Secretary
of Agriculture and Natural Resources, shall from time to time classify the
lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and

Section 2. (a) The Secretary of the Interior shall cause all Government or public (c) Mineral lands, x x x.
lands made or reclaimed by the Government by dredging or filling or otherwise to
be divided into lots or blocks, with the necessary streets and alleyways located
Sec. 7. For the purposes of the government and disposition of alienable or
thereon, and shall cause plats and plans of such surveys to be prepared and filed
disposable public lands, the Governor-General, upon recommendation by the
with the Bureau of Lands.
Secretary of Agriculture and Natural Resources, shall from time to time
declare what lands are open to disposition or concession under this Act."
(b) Upon completion of such plats and plans the Governor-General shall give
notice to the public that such parts of the lands so made or reclaimed as
Sec. 8. Only those lands shall be declared open to disposition or
are not needed for public purposes will be leased for commercial and
concession which have been officially delimited or classified x x x.
business purposes, x x x.
xxx
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor
(e) The leases above provided for shall be disposed of to the highest and
mineral land, shall be classified as suitable for residential purposes or for
best bidder therefore, subject to such regulations and safeguards as the
commercial, industrial, or other productive purposes other than agricultural
Governor-General may by executive order prescribe." (Emphasis supplied)
purposes, and shall be open to disposition or concession, shall be disposed of
under the provisions of this chapter, and not otherwise.
Act No. 1654 mandated that the government should retain title to all lands reclaimed
by the government. The Act also vested in the government control and disposition of
Sec. 56. The lands disposable under this title shall be classified as follows:
foreshore lands. Private parties could lease lands reclaimed by the government only if
these lands were no longer needed for public purpose. Act No. 1654 mandated public
bidding in the lease of government reclaimed lands. Act No. 1654 made government (a) Lands reclaimed by the Government by dredging, filling, or other
reclaimed lands sui generis in that unlike other public lands which the government could means;
sell to private parties, these reclaimed lands were available only for lease to private
parties. (b) Foreshore;
 (c) Marshy lands or lands covered with water bordering upon the shores
or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six
shall be disposed of to private parties by lease only and not otherwise, as
soon as the Governor-General, upon recommendation by the Secretary of
Agriculture and Natural Resources, shall declare that the same are not
necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease
under the provisions of this Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the
public domain into x x x alienable or disposable"47 lands. Section 7 of the Act empowered
the Governor-General to "declare what lands are open to disposition or concession."
Section 8 of the Act limited alienable or disposable lands only to those lands which have
been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be
classified" as government reclaimed, foreshore and marshy lands, as well as other lands.
All these lands, however, must be suitable for residential, commercial, industrial or other
productive non-agricultural purposes. These provisions vested upon the Governor-
General the power to classify inalienable lands of the public domain into disposable
lands of the public domain. These provisions also empowered the Governor-General to
classify further such disposable lands of the public domain into government reclaimed,
foreshore or marshy lands of the public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public
domain classified as government reclaimed, foreshore and marshy lands "shall be
disposed of to private parties by lease only and not otherwise." The Governor-
General, before allowing the lease of these lands to private parties, must formally declare
that the lands were "not necessary for the public service." Act No. 2874 reiterated the
State policy to lease and not to sell government reclaimed, foreshore and marshy lands
of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government
reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or
disposable lands of the public domain that the government could not sell to private
parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and
marshy public lands for non-agricultural purposes retain their inherent potential as areas
for public service. This is the reason the government prohibited the sale, and only
allowed the lease, of these lands to private parties. The State always reserved these
lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore
and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling
under Section 56 (d) were the only lands for non-agricultural purposes the government
could sell to private parties. Thus, under Act No. 2874, the government could not sell
government reclaimed, foreshore and marshy lands to private parties, unless the
legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to
Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by
private parties with government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino
people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1,
Article XIII, that
"Section 1. All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy and other natural resources of the Philippines belong to the State, and
their disposition, exploitation, development, or utilization shall be limited to
citizens of the Philippines or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, subject to any existing
right, grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization of any of the
natural resources shall be granted for a period exceeding twenty-five years,
renewable for another twenty-five years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of water
power, in which cases beneficial use may be the measure and limit of the grant."
(Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public
agricultural lands, which were the only natural resources the State could alienate. Thus,
foreshore lands, considered part of the State's natural resources, became inalienable by
constitutional fiat, available only for lease for 25 years, renewable for another 25 years.
The government could alienate foreshore lands only after these lands were reclaimed
and classified as alienable agricultural lands of the public domain. Government reclaimed
and marshy lands of the public domain, being neither timber nor mineral lands, fell under "Sec. 6. The President, upon the recommendation of the Secretary of
the classification of public agricultural lands.50 However, government reclaimed and Agriculture and Commerce, shall from time to time classify the lands of the
marshy lands, although subject to classification as disposable public agricultural lands, public domain into
could only be leased and not sold to private parties because of Act No. 2874.
(a) Alienable or disposable,
The prohibition on private parties from acquiring ownership of government reclaimed and
marshy lands of the public domain was only a statutory prohibition and the legislature (b) Timber, and
could therefore remove such prohibition. The 1935 Constitution did not prohibit
individuals and corporations from acquiring government reclaimed and marshy lands of (c) Mineral lands,
the public domain that were classified as agricultural lands under existing public land
laws. Section 2, Article XIII of the 1935 Constitution provided as follows:
and may at any time and in like manner transfer such lands from one class to
another,53 for the purpose of their administration and disposition.
"Section 2. No private corporation or association may acquire, lease, or hold
public agricultural lands in excess of one thousand and twenty four
Sec. 7. For the purposes of the administration and disposition of alienable or
hectares, nor may any individual acquire such lands by purchase in excess
disposable public lands, the President, upon recommendation by the
of one hundred and forty hectares, or by lease in excess of one thousand
Secretary of Agriculture and Commerce, shall from time to time declare
and twenty-four hectares, or by homestead in excess of twenty-four hectares.
what lands are open to disposition or concession under this Act.
Lands adapted to grazing, not exceeding two thousand hectares, may be leased
to an individual, private corporation, or association." (Emphasis supplied)
Sec. 8. Only those lands shall be declared open to disposition or
concession which have been officially delimited and classified and, when
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58
practicable, surveyed, and which have not been reserved for public or quasi-
of Act No. 2874 to open for sale to private parties government reclaimed and marshy
public uses, nor appropriated by the Government, nor in any manner become
lands of the public domain. On the contrary, the legislature continued the long
private property, nor those on which a private right authorized and recognized by
established State policy of retaining for the government title and ownership of
this Act or any other valid law may be claimed, or which, having been reserved or
government reclaimed and marshy lands of the public domain.
appropriated, have ceased to be so. x x x."
Commonwealth Act No. 141 of the Philippine National Assembly
Thus, before the government could alienate or dispose of lands of the public domain, the
President must first officially classify these lands as alienable or disposable, and then
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, declare them open to disposition or concession. There must be no law reserving these
also known as the Public Land Act, which compiled the then existing laws on lands of the lands for public or quasi-public uses.
public domain. CA No. 141, as amended, remains to this day the existing general
law governing the classification and disposition of lands of the public domain other than
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy
timber and mineral lands.51
lands of the public domain, are as follows:
Section 6 of CA No. 141 empowers the President to classify lands of the public domain
"Sec. 58. Any tract of land of the public domain which, being neither timber
into "alienable or disposable"52 lands of the public domain, which prior to such
nor mineral land, is intended to be used for residential purposes or for
classification are inalienable and outside the commerce of man. Section 7 of CA No. 141
commercial, industrial, or other productive purposes other than
authorizes the President to "declare what lands are open to disposition or concession."
agricultural, and is open to disposition or concession, shall be disposed of
Section 8 of CA No. 141 states that the government can declare open for disposition or
under the provisions of this chapter and not otherwise.
concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of
CA No. 141 read as follows:
Sec. 59. The lands disposable under this title shall be classified as follows:
 (a) Lands reclaimed by the Government by dredging, filling, or other
means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores
or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the
case may be, to any person, corporation, or association authorized to purchase
or lease public lands for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine
shall be disposed of to private parties by lease only and not otherwise, as
soon as the President, upon recommendation by the Secretary of
Agriculture, shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. The lands included in
class (d) may be disposed of by sale or lease under the provisions of this
Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution,
Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and
marshy disposable lands of the public domain. All these lands are intended for
residential, commercial, industrial or other non-agricultural purposes. As before, Section
61 allowed only the lease of such lands to private parties. The government could sell to
private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for
non-agricultural purposes not classified as government reclaimed, foreshore and marshy
disposable lands of the public domain. Foreshore lands, however, became inalienable
under the 1935 Constitution which only allowed the lease of these lands to qualified
private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain
intended for residential, commercial, industrial or other productive purposes other than
agricultural "shall be disposed of under the provisions of this chapter and not
otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of the
land. Any disposition of government reclaimed, foreshore and marshy disposable lands
for non-agricultural purposes must comply with Chapter IX, Title III of CA No.
141,54 unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v.
Court of Appeals,55Justice Reynato S. Puno summarized succinctly the law on this
matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So too are
lands reclaimed by the government by dredging, filling, or other means. Act 1654
mandated that the control and disposition of the foreshore and lands under water
remained in the national government. Said law allowed only the 'leasing' of
reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the
foreshore and lands reclaimed by the government were to be "disposed of to
private parties by lease only and not otherwise." Before leasing, however, the
Governor-General, upon recommendation of the Secretary of Agriculture and
Natural Resources, had first to determine that the land reclaimed was not
necessary for the public service. This requisite must have been met before the
land could be disposed of. But even then, the foreshore and lands under
water were not to be alienated and sold to private parties. The disposition
of the reclaimed land was only by lease. The land remained property of the
State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has
remained in effect at present."
The State policy prohibiting the sale to private parties of government reclaimed,
foreshore and marshy alienable lands of the public domain, first implemented in 1907
was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The prohibition
on the sale of foreshore lands, however, became a constitutional edict under the 1935
Constitution. Foreshore lands became inalienable as natural resources of the State,
unless reclaimed by the government and classified as agricultural lands of the public
domain, in which case they would fall under the classification of government reclaimed
lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy
disposable lands of the public domain continued to be only leased and not sold to private
parties.56 These lands remained sui generis, as the only alienable or disposable lands of
the public domain the government could not sell to private parties.
Since then and until now, the only way the government can sell to private parties
government reclaimed and marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale. CA No. 141 does not authorize the
President to reclassify government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that the government could
sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before
lands under Section 59 that the government previously transferred to government units
or entities could be sold to private parties. Section 60 of CA No. 141 declares that
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment
of the Secretary of Agriculture and Natural Resources, be reasonably necessary
for the purposes for which such sale or lease is requested, and shall not exceed
one hundred and forty-four hectares: Provided, however, That this limitation shall
not apply to grants, donations, or transfers made to a province, municipality or
branch or subdivision of the Government for the purposes deemed by said
entities conducive to the public interest; but the land so granted, donated, or
transferred to a province, municipality or branch or subdivision of the
Government shall not be alienated, encumbered, or otherwise disposed of
in a manner affecting its title, except when authorized by Congress: x x x."
(Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative
authority required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted
government units and entities from the maximum area of public lands that could be
acquired from the State. These government units and entities should not just turn around
and sell these lands to private parties in violation of constitutional or statutory limitations.
Otherwise, the transfer of lands for non-agricultural purposes to government units and
entities could be used to circumvent constitutional limitations on ownership of alienable
or disposable lands of the public domain. In the same manner, such transfers could also
be used to evade the statutory prohibition in CA No. 141 on the sale of government
reclaimed and marshy lands of the public domain to private parties. Section 60 of CA No.
141 constitutes by operation of law a lien on these lands.57
In case of sale or lease of disposable lands of the public domain falling under Section 59
of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA
No. 141 provide as follows:
"Sec. 63. Whenever it is decided that lands covered by this chapter are not
needed for public purposes, the Director of Lands shall ask the Secretary of
Agriculture and Commerce (now the Secretary of Natural Resources) for
authority to dispose of the same. Upon receipt of such authority, the Director of
Lands shall give notice by public advertisement in the same manner as in the
case of leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication
shall be made to the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales
of alienable or disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the
Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with
government permission. However, the reclaimed land could become private land only
if classified as alienable agricultural land of the public domain open to disposition
under CA No. 141. The 1935 Constitution prohibited the alienation of all natural
resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public
dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950
state that
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or
for public service, shall form part of the patrimonial property of the State."
Again, the government must formally declare that the property of public dominion is no
longer needed for public use or public service, before the same could be classified as
patrimonial property of the State.59 In the case of government reclaimed and marshy
lands of the public domain, the declaration of their being disposable, as well as the
manner of their disposition, is governed by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public
dominion those properties of the State which, without being for public use, are intended
for public service or the "development of the national wealth." Thus, government
reclaimed and marshy lands of the State, even if not employed for public use or public
service, if developed to enhance the national wealth, are classified as property of public
dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the
Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the State. With the exception of
agricultural, industrial or commercial, residential, and resettlement lands of
the public domain, natural resources shall not be alienated, and no license,
concession, or lease for the exploration, development, exploitation, or utilization
of any of the natural resources shall be granted for a period exceeding twenty-
five years, renewable for not more than twenty-five years, except as to water
rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases, beneficial use may be the measure
and the limit of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception
of "agricultural, industrial or commercial, residential, and resettlement lands of the public
domain." In contrast, the 1935 Constitution barred the alienation of all natural resources
except "public agricultural lands." However, the term "public agricultural lands" in the
1935 Constitution encompassed industrial, commercial, residential and resettlement
lands of the public domain.60 If the land of public domain were neither timber nor mineral
land, it would fall under the classification of agricultural land of the public domain. Both
the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural
resources except agricultural lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to
individuals who were citizens of the Philippines. Private corporations, even if wholly
owned by Philippine citizens, were no longer allowed to acquire alienable lands of the
public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973
Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological,
and development requirements of the natural resources, shall determine by law
the size of land of the public domain which may be developed, held or acquired
by, or leased to, any qualified individual, corporation, or association, and the
conditions therefor. No private corporation or association may hold alienable
lands of the public domain except by lease not to exceed one thousand
hectares in area nor may any citizen hold such lands by lease in excess of five
hundred hectares or acquire by purchase, homestead or grant, in excess of
twenty-four hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest
resources in excess of one hundred thousand hectares. However, such area may
be increased by the Batasang Pambansa upon recommendation of the National
Economic and Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the
public domain only through lease. Only individuals could now acquire alienable lands of
the public domain, and private corporations became absolutely barred from
acquiring any kind of alienable land of the public domain. The constitutional ban
extended to all kinds of alienable lands of the public domain, while the statutory ban
under CA No. 141 applied only to government reclaimed, foreshore and marshy
alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No.
1084 creating PEA, a wholly government owned and controlled corporation with a special
charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and
powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging,
filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease
and sell any and all kinds of lands, buildings, estates and other forms of real
property, owned, managed, controlled and/or operated by the government;
(c) To provide for, operate or administer such service as may be necessary for
the efficient, economical and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out
the purposes for which it is created, have the following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to
private corporations by statute.
 (j) To reclaim lands and to construct work across, or otherwise, any stream,
watercourse, canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for
the attainment of the purposes and objectives herein specified." (Emphasis
supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the
public domain. Foreshore areas are those covered and uncovered by the ebb and flow of
the tide.61 Submerged areas are those permanently under water regardless of the ebb
and flow of the tide.62 Foreshore and submerged areas indisputably belong to the public
domain63 and are inalienable unless reclaimed, classified as alienable lands open to
disposition, and further declared no longer needed for public service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands
of the public domain did not apply to PEA since it was then, and until today, a fully owned
government corporation. The constitutional ban applied then, as it still applies now, only
to "private corporations and associations." PD No. 1084 expressly empowers PEA "to
hold lands of the public domain" even "in excess of the area permitted to private
corporations by statute." Thus, PEA can hold title to private lands, as well as title to
lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the
public domain, there must be legislative authority empowering PEA to sell these lands.
This legislative authority is necessary in view of Section 60 of CA No.141, which states
"Sec. 60. x x x; but the land so granted, donated or transferred to a province,
municipality, or branch or subdivision of the Government shall not be alienated,
encumbered or otherwise disposed of in a manner affecting its title, except when
authorized by Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed
foreshore and submerged alienable lands of the public domain. Nevertheless, any
legislative authority granted to PEA to sell its reclaimed alienable lands of the public
domain would be subject to the constitutional ban on private corporations from acquiring
alienable lands of the public domain. Hence, such legislative authority could only benefit
private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the
Regalian doctrine. The 1987 Constitution declares that all natural resources are "owned
by the State," and except for alienable agricultural lands of the public domain, natural
resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution
state that
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State.
With the exception of agricultural lands, all other natural resources shall
not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest or
timber, mineral lands, and national parks. Agricultural lands of the public domain
may be further classified by law according to the uses which they may be
devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable
lands of the public domain except by lease, for a period not exceeding
twenty-five years, renewable for not more than twenty-five years, and not to
exceed one thousand hectares in area. Citizens of the Philippines may lease
not more than five hundred hectares, or acquire not more than twelve hectares
thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development,
and subject to the requirements of agrarian reform, the Congress shall
determine, by law, the size of lands of the public domain which may be acquired,
developed, held, or leased and the conditions therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations from acquiring any kind of alienable land of the public domain. Like the
1973 Constitution, the 1987 Constitution allows private corporations to hold alienable
lands of the public domain only through lease. As in the 1935 and 1973 Constitutions,
the general law governing the lease to private corporations of reclaimed, foreshore and
marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except
through lease, alienable lands of the public domain is not well understood. During the
deliberations of the 1986 Constitutional Commission, the commissioners probed the
rationale behind this ban, thus:
 "FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5
which says:
`No private corporation or association may hold alienable lands of the public
domain except by lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this was
introduced in the 1973 Constitution. In effect, it prohibits private corporations from
acquiring alienable public lands. But it has not been very clear in
jurisprudence what the reason for this is. In some of the cases decided in
1982 and 1983, it was indicated that the purpose of this is to prevent large
landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were
instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-
square meter land where a chapel stood because the Supreme Court said it
would be in violation of this." (Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this
way:
"Indeed, one purpose of the constitutional prohibition against purchases of public
agricultural lands by private corporations is to equitably diffuse land ownership or
to encourage 'owner-cultivatorship and the economic family-size farm' and to
prevent a recurrence of cases like the instant case. Huge landholdings by
corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the Constitution
could have simply limited the size of alienable lands of the public domain that
corporations could acquire. The Constitution could have followed the limitations on
individuals, who could acquire not more than 24 hectares of alienable lands of the public
domain under the 1973 Constitution, and not more than 12 hectares under the 1987
Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in
the name of a corporation would be more effective in preventing the break-up of
farmlands. If the farmland is registered in the name of a corporation, upon the death of
the owner, his heirs would inherit shares in the corporation instead of subdivided parcels
of the farmland. This would prevent the continuing break-up of farmlands into smaller
and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on
individuals from acquiring more than the allowed area of alienable lands of the public
domain. Without the constitutional ban, individuals who already acquired the maximum
area of alienable lands of the public domain could easily set up corporations to acquire
more alienable public lands. An individual could own as many corporations as his means
would allow him. An individual could even hide his ownership of a corporation by putting
his nominees as stockholders of the corporation. The corporation is a convenient vehicle
to circumvent the constitutional limitation on acquisition by individuals of alienable lands
of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership
of only a limited area of alienable land of the public domain to a qualified individual. This
constitutional intent is safeguarded by the provision prohibiting corporations from
acquiring alienable lands of the public domain, since the vehicle to circumvent the
constitutional intent is removed. The available alienable public lands are gradually
decreasing in the face of an ever-growing population. The most effective way to insure
faithful adherence to this constitutional intent is to grant or sell alienable lands of the
public domain only to individuals. This, it would seem, is the practical benefit arising from
the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause,
consists of three properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio
Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a
combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;"
and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or
less to regularize the configuration of the reclaimed area."65
PEA confirms that the Amended JVA involves "the development of the Freedom Islands
and further reclamation of about 250 hectares x x x," plus an option "granted to AMARI to
subsequently reclaim another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84
hectares of the 750-hectare reclamation project have been reclaimed, and the rest
of the 592.15 hectares are still submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for
PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also
complete, at its own expense, the reclamation of the Freedom Islands. AMARI will further
shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares, still to
be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined in the Amended JVA as the total
reclaimed area less 30 percent earmarked for common areas. Title to AMARI's share in
the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI.
Section 5.2 (c) of the Amended JVA provides that
"x x x, PEA shall have the duty to execute without delay the necessary deed of
transfer or conveyance of the title pertaining to AMARI's Land share based on
the Land Allocation Plan. PEA, when requested in writing by AMARI, shall
then cause the issuance and delivery of the proper certificates of title
covering AMARI's Land Share in the name of AMARI, x x x; provided, that if
more than seventy percent (70%) of the titled area at any given time pertains to
AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles
pertaining to AMARI, until such time when a corresponding proportionate area of
additional land pertaining to PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of
367.5 hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint
venture PEA's statutory authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that
"PEA hereby contributes to the joint venture its rights and privileges to perform
Rawland Reclamation and Horizontal Development as well as own the
Reclamation Area, thereby granting the Joint Venture the full and exclusive right,
authority and privilege to undertake the Project in accordance with the Master
Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25,
1995 and its supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under
the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in
Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state
that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural resources
shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, x x x."(Emphasis
supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila
Bay are alienable or disposable lands of the public domain. In its Memorandum,67 PEA
admits that
"Under the Public Land Act (CA 141, as amended), reclaimed lands are
classified as alienable and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as
follows:
(a) Lands reclaimed by the government by dredging, filling, or other
means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No.
365 admitted in its Report and Recommendation to then President Fidel V.
Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the
public domain."69 The Legal Task Force concluded that
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority,
the rights of ownership and disposition over reclaimed lands have been
transferred to PEA, by virtue of which PEA, as owner, may validly convey the
same to any qualified person without violating the Constitution or any statute.
 The constitutional provision prohibiting private corporations from holding public
land, except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to
reclaimed lands whose ownership has passed on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas
of Manila Bay are part of the "lands of the public domain, waters x x x and other natural
resources" and consequently "owned by the State." As such, foreshore and submerged
areas "shall not be alienated," unless they are classified as "agricultural lands" of the
public domain. The mere reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or disposable lands of the public
domain. There must be a law or presidential proclamation officially classifying these
reclaimed lands as alienable or disposable and open to disposition or concession.
Moreover, these reclaimed lands cannot be classified as alienable or disposable if the
law has reserved them for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to
disposition or concession which have been officially delimited and classified."72 The
President has the authority to classify inalienable lands of the public domain into
alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141.
In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi property
in Tokyo, Japan, which was acquired by the Philippine Government for use as the
Chancery of the Philippine Embassy. Although the Chancery had transferred to another
location thirteen years earlier, the Court still ruled that, under Article 42274 of the Civil
Code, a property of public dominion retains such character until formally declared
otherwise. The Court ruled that
"The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any
such conversion happens only if the property is withdrawn from public use (Cebu
Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property
continues to be part of the public domain, not available for private
appropriation or ownership 'until there is a formal declaration on the part of
the government to withdraw it from being such' (Ignacio v. Director of Lands,
108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land
patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila
Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No.
3517 in the name of PEA for the 157.84 hectares comprising the partially reclaimed
Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the
Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA
pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of title are still in the name
of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and
President Aquino's issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service. The Freedom Islands are
thus alienable or disposable lands of the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already
reclaimed the Freedom Islands although subsequently there were partial erosions on
some areas. The government had also completed the necessary surveys on these
islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the land
mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain
into "agricultural, forest or timber, mineral lands, and national parks." Being neither
timber, mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall
under the classification of agricultural lands of the public domain. Under the 1987
Constitution, agricultural lands of the public domain are the only natural resources that
the State may alienate to qualified private parties. All other natural resources, such as
the seas or bays, are "waters x x x owned by the State" forming part of the public
domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private
corporation, reclaimed the islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters
of 1866, argues that "if the ownership of reclaimed lands may be given to the party
constructing the works, then it cannot be said that reclaimed lands are lands of the public
domain which the State may not alienate."75 Article 5 of the Spanish Law of Waters reads
as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by
the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such
works, unless otherwise provided by the terms of the grant of authority."
(Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from
the sea only with "proper permission" from the State. Private parties could own the
reclaimed land only if not "otherwise provided by the terms of the grant of authority." This
clearly meant that no one could reclaim from the sea without permission from the State
because the sea is property of public dominion. It also meant that the State could grant
or withhold ownership of the reclaimed land because any reclaimed land, like the sea
from which it emerged, belonged to the State. Thus, a private person reclaiming from the
sea without permission from the State could not acquire ownership of the reclaimed land
which would remain property of public dominion like the sea it replaced.76 Article 5 of the
Spanish Law of Waters of 1866 adopted the time-honored principle of land ownership
that "all lands that were not acquired from the government, either by purchase or by
grant, belong to the public domain."77
Article 5 of the Spanish Law of Waters must be read together with laws subsequently
enacted on the disposition of public lands. In particular, CA No. 141 requires that lands of
the public domain must first be classified as alienable or disposable before the
government can alienate them. These lands must not be reserved for public or quasi-
public purposes.78 Moreover, the contract between CDCP and the government was
executed after the effectivity of the 1973 Constitution which barred private corporations
from acquiring any kind of alienable land of the public domain. This contract could not
have converted the Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing
the reclamation of areas under water and revested solely in the National Government the
power to reclaim lands. Section 1 of PD No. 3-A declared that
"The provisions of any law to the contrary notwithstanding, the reclamation
of areas under water, whether foreshore or inland, shall be limited to the
National Government or any person authorized by it under a proper
contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because
reclamation of areas under water could now be undertaken only by the National
Government or by a person contracted by the National Government. Private parties may
reclaim from the sea only under a contract with the National Government, and no longer
by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the
government," which "shall be undertaken by the PEA or through a proper contract
executed by it with any person or entity." Under such contract, a private party
receives compensation for reclamation services rendered to PEA. Payment to the
contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject
to the constitutional ban on private corporations from acquiring alienable lands of the
public domain. The reclaimed land can be used as payment in kind only if the reclaimed
land is first classified as alienable or disposable land open to disposition, and then
declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15
hectares which are still submerged and forming part of Manila Bay. There is no
legislative or Presidential act classifying these submerged areas as alienable or
disposable lands of the public domain open to disposition. These submerged areas
are not covered by any patent or certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in their present state
are inalienable and outside the commerce of man. Until reclaimed from the sea, these
submerged areas are, under the Constitution, "waters x x x owned by the State," forming
part of the public domain and consequently inalienable. Only when actually reclaimed
from the sea can these submerged areas be classified as public agricultural lands, which
under the Constitution are the only natural resources that the State may alienate. Once
reclaimed and transformed into public agricultural lands, the government may then
officially classify these lands as alienable or disposable lands open to disposition.
Thereafter, the government may declare these lands no longer needed for public service.
Only then can these reclaimed lands be considered alienable or disposable lands of the
public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or
disposable lands open to disposition is necessary because PEA is tasked under its
charter to undertake public services that require the use of lands of the public domain.
Under Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o own or
operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct,
maintain and operate such systems of sanitary sewers as may be necessary; [T]o
construct, maintain and operate such storm drains as may be necessary." PEA is
empowered to issue "rules and regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads, utilities, buildings and/or any of
its properties and to impose or collect fees or tolls for their use." Thus, part of the
reclaimed foreshore and submerged lands held by the PEA would actually be needed for
public use or service since many of the functions imposed on PEA by its charter
constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and on
behalf of the National Government." The same section also states that "[A]ll reclamation
projects shall be approved by the President upon recommendation of the PEA, and shall
be undertaken by the PEA or through a proper contract executed by it with any person or
entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA
became the primary implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as
the government entity "to undertake the reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests."79 Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal
declaration segregating reclaimed lands no longer needed for public service from those
still needed for public service.
1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or
be owned by the PEA," could not automatically operate to classify inalienable lands into
alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and
submerged lands of the public domain would automatically become alienable once
reclaimed by PEA, whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No.
525, vests in the Department of Environment and Natural Resources ("DENR" for brevity)
the following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and
disposable public lands, mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees, charges, rentals and any such form
of levy and collect such revenues for the exploration, development, utilization or
gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the issuance of
licenses, permits, concessions, lease agreements and such other
privileges concerning the development, exploration and utilization of the
country's marine, freshwater, and brackish water and over all aquatic
resources of the country and shall continue to oversee, supervise and
police our natural resources; cancel or cause to cancel such privileges upon
failure, non-compliance or violations of any regulation, order, and for all other
causes which are in furtherance of the conservation of natural resources and
supportive of the national interest;
(15) Exercise exclusive jurisdiction on the management and disposition of
all lands of the public domain and serve as the sole agency responsible for
classification, sub-classification, surveying and titling of lands in consultation
with appropriate agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR
exercises "supervision and control over alienable and disposable public lands." DENR
also exercises "exclusive jurisdiction on the management and disposition of all lands of
the public domain." Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay,
or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 681 and 782 of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the President the
issuance of a proclamation classifying the lands as alienable or disposable lands of the
public domain open to disposition. We note that then DENR Secretary Fulgencio S.
Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of areas
under water, whether directly or through private contractors. DENR is also empowered to
classify lands of the public domain into alienable or disposable lands subject to the
approval of the President. On the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas
does not make the reclaimed lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA. Likewise, the mere transfer by the National
Government of lands of the public domain to PEA does not make the lands alienable or
disposable lands of the public domain, much less patrimonial lands of PEA.
Absent two official acts a classification that these lands are alienable or disposable and
open to disposition and a declaration that these lands are not needed for public service,
lands reclaimed by PEA remain inalienable lands of the public domain. Only such an
official classification and formal declaration can convert reclaimed lands into alienable or
disposable lands of the public domain, open to disposition under the Constitution, Title I
and Title III83 of CA No. 141 and other applicable laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the
public domain, the reclaimed lands shall be disposed of in accordance with CA No. 141,
the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands
transferred to a branch or subdivision of the government "shall not be alienated,
encumbered, or otherwise disposed of in a manner affecting its title, except when
authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of
1987, which states that
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to
the Government. The Court declared that -
"It is not for the President to convey real property of the government on his or her
own sole will. Any such conveyance must be authorized and approved by a
law enacted by the Congress. It requires executive and legislative
concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority
allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977,
provides that
"The land reclaimed in the foreshore and offshore area of Manila
Bay pursuant to the contract for the reclamation and construction of the Manila-
Cavite Coastal Road Project between the Republic of the Philippines and the
Construction and Development Corporation of the Philippines dated November
20, 1973 and/or any other contract or reclamation covering the same area is
hereby transferred, conveyed and assigned to the ownership and
administration of the Public Estates Authority established pursuant to PD No.
1084; Provided, however, That the rights and interests of the Construction and
Development Corporation of the Philippines pursuant to the aforesaid contract
shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the
obligations of the Republic of the Philippines (Department of Public Highways)
arising from, or incident to, the aforesaid contract between the Republic of the
Philippines and the Construction and Development Corporation of the
Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates
Authority shall issue in favor of the Republic of the Philippines the corresponding
shares of stock in said entity with an issued value of said shares of stock (which)
shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public
Estates Authority shall execute such contracts or agreements, including
appropriate agreements with the Construction and Development Corporation of
the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural
Resources in favor of the Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his assignees of such portion or
portions of the land reclaimed or to be reclaimed as provided for in the
above-mentioned contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding certificate of title."
(Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that
-
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the
PEA which shall be responsible for its administration, development, utilization or
disposition in accordance with the provisions of Presidential Decree No. 1084.
Any and all income that the PEA may derive from the sale, lease or use of
reclaimed lands shall be used in accordance with the provisions of Presidential
Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its
reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of lands
reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by
PEA "shall belong to or be owned by PEA." EO No. 525 expressly states that PEA
should dispose of its reclaimed lands "in accordance with the provisions of Presidential
Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer,
deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned,
managed, controlled and/or operated by the government."87(Emphasis supplied) There
is, therefore, legislative authority granted to PEA to sell its lands, whether
patrimonial or alienable lands of the public domain. PEA may sell to private parties
its patrimonial propertiesin accordance with the PEA charter free from constitutional
limitations. The constitutional ban on private corporations from acquiring alienable lands
of the public domain does not apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private
individuals since, with the legislative authority, there is no longer any statutory prohibition
against such sales and the constitutional ban does not apply to individuals. PEA,
however, cannot sell any of its alienable or disposable lands of the public domain to
private corporations since Section 3, Article XII of the 1987 Constitution expressly
prohibits such sales. The legislative authority benefits only individuals. Private
corporations remain barred from acquiring any kind of alienable land of the public
domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be
transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would not
apply to private corporations but only to individuals because of the constitutional ban.
Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987
Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands
open to disposition, and further declared no longer needed for public service, PEA would
have to conduct a public bidding in selling or leasing these lands. PEA must observe the
provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence
of a law exempting PEA from holding a public auction.88 Special Patent No. 3517
expressly states that the patent is issued by authority of the Constitution and PD No.
1084, "supplemented by Commonwealth Act No. 141, as amended." This is an
acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed
alienable lands of the public domain unless otherwise provided by law. Executive Order
No. 654,89 which authorizes PEA "to determine the kind and manner of payment for the
transfer" of its assets and properties, does not exempt PEA from the requirement of
public auction. EO No. 654 merely authorizes PEA to decide the mode of payment,
whether in kind and in installment, but does not authorize PEA to dispense with public
auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government
Auditing Code, the government is required to sell valuable government property through
public bidding. Section 79 of PD No. 1445 mandates that
"Section 79. When government property has become unserviceable for any
cause, or is no longer needed, it shall, upon application of the officer accountable
therefor, be inspected by the head of the agency or his duly authorized
representative in the presence of the auditor concerned and, if found to be
valueless or unsaleable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the
supervision of the proper committee on award or similar body in the presence of
the auditor concerned or other authorized representative of the
Commission, after advertising by printed notice in the Official Gazette, or for
not less than three consecutive days in any newspaper of general
circulation, or where the value of the property does not warrant the expense of
publication, by notices posted for a like period in at least three public places in
the locality where the property is to be sold. In the event that the public auction
fails, the property may be sold at a private sale at such price as may be
fixed by the same committee or body concerned and approved by the
Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price.90 The Commission on Audit
implements Section 79 of the Government Auditing Code through Circular No. 89-
29691 dated January 27, 1989. This circular emphasizes that government assets must be
disposed of only through public auction, and a negotiated sale can be resorted to only in
case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed
foreshore and submerged alienable lands of the public domain. Private corporations are
barred from bidding at the auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10,
1991. PEA imposed a condition that the winning bidder should reclaim another 250
hectares of submerged areas to regularize the shape of the Freedom Islands, under a
60-40 sharing of the additional reclaimed areas in favor of the winning bidder.92 No one,
however, submitted a bid. On December 23, 1994, the Government Corporate Counsel
advised PEA it could sell the Freedom Islands through negotiation, without need of
another public bidding, because of the failure of the public bidding on December 10,
1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands
and the additional 250 hectares still to be reclaimed, it also granted an option to AMARI
to reclaim another 350 hectares. The original JVA, a negotiated contract, enlarged the
reclamation area to 750 hectares.94 The failure of public bidding on December 10, 1991,
involving only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750
hectares, almost double the area publicly auctioned. Besides, the failure of public bidding
happened on December 10, 1991, more than three years before the signing of the
original JVA on April 25, 1995. The economic situation in the country had greatly
improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute
and clear: "Private corporations or associations may not hold such alienable lands of the
public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for
brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands to
private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states
 "Sec. 6. Repayment Scheme. - For the financing, construction, operation and
maintenance of any infrastructure projects undertaken through the build-operate-
and-transfer arrangement or any of its variations pursuant to the provisions of this
Act, the project proponent x x x may likewise be repaid in the form of a share in
the revenue of the project or other non-monetary payments, such as, but not
limited to, the grant of a portion or percentage of the reclaimed land, subject to
the constitutional requirements with respect to the ownership of the land: x
x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a
government BOT project, cannot acquire reclaimed alienable lands of the public domain
in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI,
authorizes local governments in land reclamation projects to pay the contractor or
developer in kind consisting of a percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and
Management of Infrastructure Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the repayment
plan may consist of the grant of a portion or percentage of the reclaimed land or
the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar
to that of the BOT Law, the constitutional restrictions on land ownership automatically
apply even though not expressly mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or
developer, if a corporate entity, can only be paid with leaseholds on portions of the
reclaimed land. If the contractor or developer is an individual, portions of the reclaimed
land, not exceeding 12 hectares96 of non-agricultural lands, may be conveyed to him in
ownership in view of the legislative authority allowing such conveyance. This is the only
way these provisions of the BOT Law and the Local Government Code can avoid a direct
collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to
public respondent PEA transformed such lands of the public domain to private lands."
This theory is echoed by AMARI which maintains that the "issuance of the special patent
leading to the eventual issuance of title takes the subject land away from the land of
public domain and converts the property into patrimonial or private property." In short,
PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the
corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands
have become private lands of PEA. In support of their theory, PEA and AMARI cite the
following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held
"Once the patent was granted and the corresponding certificate of title was
issued, the land ceased to be part of the public domain and became private
property over which the Director of Lands has neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate certificate of
title based on a public land patent, the land covered thereby automatically comes
under the operation of Republic Act 496 subject to all the safeguards provided
therein."3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court
ruled -
"While the Director of Lands has the power to review homestead patents, he may
do so only so long as the land remains part of the public domain and continues to
be under his exclusive control; but once the patent is registered and a certificate
of title is issued, the land ceases to be part of the public domain and becomes
private property over which the Director of Lands has neither control nor
jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held
"When the lots in dispute were certified as disposable on May 19, 1971, and free
patents were issued covering the same in favor of the private respondents, the
said lots ceased to be part of the public domain and, therefore, the Director of
Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court stated
"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally
effected a land grant to the Mindanao Medical Center, Bureau of Medical
Services, Department of Health, of the whole lot, validly sufficient for initial
registration under the Land Registration Act. Such land grant is constitutive of a
'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center.
Thus, Section 122 of the Act, which governs the registration of grants or patents
 involving public lands, provides that 'Whenever public lands in the Philippine
Islands belonging to the Government of the United States or to the Government
of the Philippines are alienated, granted or conveyed to persons or to public or
private corporations, the same shall be brought forthwith under the operation of
this Act (Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the
corresponding certificates of titles issued to private parties. These four cases uniformly
hold that the Director of Lands has no jurisdiction over private lands or that upon
issuance of the certificate of title the land automatically comes under the Torrens
System. The fifth case cited involves the registration under the Torrens System of a 12.8-
hectare public land granted by the National Government to Mindanao Medical Center, a
government unit under the Department of Health. The National Government transferred
the 12.8-hectare public land to serve as the site for the hospital buildings and other
facilities of Mindanao Medical Center, which performed a public service. The Court
affirmed the registration of the 12.8-hectare public land in the name of Mindanao Medical
Center under Section 122 of Act No. 496. This fifth case is an example of a public land
being registered under Act No. 496 without the land losing its character as a property of
public dominion.
In the instant case, the only patent and certificates of title issued are those in the name of
PEA, a wholly government owned corporation performing public as well as proprietary
functions. No patent or certificate of title has been issued to any private party. No one is
asking the Director of Lands to cancel PEA's patent or certificates of title. In fact, the
thrust of the instant petition is that PEA's certificates of title should remain with PEA, and
the land covered by these certificates, being alienable lands of the public domain, should
not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant
private or public ownership of the land. Registration is not a mode of acquiring ownership
but is merely evidence of ownership previously conferred by any of the recognized
modes of acquiring ownership. Registration does not give the registrant a better right
than what the registrant had prior to the registration.102 The registration of lands of the
public domain under the Torrens system, by itself, cannot convert public lands into
private lands.103
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of
title the alienable land of the public domain automatically becomes private land cannot
apply to government units and entities like PEA. The transfer of the Freedom Islands to
PEA was made subject to the provisions of CA No. 141 as expressly stated in Special
Patent No. 3517 issued by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the
Philippines and in conformity with the provisions of Presidential Decree No. 1084,
supplemented by Commonwealth Act No. 141, as amended, there are hereby
granted and conveyed unto the Public Estates Authority the aforesaid tracts of
land containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters; the technical description of which
are hereto attached and made an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered
by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by
Congress," the sale of alienable lands of the public domain that are transferred to
government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of
PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated
on the certificate of title.104Alienable lands of the public domain held by government
entities under Section 60 of CA No. 141 remain public lands because they cannot be
alienated or encumbered unless Congress passes a law authorizing their disposition.
Congress, however, cannot authorize the sale to private corporations of reclaimed
alienable lands of the public domain because of the constitutional ban. Only individuals
can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA
No. 141 does not automatically convert alienable lands of the public domain into private
or patrimonial lands. The alienable lands of the public domain must be transferred to
qualified private parties, or to government entities not tasked to dispose of public lands,
before these lands can become private or patrimonial lands. Otherwise, the constitutional
ban will become illusory if Congress can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency tasked to dispose of public lands.
This will allow private corporations to acquire directly from government agencies limitless
areas of lands which, prior to such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National
Government to reclaim foreshore and submerged areas of the public domain. Thus, EO
No. 525 declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for
all Reclamation Projects
Whereas, there are several reclamation projects which are ongoing or being
proposed to be undertaken in various parts of the country which need to be
evaluated for consistency with national programs;
 Whereas, there is a need to give further institutional support to the Government's
declared policy to provide for a coordinated, economical and efficient reclamation
of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall
be limited to the National Government or any person authorized by it under
proper contract;
Whereas, a central authority is needed to act on behalf of the National
Government which shall ensure a coordinated and integrated approach in
the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority
as a government corporation to undertake reclamation of lands and ensure
their maximum utilization in promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing
authority to reorganize the national government including the transfer, abolition,
or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution and pursuant to
Presidential Decree No. 1416, do hereby order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible
for integrating, directing, and coordinating all reclamation projects for and
on behalf of the National Government. All reclamation projects shall be
approved by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with any
person or entity; Provided, that, reclamation projects of any national government
agency or entity authorized under its charter shall be undertaken in consultation
with the PEA upon approval of the President.
x x x ."
As the central implementing agency tasked to undertake reclamation projects
nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling reclaimed lands of the public domain.
The reclaimed lands being leased or sold by PEA are not private lands, in the same
manner that DENR, when it disposes of other alienable lands, does not dispose of
private lands but alienable lands of the public domain. Only when qualified private parties
acquire these lands will the lands become private lands. In the hands of the
government agency tasked and authorized to dispose of alienable of disposable
lands of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public
domain" as well as "any and all kinds of lands." PEA can hold both lands of the public
domain and private lands. Thus, the mere fact that alienable lands of the public domain
like the Freedom Islands are transferred to PEA and issued land patents or certificates of
title in PEA's name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as
private lands will sanction a gross violation of the constitutional ban on private
corporations from acquiring any kind of alienable land of the public domain. PEA will
simply turn around, as PEA has now done under the Amended JVA, and transfer
several hundreds of hectares of these reclaimed and still to be reclaimed lands to a
single private corporation in only one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to
diffuse equitably the ownership of alienable lands of the public domain among Filipinos,
now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public
domain since PEA can "acquire x x x any and all kinds of lands." This will open the
floodgates to corporations and even individuals acquiring hundreds of hectares of
alienable lands of the public domain under the guise that in the hands of PEA these
lands are private lands. This will result in corporations amassing huge landholdings
never before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution allowed private corporations to
acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution prohibited
private corporations from acquiring any kind of public land, and the 1987 Constitution has
unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496
or PD No. 1529, automatically become private lands is contrary to existing laws. Several
laws authorize lands of the public domain to be registered under the Torrens System or
Act No. 496, now PD No. 1529, without losing their character as public lands. Section
122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x
Government of the Philippine Islands are alienated, granted, or conveyed to
persons or the public or private corporations, the same shall be brought
forthwith under the operation of this Act and shall become registered lands."
 PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the
Government alienated, granted or conveyed to any person, the same shall be
brought forthwith under the operation of this Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of
PD No. 1529 includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province,
municipality, or branch or subdivision of the Government," as provided in Section 60 of
CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD
No. 1529. Such registration, however, is expressly subject to the condition in Section 60
of CA No. 141 that the land "shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when authorized by Congress."
This provision refers to government reclaimed, foreshore and marshy lands of the public
domain that have been titled but still cannot be alienated or encumbered unless
expressly authorized by Congress. The need for legislative authority prevents the
registered land of the public domain from becoming private land that can be disposed of
to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public
domain may be registered under the Torrens System. Section 48, Chapter 12, Book I of
the Code states
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality."
(Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public
wharf may be titled in the name of a government corporation regulating port operations in
the country. Private property purchased by the National Government for expansion of an
airport may also be titled in the name of the government agency tasked to administer the
airport. Private property donated to a municipality for use as a town plaza or public
school site may likewise be titled in the name of the municipality.106 All these properties
become properties of the public domain, and if already registered under Act No. 496 or
PD No. 1529, remain registered land. There is no requirement or provision in any
existing law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain
become unquestionably part of the public domain. Nevertheless, Section 85 of PD No.
1529 authorizes the Register of Deeds to issue in the name of the National Government
new certificates of title covering such expropriated lands. Section 85 of PD No. 1529
states
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or
interest therein, is expropriated or taken by eminent domain, the National
Government, province, city or municipality, or any other agency or instrumentality
exercising such right shall file for registration in the proper Registry a certified
copy of the judgment which shall state definitely by an adequate description, the
particular property or interest expropriated, the number of the certificate of title,
and the nature of the public use. A memorandum of the right or interest taken
shall be made on each certificate of title by the Register of Deeds, and where the
fee simple is taken, a new certificate shall be issued in favor of the National
Government, province, city, municipality, or any other agency or
instrumentality exercising such right for the land so taken. The legal expenses
incident to the memorandum of registration or issuance of a new certificate of title
shall be for the account of the authority taking the land or interest therein."
(Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively
private or patrimonial lands. Lands of the public domain may also be registered pursuant
to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the
Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In
the words of AMARI, the Amended JVA "is not a sale but a joint venture with a stipulation
for reimbursement of the original cost incurred by PEA for the earlier reclamation and
construction works performed by the CDCP under its 1973 contract with the Republic."
Whether the Amended JVA is a sale or a joint venture, the fact remains that the
Amended JVA requires PEA to "cause the issuance and delivery of the certificates of title
conveying AMARI's Land Share in the name of AMARI."107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which
provides that private corporations "shall not hold such alienable lands of the public
domain except by lease." The transfer of title and ownership to AMARI clearly means
that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title and
ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or
alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3, Article
XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and
submerged areas form part of the public domain and are inalienable. Lands reclaimed
from foreshore and submerged areas also form part of the public domain and are also
inalienable, unless converted pursuant to law into alienable or disposable lands of the
public domain. Historically, lands reclaimed by the government are sui generis, not
available for sale to private parties unlike other alienable public lands. Reclaimed lands
retain their inherent potential as areas for public use or public service. Alienable lands of
the public domain, increasingly becoming scarce natural resources, are to be distributed
equitably among our ever-growing population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private corporations from acquiring any kind of
alienable land of the public domain. Those who attempt to dispose of inalienable natural
resources of the State, or seek to circumvent the constitutional ban on alienation of lands
of the public domain to private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now
covered by certificates of title in the name of PEA, are alienable lands of the
public domain. PEA may lease these lands to private corporations but may not
sell or transfer ownership of these lands to private corporations. PEA may only
sell these lands to Philippine citizens, subject to the ownership limitations in the
1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable
natural resources of the public domain until classified as alienable or disposable
lands open to disposition and declared no longer needed for public service. The
government can make such classification and declaration only after PEA has
reclaimed these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural resources the
government can alienate. In their present state, the 592.15 hectares of
submerged areas are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation,
ownership of 77.34 hectares110of the Freedom Islands, such transfer is void for
being contrary to Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land of the public
domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of
290.156 hectares111 of still submerged areas of Manila Bay, such transfer is void
for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits
the alienation of natural resources other than agricultural lands of the public
domain. PEA may reclaim these submerged areas. Thereafter, the government
can classify the reclaimed lands as alienable or disposable, and further declare
them no longer needed for public service. Still, the transfer of such reclaimed
alienable lands of the public domain to AMARI will be void in view of Section 3,
Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose
is contrary to law," or whose "object is outside the commerce of men," are "inexistent and
void from the beginning." The Court must perform its duty to defend and uphold the
Constitution, and therefore declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether
the Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule
on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a
determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari
Coastal Bay Development Corporation are PERMANENTLY ENJOINED from
implementing the Amended Joint Venture Agreement which is hereby
declared NULL and VOID ab initio.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 103882 November 25, 1998
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS AND REPUBLIC REAL ESTATE
CORPORATION, respondents, CULTURAL CENTER OF THE
PHILIPPINES, intervenor.
G.R. No. 105276 November 25, 1998
PASAY CITY AND REPUBLIC REAL ESTATE CORPORATION, petitioners,
vs.
COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, respondents.
PURISIMA, J.:
At bar are two consolidated petitions for review on certiorari under Rule 45 of the
Revised Rules of Court. Here, the Court is confronted with a case commenced before
the then Court of First Instance (now Regional Trial Court) of Rizal in Pasay City, in
1961, more than 3 decades back, that has spanned six administrations of the Republic
and outlasted the tenure of ten (10) Chief Justices of the Supreme Court.
In G.R. No. 103882, the Republic of the Philippines, as petitioner, assails the Decision,
dated January 29, 1992 and Amended Decision, dated April 28, 1992, of the Court of
Appeals 1 which affirmed with modification the Decision of the former Court of First Instance
of Rizal (Branch 7, Pasay City) in Civil Case No. 2229-P, entitled "Republic of the Philippines
vs. Pasay City and Republic Real Estate Corporation".
The facts that matter are, as follows:
Republic Act No. 1899 ("RA 1899"), which was approved on June 22, 1957, authorized
the reclamation of foreshore lands by chartered cities and municipalities. Section I of said
law, reads:
Sec. 1. Authority is hereby granted to all municipalities and chartered
cities to undertake and carry out at their own expense the reclamation by
dredging, filling, or other means, of any foreshore lands bordering them,
and to establish, provide, construct, maintain and repair proper and
adequate docking and harbor facilities as such municipalities and
chartered cities may determine in consultation with the Secretary of
Finance and the Secretary of Public Works and Communications.
On May 6, 1958, invoking the a forecited provision of RA 1899, the Pasay City Council
passed Ordinance No. 121, for the reclamation of Three Hundred (300) hectares of
foreshore lands in Pasay City, empowering the City Mayor to award and enter into
reclamation contracts, and prescribing terms and conditions therefor. The said Ordinance
was amended on April 21, 1959 by Ordinance No. 158, which authorized the Republic
Real Estate Corporation ("RREC") to reclaim foreshore lands of Pasay City under certain
terms and conditions.
On April 24, 1959, Pasay City and RREC entered into an Agreement 2 for the reclamation
of the foreshore lands in Pasay City.
On December 19, 1961, the Republic of the Philippines ("Republic") filed a
Complaint 3 for Recovery of Possession and Damages with Writ of Preliminary Preventive
injunction and Mandatory Injunction, docketed as Civil Case No. 2229-P before the former
Court of First Instance of Rizal, (Branch 7, Pasay City).
On March 5, 1962, the Republic of the Philippines filed an Amended
Complaint 4 questioning subject Agreement between Pasay City and RREC (Exhibit "P") on
the grounds that the subject-matter of such Agreement is outside the commerce of man, that
its terms and conditions are violative of RA 1899, and that the said Agreement was executed
without any public bidding.
The Answers 5 of RREC and Pasay City, dated March 10 and March 14, 1962, respectively,
averred that the subject-matter of said Agreement is within the commerce of man, that the
phrase "foreshore lands" within the contemplation of RA 1899 has a broader meaning than
the cited definition of the term in the Words and Phrases and in the Webster's Third New
International Dictionary and the plans and specifications of the reclamation involved were
approved by the authorities concerned.
On April 26,1962, Judge Angel H. Mojica, (now deceased) of the former Court of First
Instance of Rizal (Branch 7, Pasay City) issued an Order 6 the dispositive portion of which
was to the following effect:
WHEREFORE, the court hereby orders the defendants, their agents, and
all persons claiming under them, to refrain from "further reclaiming or
committing acts of dispossession or dispoilation over any area within the
Manila Bay or the Manila Bay Beach Resort", until further orders of the
court.
On the following day, the same trial court issued a writ of preliminary injunction 7 which
enjoined the defendants, RREC and Pasay City, their agents, and all persons claiming under
them "from further reclaiming or committing acts of dispossession."
Thereafter, a Motion to Intervene 8, dated June 27, 1962, was filed by Jose L. Bautista,
Emiliano Custodio, Renato Custodio, Roger de la Rosa, Belen Gonzales, Norma Martiner,
Emilia E. Paez, Ambrosio R. Parreno, Antolin M. Oreta, Sixto L. Orosa, Pablo S. Sarmiento,
Jesus Yujuico, Zamora Enterprises, Inc., Industrial and Commercial Factors, Inc.,
Metropolitan Distributors of the Philippines, and Bayview Hotel, Inc. stating inter alia that they
were buyers of lots in the Manila Bay area being reclaimed by RREC, whose rights would be
affected by whatever decision to be rendered in the case. The Motion was granted by the trial
court and the Answer attached thereto admitted. 9
The defendants and the intervenors then moved to dismiss 10 the Complaint of the
Republic, placing reliance on Section 3 of Republic Act No. 5187, which reads:
Sec. 3. Miscellaneous Projects
xxx xxx xxx
m. For the construction of seawall and limited access highway from the
south boundary of the City of Manila to Cavite City, to the south, and from
the north boundary of the City of Manila to the municipality of Mariveles,
province of Bataan, to the north, including the reclamation of the
foreshore and submerged areas: Provided, That priority in the
construction of such seawalls, highway and attendant reclamation works
shall be given to any corporation and/or corporations that may offer to
undertake at its own expense such projects, in which case the President
of the Philippines may, after competitive didding, award contracts for the
construction of such project, with the winning bidder shouldering all costs
thereof, the same to be paid in terms of percentage fee of the contractor
which shall not exceed fifty percent of the area reclaimed by the
contractor and shall represent full compensation for the purpose, the
provisions of the Public Land Law concerning disposition of reclaimed
and foreshore lands to the contrary notwithstanding: Provided, finally, that
the foregoing provisions and those of other laws, executive orders, rules
and regulations to the contrary notwithstanding, existing rights, projects
and/or contracts of city or municipal governments for the reclamation of
foreshore and submerged lands shall be respected. . . . . (emphasis
ours).
Since the aforecited law provides that existing contracts shall be respected,
movants contended that the issues raised by the pleadings have become "moot,
academic and of no further validity or effect."
Meanwhile, the Pasay Law and Conscience Union, Inc. ("PLCU") moved to intervene 11,
alleging as legal interest in the matter in litigation the avowed purpose of the organization for
the promotion of good government in Pasay City. In its Order of June 10, 1969, the lower
court of origin allowed the said intervention 12.
On March 24, 1972, the trial court of origin came out with a Decision, disposing, thus:
WHEREFORE, after carefully considering (1) the original complaint, (2)
the first Amended Complaint, (3) the Answer of Defendant Republic Real
Estate Corporation to the first Amended Complaint, (4) the Answer of
Defendant Pasay City to the first Amended Complaint, (5) the Second
Amended Complaint, (6) the Answer of Defendant Republic Real Estate
Corporation to the Second Amended Complaint, (7) the Answer of
Defendant Pasay City to the Second Amended Complaint, (8) the
Memorandum in Support of Preliminary Injunction of Plaintiff, (9) the
Memorandum In Support of the Opposition to the Issuance of Preliminary
Injunction of Defendant Pasay City and Defendant Republic Real Estate
Corporation, (10) the Answer in Intervention of Intervenors
Bautista, et. al., (11) Plaintiff's Opposition to Motion to Intervene, (12) the
Reply to Opposition to Motion to Intervene of Intervenors Bautista, et. al.,
(13) the Stipulation of Facts by all the parties, (14) the Motion for Leave
to Intervene of Intervenor Pasay Law and Conscience Union, Inc., (15)
the Opposition to Motion For Leave to Intervene of Intervenors
Bautista, et. al., (16) the Reply of Intervenor Pasay Law and Conscience
Union, Inc., (17) the Supplement to Opposition to Motion to Intervene of
Defendant Pasay City and Republic Real Estate Corporation (18) the
Complain in Intervention of Intervenor Pasay Law and Conscience Union,
Inc., (19) the Answer of Defendant Republic Real Estate Corporation,
(20) the Answer of Intervenor Jose L. Bautista, et. al., to Complaint in
Intervention, (21) the Motion to Dismiss of Defendant Republic Real
Estate Corporation, and Intervenors Bautista, et. al., (22) the Opposition
of Plaintiff to said Motion to Dismiss, (23) the Opposition of Intervenor
Pasay Law and Conscience Union, Inc., (24) the Memorandum of the
Defendant Republic Real Estate Corporation, (25) the Memorandum for
the Intervenor Pasay Law and Conscience Union, Inc., (26) the
Manifestation of Plaintiff filed by the Office of the Solicitor General, and all
the documentary evidence by the parties to wit: (a) Plaintiff's Exhibits "A"
to "YYY- 4", (b) Defendant Republic Real Estate Corporation's Exhibits
"1-RREC" to "40-a" and (c) Intervenor Pasay Law and Conscience Union,
Inc's., Exhibits "A-PLACU" to "C-PLACU", the Court hereby:
(1) Denies the "Motion to Dismiss" filed on January 10, 1968, by
Defendant Republic Real Estate Corporation and Intervenors
Bautista, et. al., as it is the finding of this Court that Republic Act No.
5187 was not passed by Congress to cure any defect in the ordinance
and agreement in question and that the passage of said Republic Act No.
5187 did not make the legal issues raised in the pleadings "moot,
academic and of no further validity or effect;" and
(2) Renders judgment:
 (a) dismissing the Plaintiff's Complaint;
(b) Dismissing the Complaint in Intervention of Intervenor Pasay Law and
Conscience Union, Inc.,
(c) Enjoining Defendant Republic Real Estate Corporation and Defendant
Pasay City to have all the plans and specifications in the reclamation
approved by the Director of Public Works and to have all the contracts
and sub-contracts for said reclamation awarded by means of, and only
after, public bidding; and
(d) Lifting the preliminary Injunction issued by the Court on April 26, 1962,
as soon as Defendant Republic Real Estate Corporation and Defendant
Pasay City shall have submitted the corresponding plans and
specifications to the Director of Public Works, and shall have obtained
approval thereof, and as soon as the corresponding public bidding for the
award to the contractor and sub-contractor that will undertake the
reclamation project shall have been effected.
No pronouncement as to costs.
SO ORDERED. (See Court of Appeals' Decision dated January 28, 1992;
pp. 6-8)
Dissatisfied with the said judgment, the Republic appealed therefrom to the Court of
Appeals. However, on January 11, 1973, before the appeal could be resolved,
Presidential Decree No. 3-A issued, amending Presidential Decree No. 3, thus:
Sec. 1. Section 7 of Presidential Decree No. 3, dated September 26,
1972, is hereby amended by the addition of the following paragraphs:
The provisions of any law to the contrary notwithstanding, the reclamation
of areas under water, whether foreshore or inland, shall be limited to the
National Government or any person authorized by it under a proper
contract.
All reclamations made in violation of this provision shall be forfeited to the
State without need of judicial action.
Contracts for reclamation still legally existing or whose validity has been
accepted by the National Government shall be taken over by the National
Government on the basis of quantum meruit, for proper prosecution of
the project involved by administration.
On November 20, 1973, the Republic and the Construction Development Corporation of
the Philippines ("CDCP") signed a Contract 13 for the Manila-Cavite Coastal Road Project
(Phases I and II) which contract included the reclamation and development of areas covered
by the Agreement between Pasay City and RREC. Then, there was issued Presidential
Decree No. 1085 which transferred to the Public Estate Authority ("PEA") the rights and
obligations of the Republic of the Philippines under the contract between the Republic and
CDCP.
Attempts to settle amicably the dispute between representatives of the Republic, on the
one hand, and those of Pasay City and RREC, on the other, did not work out. The parties
involved failed to hammer out a compromise.
On January 28, 1992, the Court of Appeals came out with a Decision 14 dismissing the
appeal of the Republic and holding, thus:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the
following modifications:
1. The requirement by the trial court on public bidding and submission of
RREC's plans specification to the Department Public Works and
Highways in order that RREC may continue the implementation of the
reclamation work is deleted for being moot and academic;
2. Ordering the plaintiff-appellant to turn over to Pasay City the ownership
and possession over all vacant spaces in the twenty-one hectare area
already reclaimed by Pasay City and RREC at the time it took over the
same. Areas thereat over which permanent structures has (sic) been
introduced shall, including the structures, remain in the possession of the
present possessor, subject to any negotiation between Pasay City and
the said present possessor, as regards the continued possession and
ownership of the latter area.
3. Sustaining RREC's irrevocable option to purchase sixty (60%) percent
of the Twenty-One (21) hectares of land already reclaimed by it, to be
exercised within one (1) year from the finality of this decision, at the same
terms and condition embodied in the Pasay City-RREC reclamation
contract, and enjoining appellee Pasay City to respect RREC's option.
SO ORDERED.
On February 14, 1992, Pasay City and RREC presented a Motion for Reconsideration of
such Decision of the Court of Appeals, contending, among others, that RREC had
actually reclaimed Fifty-Five (55) hectares, and not only Twenty-one (21) hectares, and In G.R. No. 103882, the Republic of the Philippines theorizes, by way of assignment of
the respondent Court of Appeals erred in not awarding damages to them, movants. errors, that:

On April 28, 1992, the Court of Appeals acted favorably on the said Motion for I
Reconsideration, by amending the dispositive portion of its judgment of January 28,
1992, to read as follows: THE COURT OF APPEALS ERRED IN UPHOLDING
THE VALIDITY OF PASAY CITY ORDINANCE NO. 158
WHEREFORE, the dispositive portion of our Decision dated January 28, DATED APRIL 21, 1959 AND THE RECLAMATION
1992 is hereby AMENDED to read as follows: CONTRACT ENTERED INTO BETWEEN PASAY CITY
AND RREC;
1. The requirement by the trial court on public bidding and the submission
of the RREC's plans and specification to the Department of Public Works II
and Highways in order that RREC may continue the implementation of
the reclamation work is deleted for being moot and academic. THE COURT OF APPEALS ERRED IN FINDING THAT
RREC HAD RECLAIMED 55 HECTARES AND IN
2. Ordering plaintiff-appellant to turn over to Pasay City the ownership ORDERING THE TURN-OVER TO PASAY CITY OF THE
and possession of the above enumerated lots (1 to 9). OWNERSHIP AND POSSESSION OF NINE (9) LOTS
TITLED IN THE NAME OF CCP.
3. Sustaining RREC's irrevocable option to purchase sixty (60%) percent
of the land referred to in No. 2 of this dispositive portion, to be exercised In G.R. No. 105276, the petitioners, Pasay City and RREC, contend, that:
within one (1) year from the finality of this Decision, at the same terms
and condition embodied in the Pasay City-RREC reclamation contract, I
and enjoining Pasay City to respect RREC's irrevocable option.
THE COURT OF APPEALS ERRED IN NOT
SO ORDERED. DECLARING PRESIDENTIAL DECREE NO. 3-A
UNCONSTITUTIONAL;
From the Decision and Amended Decision of the Court of Appeals aforementioned, the
Republic of the Philippines, as well as Pasay City and RREC, have come to this Court to II
seek relief, albeit with different prayers.
THE COURT OF APPEALS ERRED IN NOT AWARDING
On September 10, 1997, the Court commissioned the former thirteenth Division of Court DAMAGES IN FAVOR OF PASAY CITY AND RREC.
of Appeals to hear and receive evidence on the controversy. The corresponding
Commissioner's Report, dated November 25, 1997, was submitted and now forms part of Let us first tackle the issues posed in G.R. No. 103882.
the records.
On the first question regarding the validity of Pasay City Ordinance No. 158 dated April
On October 11, 1997, the Cultural Center of the Philippines ("CCP") filed a Petition in 21, 1959 and the Agreement dated April 24, 1959 between Pasay City and RREC, we
Intervention, theorizing that it has a direct interest in the case being the owner of subject rule in the negative.
nine (9) lots titled in its (CCP) name, which the respondent Court of Appeals ordered to
be turned over to Pasay City. The CCP, as such intervenor, was allowed to present its
Sec. 1 of RA 1899, reads:
evidence, as it did, before the Court of Appeals, which evidence has been considered in
the formulation of this disposition.
Sec. 1. Authority is hereby granted to all municipalities
and chartered cities to undertake and carry out at their
 own expense the reclamation by dredging, filling, or other
means, of any foreshore lands bordering them, and to
establish, provide, construct, maintain and repair proper
and adequate docking and harbor facilities as such
municipalities and chartered cities may determine in
consultation with the Secretary of Finance and the
Secretary of Public Works and Communications.
It is the submission of the petitioner, Republic of the Philippines, that there are no
foreshore lands along the seaside of Pasay City 15; that what Pasay City has are
submerged or offshore areas outside the commerce of man which could not be a proper
subject matter of the Agreement between Pasay City and RREC in question as the area
affected is within the National Park, known as Manila Bay Beach Resort, established under
Proclamation No. 41, dated July 5, 1954, pursuant to Act No. 3915, of which area it
(Republic) has been in open, continuous and peaceful possession since time immemorial.
Petitioner faults the respondent court for unduly expanding what may be considered
"foreshore land" through the following disquisition:
The former Secretary of Justice Alejo Mabanag, in
response to a request for an opinion from the then
Secretary of Public Works and Communications as to
whether the term, "foreshore areas" as used in Section I
of the immediately aforequoted law is that defined in
Webster's Dictionary and the Law of Waters so as to
make any dredging or filling beyond its prescribed limit
illegal, opined:
According to the basic letter of the
Director of Public Works, the law of
Waters speaks of "shore" and defines it
thus: "that space movement of the tide. Its
interior or terrestrial limit in the line
reached by highest equinoctial tides."
Webster's definition of foreshore reads as follows:
That part of the shore between high water
and low-water marks usually fixed at the
line to which the ordinary means tide
flows: also, by extension, the beach, the
shore near the water's edge.
If we were to be strictly literal the term
foreshore or foreshore lands should be
confined to but a portion of the shore, in
itself a very limited area. (p. 6,
Intervenors-appellees' brief).
Bearing in mind the (Webster's and Law of
Waters) definitions of "shore" and of
foreshore lands, one is struck with the
apparent inconsistency between the areas
thus described and the purpose to which
that area, when reclaimed under the
provision of Republic Act No. 1899, shall
be devoted. Section I (of said Law)
authorizes the construction thereat of
"adequate docking and harbor facilities".
This purpose is repeated in Sections 3
and 4 of the Act.
And yet, it is well known fact that
foreshore lands normally extend only from
10 to 20 meters along the coast. Not very
much more if at all. In fact certain parts in
Manila bordering on Manila Bay, has no
foreshore to speak of since the sea
washes the sea wall.
It does not seem logical, then, that
Congress had in mind. Webster's limited
concept of foreshore when it enacted
Republic Act No. 1899, unless it intends
that the wharves, piers, docks, etc. should
be constructed parallel to the shore, which
is impractical.
Since it is to be presumed that Congress
could not have intended to enact an
ineffectual measure not one that would
lead to absurd consequences, it would
seem that it used "foreshore" in a sense
wider in scope that defined by Webster. . .
.
To said opinion on the interpretation of the R.A. 1899,
plaintiff-appellant could not offer any refutation or contrary
opinion. Neither can we. In fact, the above construction is
consistent with the "rule on context" in statutory
construction which provides that in construing a statute,
the same must be construed as a whole. The particular
words, clauses and phrases should not be studied as
detached and isolated expressions, but the whole and
every part of the statute must be considered in fixing the
meaning of any of its parts in order to produce a
harmonious whole (see Araneta vs. Concepcion, 99 Phil.
709). There are two reasons for this. Firstly, the force and
significance of particular expressions will largely depend
upon the connection in which they are found and their
relation to the general subject-matter of the law. The
legislature must be understood to have expressed its
whole mind on the special object to which the legislative
act is directed but the vehicle for the expressions of that
meaning is the statute, considered as one entire and
continuous act, and not as an agglomeration of unrelated
clauses. Each clause or provision will be illuminated by
those which are cognate to it and by the general tenor of
the whole statute and thus obscurities end ambiguities
may often be cleared up by the most direct and natural
means. Secondly effect must be given, if it is possible, to
every word and clause of the statute, so that nothing shall
be left devoid of meaning or destitute of force. To this
end, each provision of the statute should be read in the
light of the whole. For the general meaning of the
legislature, as gathered from the entire act, may often
prevail over the construction which would appear to be
the most natural and obvious on the face of a particular
clause. If is by this means that contradiction and
repugnance between the different parts of the statute may
be avoided. (See Black, Interpretation of Laws, 2nd Ed.,
pp. 317-319).
Resorting to extrinsic aids, the "Explanatory Note" to
House Bill No. 3830, which was subsequently enacted as
Republic Act No. 1899, reads:
In order to develop and expand the
Maritime Commerce of the Philippines, it
is necessary that harbor facilities be
correspondingly improved and, where
necessary, expanded and developed. The
national government is not in a financial
position to handle all this work. On the
other hand, with a greater autonomy many
chartered cities and provinces are
financially able to have credit position
which will allow them to undertake these
projects. Some cities, such as the City of
Bacolod under R.A. 161, has been
authorized to reclaim foreshore lands
bordering it.
Other cities end provinces have
continuously been requesting for authority
to reclaim foreshore lands on the basis of
the Bacolod City pattern, and to undertake
work to establish, construct on the
reclaimed area and maintain such port
facilities as may be necessary. In order
not to unduly delay the undertaking of
these projects, and inorder to obviate the
passage of individual pieces of legislation
for every chartered city and province, it is
hereby recommended that the
accompanying bill be approved. It covers
Authority for All chartered cities and
provinces to undertake this work. . . .
(emphasis supplied)
Utilizing the above explanatory note in interpreting and
construing the provisions of R.A. 1899, then Secretary of
Justice Mabanag opined:
It is clear that the "Bacolod City pattern"
was the basis of the enactment of the
aforementioned bill of general application.
This so-called "Bacolod City pattern"
appears to be composed of 3 parts,
namely: Republic Ad No. 161, which
grants authority to Bacolod City to
undertake or carry out . . . the reclamation
. . . of any [sic] carry out the reclamation
project conformably with Republic Act No.
161; and Republic Act No. 1132
authorizing Bacolod City to contract
indebtedness or to issue bonds in the
amount not exceeding six million pesos to
finance the reclamation of land in said city.
Republic Act No. 161 did not in itself
specify the precise space therein referred
to as "foreshore" lands, but it provided that
docking and harbor facilities should be
erected on the reclaimed portions thereof,
while not conclusive would indicate that
Congress used the word "foreshore" in its
broadest sense. Significantly, the plan of
reclamation of foreshore drawn up by the
Bureau of Public Works maps out an area
of approximately 1,600,000 square
meters, the boundaries of which clearly
extend way beyond Webster's limited
concept of the term "foreshore". As a
contemporaneous construction by that
branch of the Government empowered to
oversee at least, the conduct of the work,
such an interpretation deserves great
weight. Finally, Congress in enacting
Republic Act No. 1132 (supplement to RA
161), tacitly confirmed and approved the
Bureau's interpretation of the term
'foreshore' when instead of taking the
occasion to correct the Bureau of over
extending its plan, it authorized the city of
Bacolod to raise the full estimated cost of
reclaiming the total area covered by the
plan. The explanatory note to House Bill
No. 1249 which became Republic Act No.
1132 states among the things:
The Bureau of Public Works already
prepared a plan for the reclamation of
about 1,600,000 square meters of land at
an estimated costs of about
P6,000,000.00. The project is self-
supporting because the proceeds from the
sales or leases of lands so reclaimed will
be more than sufficient to cover the cost of
the project.
Consequently, when Congress passed
Republic Act No. 1899 in order to facilitate
the reclamation by local governments of
foreshore lands on the basis of the
Bacolod City pattern and in order to
obviate the passage of individual pieces of
legislation for every chartered city and
provinces requesting authority to
undertake such projects, the lawmaking
body could not have had in mind the
limited area described by Webster as
"foreshore" lands. . . . .
If it was really the intention of Congress to limit the area to
the strict literal meaning of "foreshore" lands which may
be reclaimed by chartered cities and municipalities,
Congress would have excluded the cities of Manila, Iloilo,
Cebu, Zamboanga and Davao from the operation of RA
1899 as suggested by Senator Cuenco during the
deliberation of the bill considering that these cities do not
have 'foreshore' lands in the strict meaning of the term.
Yet, Congress did not approve the proposed amendment
of Senator Cuenco, implying therefore, that Congress
intended not to limit the area that may be reclaimed to the
strict definition of "foreshore" lands.
The opinion of the then Secretary of Justice Mabanag,
who was at that time the chief law officer and legal
adviser of the government and whose office is required by
law to issue opinions for the guidance of the various
departments of the government, there being then no
judicial interpretation to the contrary, is entitled to respect
(see Bengzon vs. Secretary of Justice and Insular Auditor,
68 Phil. 912).
We are not unmindful of the Supreme Court Resolution
dated February 3, 1965 in Ponce vs. Gomez (L-21870)
and Ponce vs. City of Cebu (L-2266), by a unanimous
vote of six (6) justices (the other five (5) members
deemed it unnecessary to express their view because in
their opinion the questions raised were not properly
brought before the court), which in essence applied the
strict dictionary meaning of "foreshore lands" as used in
RA 1899 in the case of the city of Cebu. But this was
promulgated long after the then Secretary of Justice
Mabanag rendered the above opinion on November 16,
1959 and long after RREC has started the subject
reclamation project.
Furthermore, as held by the lower court, Congress, after
the Supreme Court issued the aforementioned
Resolution, enacted RA 5187. In Sec. 3 (m) of said law,
Congress appropriated money "for the construction of the
seawall and limited access highway from the South
boundary of the city of Manila to Cavite City, to the South,
and from the North boundary of the city of Manila to the
municipality of Mariveles, province of Bataan, to the North
(including the reclamation of foreshore and submerged
areas . . . provided . . . that . . . existing projects and/or
contracts of city or municipal governments for the
reclamation of foreshore and submerged lands shall be
respected . . ." This is a clear manifestation that Congress
in enacting RA 1899, did not intend to limit the
interpretation of the term "foreshore land" to its dictionary
meaning.
It is presumed that the legislature was acquainted with
and had in mind the judicial construction given to a former
statute on the subject, and that the statute on the subject,
and that the statute was enacted having in mind the
judicial construction that the prior enactment had
received, or in the light of such existing judicial decisions
as have direct bearing upon it (see 50 Am. Jur., Sec. 321,
pp. 312-313). But notwithstanding said interpretation by
the Supreme Court of RA 1899 in the Ponce cases,
Congress enacted a law covering the same areas
previously embraced in a RA 1899 (as mentioned earlier,
cities without foreshore lands which were sought to be
excluded from the operation of RA 1899 were not
excluded), providing that respect be given the reclamation
of not only foreshore lands but also of submerged lands
signifying its non-conformity to the judicial construction
given to RA 1899. If Congress was in accord with the
interpretation and construction made by the Supreme
Court on RA 1899, it would have mentioned reclamation
of "foreshore lands" only in RA 5187, but Congress
included "submerged lands" in order to clarify the
intention on the grant of authority to cities and
municipalities in the reclamation of lands bordering them
as provided in RA 1899. It is, therefore, our opinion that it
is actually the intention of Congress in RA 1899 not to
limit the authority granted to cities and municipalities to
reclaim foreshore lands in its strict dictionary meaning but
rather in its wider scope as to include submerged lands.
The Petition is impressed with merit.
To begin with, erroneous and unsustainable is the opinion of respondent court that under
RA 1899, the term "foreshore lands" includes submerged areas. As can be gleaned from
its disquisition and rationalization aforequoted, the respondent court unduly stretched
and broadened the meaning of "foreshore lands", beyond the intentment of the law, and
against the recognized legal connotation of "foreshore lands". Well entrenched, to the
point of being elementary, is the rule that when the law speaks in clear and categorical
language, there is no reason for interpretation or construction, but only for
application. 16 So also, resort to extrinsic aids, like the records of the constitutional
convention, is unwarranted, the language of the law being plain and unambiguous. 17 Then,
too, opinions of the Secretary of Justice are unavailing to supplant or rectify any mistake or
omission in the law. 18 To repeat, the term "foreshore lands" refers to:
The strip of land that lies between the high and low water
marks and that is alternately wet and dry according to the
flow of the tide. (Words and Phrases, "Foreshore")
A strip of land margining a body of water (as a lake or
stream); the part of a seashore between the low-water
line usually at the seaward margin of a low-tide terrace
and the upper limit of wave wash at high tide usually
marked by a beach scarp or berm. (Webster's Third New
International Dictionary)
The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot
broaden its meaning, much less widen the coverage thereof. If the intention of Congress
were to include submerged areas, it should haveprovided expressly. That Congress did
not so provide could only signify the exclusion of submerged areas from the term
"foreshore lands".
Neither is there any valid ground to disregard the Resolution of this Court dated February "that part of the land adjacent to the sea which is alternately covered and left dry by the
3, 1965 in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) despite the ordinary flow of the tides." As opined by this Court in said cases:
enactment of Republic Act No. 5187 ("RA 5187"), the relevant portion of which, reads:
WHEREAS, six (6) members of the Court (Justices
Sec. 3. Miscellaneous Projects Bautista Angelo, Concepcion, Reyes, Barrera, Dizon and
Jose P. Bengzon) opine that said city ordinance and
xxx xxx xxx contracts are ultra vires and hence, null and void, insofar
as the remaining 60% of the area aforementioned,
m. For the construction of seawall and limited access because the term "foreshore lands" as used in Republic
highway from the south boundary of the City of Manila to Act No. 1899 should be understood in the sense attached
Cavite City, to the south, and from the north boundary of thereto by common parlance; (emphasis ours)
the City of Manila to the municipality of Mariveles,
province of Bataan, to the north, including the reclamation The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his
of the foreshore and submerged areas: Provided, That opinion dated December 22, 1966, in a case with analogous facts as the present one, to
priority in the construction of such seawalls, highway and wit:
attendant reclamation works shell be given to any
corporation and/or corporations that may offer to D
undertake at its own expense such projects, in which case e
the President of the Philippines may, after competitive c
bidding, award contracts for the construction of such e
projects, with the winning bidder shouldering all costs m
thereof, the same to be paid in terms of percentage fee of b
the contractor which shall not exceed fifty percent of the e
area reclaimed by the contractor and shall represent full r
compensation for the purpose, the provisions of the Public 2
Land Law concerning disposition of reclaimed and 2
foreshore lands to the contrary notwithstanding: Provided, ,
finally, that the foregoing provisions and those of other 1
laws, executive orders, rules and regulations to the 9
contrary notwithstanding, existing rights, projects and/or 6
contracts of city or municipal governments for the 6
reclamation of foreshore and submerged lands shall be
respected. . . . . The Secretary of Agriculture

There is nothing in the foregoing provision of RA 5187 which can be interpreted to and Natural Resources
broaden the scope of "foreshore lands." The said law is not amendatory to RA 1899. It is
an Appropriations Act, entitled "AN ACT APPROPRIATING FUNDS FOR PUBLIC Diliman, Quezon City
WORKS, SYNCHRONIZING THE SAME WITH PREVIOUS PUBLIC WORKS
APPROPRIATIONS."
Sir:
All things viewed in proper perspective, we reiterate what was said in Ponce v.
xxx xxx xxx
Gomez (L-21870) and Ponce v. City of Cebu (L-22669) that the term "foreshore" refers to
I. Facts
1. On January 19, 1961, pursuant to the provisions of
Republic Act No. 1899, the Municipality of Navotas
enacted Ordinance No. 1 authorizing the Municipal Mayor
to enter into a reclamation contract with Mr. Chuanico.
2. On March 15, 1961, a reclamation contract was
concluded between the Municipality of Navotas,
represented by the Municipal Mayor, and Mr. Chuanico in
accordance with the above ordinance. Thereunder, Mr.
Chuanico shall be the attorney-in-fact of the Municipality
in prosecuting the reclamation project and shall advance
the money needed therefor; that the actual expenses
incurred shall be deemed a loan to the Municipality; that
Mr. Chuanico shall have the irrevocable option to buy
70% of the reclaimed area at P7.00 per square meter;
that he shall have the full and irrevocable powers to do
any and all things necessary and proper in and about the
premises," including the power to hire necessary
personnel for the prosecution of the work, purchase
materials and supplies, and purchase or lease
construction machineries and equipment, but any and all
contracts to be concluded by him in behalf of the
Municipality shall be submitted to public bidding.
xxx xxx xxx
3. On March 16, 1961, the Municipal Council of Navotas
passed Resolution No. 22 approving and ratifying the
contract.
xxx xxx xxx
III. Comments
1. The above reclamation contract was concluded on the
basis of Navotas Ordinance No. 1 which, in turn, had
been enacted avowedly pursuant to Republic Act No.
1899. This being so, the contract, in order to be valid,
must conform to the provisions of the said law.
By authorizing local governments "to execute by
administration any reclamation work," (Republic Act No.
1899 impliedly forbids the execution of said project
by contract. Thus, in the case or Ponce et
al. vs. Gomez (February 3, 1966), five justices of the
Supreme Court voted to annul the contract between Cebu
Development Corporation and Cebu City for the
reclamation of foreshore lands because "the provisions of
said . . . contract are not . . . in accordance with the
provisions of Republic Act No. 1899," as against one
Justice who opined that the contract substantially
complied with the provisions of the said law. (Five
Justices expressed no opinion on this point.)
Inasmuch as the Navotas reclamation contract is
substantially similar to the Cebu reclamation contract, it is
believed that the former is likewise fatally defective.
2. The Navotas reclamation project envisages the
construction of a channel along the Manila Bay periphery
of that town and the reclamation of approximately 650
hectares of land from said channel to a seaward distance
of one kilometer. In the basic letter it is stated that
"practically, all the 650 hectares of lands proposed to be
reclaimed under the agreement" do not constitute
foreshore lands and that "the greater portion of the area .
. . is in fact navigable and presently being used as a
fishing harbor by deep-sea fishing operators as well as a
fishing ground of sustenance fisherman. Assuming the
correctness of these averments, the Navotas reclamation
contract evidently transcends the authority granted under
Republic Act No. 1899, which empowers the local
governments to reclaim nothing more than "foreshore
lands, i.e., "that part of the land adjacent to the see which
is alternately covered and left dry by the ordinary flow of
the tides." (26 C.J. 890.) It was for this reason that in the
cited case Ponce case, the Supreme Court, by a vote of
6-0 with five Justices abstaining, declared ultra vires and
void the contractual stipulation for the reclamation of
submerged lands off Cebu City, and permanently
enjoined its execution under Republic Act No. 1899.
xxx xxx xxx
In accordance with the foregoing, I have the honor to
submit the view that the Navotas reclamation contract is
not binding and should be disregarded for non- r
compliance with law. e
t
V a
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t f
r J
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r
s The said opinion of Justice Secretary Teehankee who became Associate Justice, and
, later Chief Justice, of this Court, did, in our considered view, supersede the earlier
opinion of former justice Secretary Alejo Mabanag, aforestated, as the cases, in
( connection with which subject opinions were sought, were with similar facts. The said
S Teehankee opinion accords with RA 1899.
G
D It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended
) by Ordinance No. 158, and the Agreement under attack, have been found to be outside
C the intendment and scope of RA 1899, and thereforeultra vires and null and void.
L
A What is worse, the same Agreement was vitiated by the glaring absence of a public
U bidding.
D
I Obviously, there is a complete dearth of evidence to prove that RREC had really
O reclaimed 55 hectares. The letter of Minister Baltazar Aquino relied upon by RREC is no
T proof at all that RREC had reclaimed 55 hectares. Said letter was just referring to a
E tentative schedule of work to be done by RREC, even as it required RREC to submit the
E pertinent papers to show its supposed accomplishment, to secure approval by the
H Ministry of Public Works and Highways to the reclamation plan, and to submit to a public
A bidding all contracts and sub-contracts for subject reclamation project but RREC never
N complied with such requirements and conditions sine qua non.
K
E
No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the
E
reclamation project were presented to reflect any accomplishment. Not even any
statement or itemization of works accomplished by contractors or subcontractors or
S vouchers and other relevant papers were introduced to describe the extent of RREC's
e accomplishment. Neither was the requisite certification from the City Engineer concerned
c
that "portions of the reclamation project not less than 50 hectares in area shall have been
accomplished or completed" obtained and presented by RREC.
As a matter of fact, no witness ever testified on any reclamation work done by RREC,
and extent thereof, as of April 26, 1962. Not a single contractor, sub-contractor,
engineer, surveyor, or any other witness involved in the alleged reclamation work of
RREC testified on the 55 hectares supposedly reclaimed by RREC. What work was
done, who did the work, where was it commenced, and when was it completed, was
never brought to light by any witness before the court. Certainly, onus probandi was on
RREC and Pasay City to show and point out the as yet unidentified 55 hectares they
allegedly reclaimed. But this burden of proof RREC and Pasay City miserably failed to
discharge.
So also, in the decision of the Pasay Court of First Instance dismissing the complaint of
plaintiff-appellant, now petitioner Republic of the Philippines, the lifting of the writ of
Preliminary Injunction issued on April 26, 1962 would become effective only "as soon as
Defendant Republic Real Estate Corporation and Defendant Pasay City shall have
submitted the corresponding plans and specifications to the Director of Public Work, and
shall have obtained approval thereof, and as soon as corresponding public bidding for
the award to the contractor and sub-contractor that will undertake the reclamation project
shall have been effected." (Rollo, pp. 127-129, G.R. No. 103882)
From the records on hand, it is abundantly clear that RREC and Pasay City never
complied with such prerequisites for the lifting of the writ of Preliminary Injunction.
Consequently, RREC had no authority to resume its reclamation work which was
stopped by said writ of preliminary injunction issued on April 26, 1962.
From the Contract for Dredging Work, dated November 26, 1960, marked Exhibit "21-A"
for RREC before the lower court, and Exhibit "EE" for CCP before the Court of Appeals, it
can be deduced that only on November 26, 1960 did RREC contract out the dredging
work to C and A Construction Company, Inc., for the reclamation of the 55 hectares
initially programmed to be reclaimed by it. But, as stated by RREC itself in the position
paper filed with this Court on July 15, 1997, with reference to CDCP's reclamation work,
mobilization of the reclamation team would take one year before a reclamation work
could actually begin. Therefore, the reclamation work undertaker by RREC could not
have started before November 26, 1961.
Considering that on April 26, 1962 RREC was enjoined from proceeding any further with
its reclamation work, it had barely five (5) months, from November, 1961 to April, 1962,
to work on subject reclamation project. It was thus physically impossible for RREC to
reclaim 55 hectares, with the stipulated specifications and elevation, in such a brief span
of time. In the report of RREC (Exhibit "DD" for CCP), it was conceded that due to the
writ of preliminary injunction issued on April 26, 1962, C and A Construction Co., Inc. had
suspended its dredging operation since May, 1962.
The "graphical report" on the Pasay Reclamation project, as of April 30, 1962, attached
to the Progress Report marked Exhibit "DD", is a schematic representation of the work
accomplishment referred to in such Progress Report, indicating the various elevations of
the land surface it embraced, ranging from 0.00 meters to the highest elevation of 2.5
meters above MLLW. Such portrayal of work accomplished is crucial in our determination
of whether or not RREC had actually "reclaimed" any land as under its Contract for
Dredging Work with C and A Construction Company (Exhibit "EE", the required final
elevation for a completely reclaimed land was 3.5 meters above MLLW, as explicitly
provided in said Contract for Dredging Work. So, the irresistible conclusion is when
the work on subject RREC-Pasay City reclamation project stopped in April, 1962 in
compliance with the writ of preliminary injunction issued by the trial court of origin, no
portion of the reclamation project worked on by RREC had reached the stipulated
elevation of 3.5 meters above MLLW. The entire area it worked on was only at sea level
or 0.00 meter above MLLW. In short, RREC had not yet reclaimed any area when the
writ of preliminary injunction issued in April 1962.
On this point, the testimonies of Architect Ruben M. Protacio, Architect and Managing
partner of Leandro V. Locsin and partners, Architect and City Planner Manuel T.
Maoza, Jr. of Planning Resources and Operation System, Inc., Rose D. Cruz, Executive
Assistant, Office of the President, from 1966 to 1970, and Dr. Lucrecia Kasilag, National
Artist and member of CCP Advisory Committee, come to the fore. These credible,
impartial and knowledgeable witnesses recounted on the witness stand that when the
construction of the Main Building of the Cultural Center of the Philippines (CCP) began in
1966, the only surface land available was the site for the said building (TSN, Sept. 29,
1997, pages 8, 14 and 50), what could be seen in front of and behind it was all water
(TSN, Sept. 29, 1997 pages 127-128). When the CCP Main Building was being
constructed, from 1968 to 1969, the land above sea level thereat was only where the
CCP Main Building was erected and the rest of the surroundings were all under water,
particularly the back portion fronting the bay. (TSN, Sept. 13, 1997, pp. 181, 182, 185,
186, 188). Dr. Lucrecia R. Kasilag stressed that on April 16, 1966, during the ground
breaking for the CCP Main Building, it was water all around (TSN, Sept. 30, 1997, pp.
320, 324, 325).
There was indeed no legal and factual basis for the Court of Appeals to order and
declare that "the requirement by the trial court on public bidding and the submission of
RREC's plans and specification to the Department of Public Works and Highways in
order that RREC may continue the implementation of the reclamation work is deleted for
being moot and academic." Said requirement has never become moot and academic. It
has remained indispensable, as ever, and non-compliance therewith restrained RREC
from lawfully resuming the reclamation work under controversy, notwithstanding the
rendition below of the decision in its favor.
Verily, contrary to what the Court of Appeals found, RREC had not reclaimed any area and PICC parking name of CCP
with the prescribed elevation of 3.5 meters above MLLW, so much so that in 1978, it
(RREC) opted to file with the former Ministry of Public Highways, a claim for space
compensation of P30,396,878.20, for reclamation work allegedly done before the CDCP
started working on the reclamation of the CCP grounds. On September 7, 1979, RREC 22 landscaped with 132,924 sq.m. TCT 75676 in the
asked the Solicitor General to settle its subject claim for compensation at the same
amount of P30,396,878.20. But on June 10, 1981, guided by the cost data, work volume
sculpture of Asean name of CCP
accomplished and other relevant information gathered by the former Ministry of Public
Highways, the Solicitor General informed RREC that the value of what it had
accomplished, based on 1962 price levels, was only P8,344,741.29, and the expenses Artists-site of
for mobilization of equipment amounted to P2,581,330.00. The aforesaid evaluation
made by the government, through the then Minister of Public Highways, is factual and Boom na Boom
realistic, so much so that on June 25, 1981, RREC, in its reply letter to the Solicitor
General, stated: 23 open space, back 34,346 sq.m. TCT 75677 in the

We regret that we are not agreeable to the amount of of Philcite name of CCP
P10,926,071.29, based on 1962 cost data, etc., as
compensation based on quantum meruit. The least we 24 Parking space for 10,352 sq.m. TCT 75678 in the
would consider is the amount of P10,926,071.29 plus
interest at the rate of 6% per annum from 1962 to the time Star City, CCP, name of CCP
of payment. We feel that 6% is very much less than the
accepted rate of inflation that has supervened since 1962
Philcite
to the present, and even less than the present legal rate
of 12% per annum. 19
25 open space 11,323 sq.m. TCT 75679 in the
Undoubtedly, what RREC claimed for was compensation for what it had done, and for
the dredge fill of 1,558,395 cubic meters it used, on subject reclamation project. occupied by Star name of CCP

Respondent Court likewise erred in ordering the turn-over to Pasay City of the following
titled lots, to wit:
LOT NO. BUILDING AREA OCT/TCT
42 Gloria Maris 9,516 sq.m. OCT 159 in the
Restaurant name of GSIS
3 Asean Garden 76,299 sq.m. OCT 10251 in the
name of CCP
12 Folk Arts Theater 1.7503 hec. TCT 18627 in the
City
28 open space, 27,689 sq.m. TCT 75684 in the
beside PICC name of CCP
29 open space, 106,067 sq.m. TCT 75681 in the
leased by El name of CCP
Shaddai
We discern no factual basis nor any legal justification therefor. In the first place,
in their answer to the Complaint and Amended Complaint below, RREC and
Pasay City never prayed for the transfer to Pasay City of subject lots, title to
 which had long become indefeasible in favor of the rightful title holders, CCP and
GSIS, respectively.
The annotation of a notice of lis pendens on the certificates of title covering the said lots
is of no moment. It did not vest in Pasay City and RREC any real right superior to the
absolute ownership thereover of CCP and GSIS. Besides, the nature of the action did not
really warrant the issuance of a notice of lis pendens.
Sec. 14 of Rule 13, Revised Rules of Civil Procedure, reads:
Sec. 14. Notice of lis pendens. In an action affecting
the title or the right of possession of real properly, the
plaintiff and the defendant, when affirmative relief is
claimed in his answer, may record in the office of the
registry of deeds of the province in which the property is
situated a notice of the pendency of the action. Said
notice shall contain the names of the parties and the
object of the action or defense, and a description of the
property in that province affected thereby. Only from the
time of filing such notice for record shall a purchaser, or
encumbrancer of the property affected thereby, be
deemed to have constructive notice of the pendency of
the action, and only of its pendency against the parties
designated by their real names.
The notice of lis pendens herein above mentioned may be
cancelled only upon order of the court, after proper
showing that the notice is for the purpose of molesting the
adverse party, or that it is not necessary to protect the
rights of the party who caused it to be recorded.
Under the aforecited provision of law in point, a notice of lis pendens is necessary when
the action is for recovery of possession or ownership of a parcel of land. In the present
litigation, RREC and Pasay City, as defendants in the main case, did not counterclaim for
the turnover to Pasay City of the titled lots aforementioned.
What is more, a torrens title cannot be collaterally attacked. The issue of validity of a
torrens title, whether fraudulently issued or not, may be posed only in an action brought
to impugn or annul it. (Halili vs. National Labor Relations Commission, 257 SCRA 174,
Cimafranca vs. Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and cannot
be ignored, is the germane provision of Section 48 of P.D. 1529, that a certificate of title
can never be the subject of a collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding instituted in accordance with law.
Although Pasay City and RREC did not succeed in their undertaking to reclaim any area
within subject reclamation project, it appearing that something compensable was
accomplished by them, following the applicable provision of law and hearkening to the
dictates of equity, that no one, not even the government, shall unjustly enrich
oneself/itself at the expense of another 20, we believe; and so hold, that Pasay City and
RREC should be paid for the said actual work done and dredge-fill poured in, worth
P10,926,071.29, as verified by the former Ministry of Public Highways, and as claimed by
RREC itself in its aforequoted letter dated June 25, 1981.
It is fervently hoped that long after the end of our sojourn in this valley of tears, the court,
for its herein historic disposition, will be exalted by the future generations of Filipinos, for
the preservation of the national patrimony and promotion of our cultural heritage. As
writer Channing rightly puts it: "Whatever expands the affections, or enlarges the sphere
of our sympathies Whatever makes us feel our relation to the universe and all that it
inherits in time and in eternity, and to the great and beneficent cause of all, must
unquestionably refine our nature, and elevate us in the scale of being."
WHEREFORE:
In G.R. No. 103882, the Petition is GRANTED; the Decision, dated January 28, 1992,
and Amended Decision, dated April 28, 1992, of the Court of Appeals, are both SET
ASIDE; and Pasay City Ordinance No. 121, dated May 6, 1958, and Ordinance No. 158,
dated April 21, 1959, as well as the Reclamation Agreements entered into by Pasay City
and Republic Real Estate Corporation (RREC) as authorized by said city ordinances, are
declared NULL and VOID for being ultra vires, and contrary to Rep. Act 1899.
The writ of preliminary injunction issued on April 26, 1962 by the trial court a quo in Civil
Case No. 2229-P is made permanent and the notice of lis pendens issued by the Court
of Appeals in CA G.R. CV No. 51349 ordered CANCELLED. The Register of Deeds of
Pasay City is directed to take note of and annotate on the certificates of title involved, the
cancellation of subject notice of lis pendens.
The petitioner, Republic of the Philippines, is hereby ordered to pay Pasay City and
Republic Real Estate Corporation the sum of TEN MILLION NINE HUNDRED TWENTY-
SIX THOUSAND SEVENTY-ONE AND TWENTY-NINE CENTAVOS (P10,926,071.29)
PESOS, plus interest thereon of six (6%) percent per annum from May 1, 1962 until full
payment, which amount shall be divided by Pasay City and RREC, share and share
alike.
In G.R. No. 105276, the Petition is hereby DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED. PEZAs petition for certiorari. The Court of Appeals ruled that the Regional Trial Court,
Branch 115, Pasay City gravely abused its discretion in finding the PEZA liable for real
Republic of the Philippines property taxes to the Province of Bataan.
SUPREME COURT
Manila Facts common to the consolidated petitions

SECOND DIVISION In the exercise of his legislative powers,6 President Ferdinand E. Marcos issued
Presidential Decree No. 66 in 1972, declaring as government policy the establishment of
G.R. No. 184203 November 26, 2014 export processing zones in strategic locations in the Philippines. Presidential Decree No.
66 aimed "to encourage and promote foreign commerce as a means of making the
CITY OF LAPU-LAPU, Petitioner, Philippines a center of international trade, of strengthening our export trade and foreign
vs. exchange position, of hastening industrialization,of reducing domestic unemployment,
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent. and of accelerating the development of the country."7

x-----------------------x
G.R. No. 187583
PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE T. GARCIA, JR.,
and EMERLINDA S. TALENTO, in her capacity as Provincial Treasurer of
Bataan, Petitioners,
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
DECISION
LEONEN, J.:
The Philippine Economic Zone Authority is exempt from payment of real property taxes.
These are consolidated1 petitions for review on certiorari the City of Lapu-Lapu and the
Province of Bataan separately filed against the Philippine Economic Zone Authority
(PEZA).
In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals
decision2 dated January 11, 2008 and resolution3 dated August 6, 2008, dismissing the
Citys appeal for being the wrong mode of appeal. The City appealed the Regional Trial
Court,Branch 111, Pasay Citys decision finding the PEZA exempt from payment of real
property taxes.
In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals
decision4 dated August 27, 2008 and resolution5 dated April 16, 2009, granting the
To carry out this policy, the Export Processing Zone Authority (EPZA) was created to
operate, administer, and manage the export processing zones established in the Port of
Mariveles, Bataan8 and such other export processing zones that may be created by virtue
of the decree.9
The decree declared the EPZA non-profit in character10 with all its revenues devoted to its
development, improvement, and maintenance.11 To maintain this non-profit character, the
EPZA was declared exempt from all taxes that may be due to the Republic of the
Philippines, its provinces, cities, municipalities, and other government agencies and
instrumentalities.12 Specifically, Section 21 of Presidential Decree No. 66 declared the
EPZA exempt from payment of real property taxes:
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority
shall be non-profit and shall devote and use all its returns from its capital investment, as
well as excess revenues from its operations, for the development, improvement and
maintenance and other related expenditures of the Authority to pay its indebtedness and
obligations and in furtherance and effective implementation of the policy enunciated in
Section 1 of this Decree. In consonance therewith, the Authority is hereby declared
exempt:
....
(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and
licenses to be paid to the National Government, its provinces, cities, municipalities and
other government agenciesand instrumentalities[.]
In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan
Export Processing Zone. Certain parcels of land of the public domain located in the City
of Lapu-Lapuin Mactan, Cebu were reserved to serve as site of the Mactan Export
Processing Zone.
In 1995, the PEZA was created by virtue of Republic Act No. 7916 or "the Special
Economic Zone Act of 1995"13 to operate, administer, manage, and develop economic
zones in the country.14 The PEZA was granted the power to register, regulate, and
supervise the enterprises located in the economic zones.15 By virtue of the law, the export
processing zone in Mariveles, Bataan became the Bataan Economic Zone16 and the
Mactan Export Processing Zone the Mactan Economic Zone.17
As for the EPZA, the law required it to "evolve into the PEZA in accordance with the
guidelines and regulations set forth in an executive order issued for [the] purpose."18
On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282,
directing the PEZA to assume and exercise all of the EPZAs powers, functions, and
responsibilities "as provided in Presidential Decree No. 66, as amended, insofar as they
are not inconsistent with the powers, functions, and responsibilities of the PEZA, as
mandated under [the Special Economic Zone Act of 1995]."19 All of EPZAs properties,
equipment, and assets, among others, were ordered transferred to the PEZA.20
Facts of G.R. No. 184203
In the letter21 dated March 25, 1998, the City of Lapu-Lapu, through the Office of the
Treasurer, demanded from the PEZA 32,912,350.08 in real property taxes for the period
from 1992 to 1998 on the PEZAs properties located in the Mactan Economic Zone.
The City reiterated its demand in the letter22 dated May 21, 1998. It cited Sections 193
and 234 of the Local Government Code of 1991 that withdrew the real property tax
exemptions previously granted to or presently enjoyed by all persons. The City pointed
out that no provision in the Special Economic Zone Act of 1995 specifically exempted the
PEZA from payment of real property taxes, unlike Section 21 of Presidential Decree No.
66 that explicitly provided for EPZAs exemption. Since no legal provision explicitly
exempted the PEZA from payment of real property taxes, the City argued that it can tax
the PEZA.
The City made subsequent demands23 on the PEZA. In its last reminder24 dated May 13,
2002, the City assessed the PEZA 86,843,503.48 as real property taxes for the period
from 1992 to 2002.
On September 11, 2002, the PEZAfiled a petition for declaratory Relief25 with the
Regional Trial Court of Pasay City, praying that the trial court declare it exempt from
payment ofreal property taxes. The case was raffled to Branch 111.
The City answered26 the petition, maintaining that the PEZA is liable for real property
taxes. To support its argument, the City cited a legal opinion dated September 6, 1999
issued by the Department of Justice,27 which stated that the PEZA is not exempt from
payment of real property taxes. The Department of Justice based its opinion on Sections
193 and 234 of the Local Government Code that withdrew the tax exemptions, including
real property tax exemptions, previously granted to all persons.
A reply28 was filed by the PEZA to which the City filed a rejoinder.29
Pursuant to Rule 63, Section 3 of Rules of Court,30 the Office of the Solicitor General filed
a comment31 on the PEZAs petition for declaratory relief. It agreed that the PEZA is
exempt from payment of real property taxes, citing Sections 24 and 51 of the Special
Economic Zone Act of 1995.
The trial court agreed with the Solicitor General. Section 24 of the Special Economic
Zone Act of 1995 provides:
SEC. 24. Exemption from National and Local Taxes. Except for real property taxes on
land owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the
gross income earned by all business enterprises within the ECOZONE shall be paid and
remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business
establishments to the treasurers office of the municipality or city where the
enterprise is located.
Section 51 of the law, on the other hand, provides:
SEC. 51. Ipso-Facto Clause. All privileges, benefits, advantages or exemptions granted
to special economic zones under Republic Act No. 7227, shall ipso-facto be accorded to
special economic zones already created or to be created under this Act. The free port
status shall not be vested upon new special economic zones.
Based on Section 51, the trial court held that all privileges, benefits, advantages, or
exemptions granted tospecial economic zones created under the Bases Conversion and
Development Act of 1992 apply to special economic zones created under the Special
Economic ZoneAct of 1995.
Since these benefits include exemption from payment of national or local taxes, these
benefits apply to special economic zones owned by the PEZA.
According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of
the Special Economic Zone Act of 1995. It ruled that Section 24, which taxes real
property owned by developers of economic zones, only applies to private developers of
economic zones, not to public developers like the PEZA. The PEZA, therefore, is not
liable for real property taxes on the land it owns.
Characterizing the PEZA as an agency of the National Government, the trial court ruled
that the City had no authority to tax the PEZA under Sections 133(o) and 234(a) of the
Local Government Code of 1991.
In the resolution32 dated June 14, 2006, the trial court granted the PEZAs petition for
declaratory relief and declared it exempt from payment of real property taxes.
The City filed a motion for reconsideration,33 which the trial court denied in its
resolution34 dated September 26, 2006.
The City then appealed35 to the Court of Appeals.
The Court of Appeals noted the following issues the City raised in its appellants brief: (1)
whether the trial court had jurisdiction over the PEZAs petition for declaratory relief; (2)
whether the PEZA is a government agency performing governmental functions; and (3)
whether the PEZA is exempt from payment of real property taxes.
The issues presented by the City, according to the Court of Appeals, are pure questions
of law which should have been raised in a petition for review on certiorari directly filed
before this court. Since the City availed itself of the wrong mode of appeal, the Court of
Appeals dismissed the Citys appeal in the decision36 dated January 11, 2008.
The City filed a motion for extension of time to file a motion for reconsideration,37 which
the Court of Appeals denied in the resolution38 dated April 11, 2008.
Despite the denial of its motion for extension, the City filed a motion for
reconsideration.39 In the resolution40 dated August 6, 2008, the Court of Appeals denied
that motion.
In its petition for review on certiorari with this court,41 the City argues that the Court of
Appeals "hid under the skirts of technical rules"42 in resolving its appeal. The City
maintains that its appeal involved mixed questions of fact and law. According to the City,
whether the PEZA performed governmental functions "cannot completely be addressed
by law but [by] the factual and actual activities [the PEZA is] carrying out."43
Even assuming that the petition involves pure questions of law, the City contends that
the subject matter of the case "is of extreme importance with [far-reaching] consequence
that [its magnitude] would surely shape and determine the course ofour nations
future."44 The Court of Appeals, the City argues, should have resolved the case on the
merits.
The City insists that the trial court had no jurisdiction to hear the PEZAs petition for
declaratory relief. According to the City, the case involves real property located in the
City of Lapu-Lapu. The petition for declaratory relief should have been filed before the
Regional Trial Court of the City of Lapu-Lapu.45
Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite
allegedly demanded real property taxes from the PEZA. The City argues that the PEZA
should have likewise impleaded these local government units as respondents in its
petition for declaratory relief. For its failure to do so, the PEZA violated Rule 63, Section
2 of the Rules of Court, and the trial court should have dismissed the petition.46
This court ordered the PEZA to comment on the Citys petition for review on certiorari.47
At the outset of its comment, the PEZA argues that the Court of Appeals decision dated
January 11, 2008 had become final and executory. After the Court of Appeals had
denied the Citys appeal, the City filed a motion for extension of time to file a motion for
reconsideration. Arguing that the time to file a motion for reconsideration is not
extendible, the PEZA filed its motion for reconsideration out of time. The Cityhas no more
right to appeal to this court.48
The PEZA maintains that the City availed itself of the wrong mode of appeal before the
Court of Appeals. Since the City raised pure questions of law in its appeal, the PEZA
argues that the proper remedy is a petition for review on certiorari with this court, not an
ordinary appeal before the appellate court. The Court of Appeals, therefore, correctly
dismissed outright the Citys appeal under Rule 50, Section 2 of the Rules of Court.49
On the merits, the PEZA argues that it is an agency and instrumentality of the National
Government. It is therefore exempt from payment of real property taxes under Sections
133(o) and 234(a) of the Local Government Code.50 It adds that the tax privileges under
Sections 24 and 51 of the Special Economic Zone Act of 1995 applied to it.51
Considering that the site of the Mactan Economic Zoneis a reserved land under
Proclamation No. 1811, the PEZA claims that the properties sought to be taxed are lands
of public dominion exempt from real property taxes.52
As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had
jurisdiction to hear its petition for declaratory relief under Rule 63, Section 1 of the Rules
of Court.[53]] It also argued that it need not implead the Province of Bataan, the City of
Baguio, and the Province of Cavite as respondents considering that their demands came
after the PEZA had already filed the petition in court.54
Facts of G.R. No. 187583
After the City of Lapu-Lapu had demanded payment of real property taxes from the
PEZA, the Province of Bataan followed suit. In its letter55 dated May 29, 2003, the
Province, through the Office of the Provincial Treasurer, informed the PEZA that it would
be sending a real property tax billing to the PEZA. Arguing that the PEZA is a developer
of economic zones, the Province claimed that the PEZA is liable for real property taxes
under Section 24 of the Special Economic Zone Act of 1995.
In its reply letter56 dated June 18, 2003, the PEZA requested the Province to suspend the
service of the real property tax billing. It cited its petition for declaratory relief against the
City of Lapu-Lapu pending before the Regional Trial Court, Branch 111, Pasay City as
basis.
The Province argued that serving a real property tax billing on the PEZA "would not in
any way affect [its] petition for declaratory relief before [the Regional Trial Court] of
Pasay City."57 Thus, in its letter58 dated June 27, 2003, the Province notified the PEZAof
its real property tax liabilities for June 1, 1995 to December 31, 2002
totalling P110,549,032.55.
After having been served a tax billing, the PEZA again requested the Province to
suspend collecting its alleged real property tax liabilities until the Regional Trial Court of
Pasay Cityresolves its petition for declaratory relief.59
The Province ignored the PEZAs request. On January 20, 2004, the Province served on
the PEZA a statement of unpaid real property tax for the period from June 1995 to
December 2004.60
The PEZA again requested the Province to suspend collecting its alleged real property
taxes.61 The Province denied the request in its letter62 dated January 29, 2004, then
servedon the PEZA a warrant of levy63 covering the PEZAs real properties located in
Mariveles, Bataan.
The PEZAs subsequent requests64 for suspension of collection were all denied by the
Province.65 The Province then served on the PEZA a notice of delinquency in the
payment of real property taxes66 and a notice of sale of real property for unpaid real
property tax.67 The Province finally sent the PEZA a notice of public auction of the latters
properties in Mariveles, Bataan.68
On June 14, 2004, the PEZA filed a petition for injunction69 with prayer for issuance of a
temporary restraining order and/or writ of preliminary injunction before the Regional Trial
Court of Pasay City, arguing that it is exempt from payment ofreal property taxes. It
added that the notice of sale issued by the Province was void because it was not
published in a newspaper ofgeneral circulation asrequired by Section 260 of the Local
Government Code.70
The case was raffled to Branch 115.
In its order71 dated June 18, 2004, the trial court issued a temporary restraining order
against the Province. After the PEZA had filed a P100,000.00 bond,72 the trial court
issued a writ of preliminary injunction,73 enjoining the Province from selling the PEZAs
real properties at public auction.
On March 3, 2006, the PEZA and Province both manifested that each would file a
memorandum after which the case would be deemed submitted for decision. The parties
then filed their respective memoranda.74
In the order75 dated January 31, 2007, the trial court denied the PEZAs petition for
injunction. The trial court ruled that the PEZA is not exempt from payment of real
property taxes. According to the trial court, Sections 193 and 234 of the Local
Government Code had withdrawn the real property tax exemptions previously granted to
all persons, whether natural or juridical.76 As to the tax exemptions under Section 51 of
the Special Economic Zone Act of 1995, the trial court ruled that the provision only
applies to businesses operating within the economic zones, not to the PEZA.77
The PEZA filed before the Court of Appeals a petition for certiorari78 with prayer for
issuance of a temporary restraining order.
The Court of Appeals issued a temporary restraining order, enjoining the Province and its
Provincial Treasurer from selling PEZA's properties at public auction scheduled on
October 17, 2007.79 It also ordered the Province to comment on the PEZAs petition.
In its comment,80 the Province alleged that it received a copy of the temporary restraining
order only on October 18, 2007 when it had already sold the PEZAs properties at public
auction. Arguing that the act sought to be enjoined was already fait accompli, the
Province prayed for the dismissal of the petition for certiorari.
The PEZA then filed a supplemental petition for certiorari, prohibition, and
mandamus81 against the Province, arguing that the Provincial Treasurer of Bataan acted
with grave abuse of discretion in issuing the notice of delinquency and notice of sale. It
maintained that it is exempt from payment of real property taxes because it is a
government instrumentality. It added that its lands are property of public dominion which
cannot be sold at public auction.
The PEZA also filed a motion82 for issuance of an order affirming the temporary
restraining order and a writ of preliminary injunction to enjoin the Province from
consolidating title over the PEZAs properties.
In its resolution83 dated January 16, 2008,the Court of Appeals admitted the supplemental
petition for certiorari, prohibition, and mandamus. It required the Province to comment on
the supplemental petition and to file a memorandum on the PEZAs prayer for issuance
of temporary restraining order.
The Province commented84 on the PEZAs supplemental petition, to which the PEZA
replied.85
The Province then filed a motion86 for leave to admit attached rejoinder with motion to
dismiss. In the rejoinder with motion to dismiss,87 the Province argued for the first time
that the Court of Appeals had no jurisdiction over the subject matter of the action.
According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that
the PEZA sought to reverse a Regional Trial Court decision in a local tax case, the
Province claimed that the court with appellate jurisdiction over the action is the Court of
Tax Appeals. The PEZA then prayed that the Court of Appeals dismiss the petition for
certiorari for lack of jurisdiction over the subject matter of the action.
The Court of Appeals held that the issue before it was whether the trial court judge
gravely abused his discretion in dismissing the PEZAs petition for prohibition. This issue,
according to the Court of Appeals, is properly addressed in a petition for certiorari over
which it has jurisdiction to resolve. It, therefore, maintained jurisdiction to resolve the
PEZAs petition for certiorari.88
Although it admitted that appeal, not certiorari, was the PEZAs proper remedy to reverse
the trial courts decision,89the Court of Appeals proceeded to decide the petition for
certiorari in "the broader interest of justice."90
The Court of Appeals ruled that the trial court judge gravely abused his discretion in
dismissing the PEZAs petition for prohibition. It held that Section 21 of Presidential
Decree No. 66 and Section 51 of the Special Economic Zone Act of 1995 granted the
PEZA exemption from payment of real property taxes.91 Based on the criteria set in
Manila International Airport Authority v. Court of Appeals,92 the Court of Appeals found
that the PEZA is an instrumentality of the national government. No taxes, therefore,
could be levied on it by local government units.93
In the decision94 dated August 27, 2008, the Court of Appeals granted the PEZAs petition
for certiorari. It set aside the trial courts decision and nullified all the Provinces
proceedings with respect to the collection of real property taxes from the PEZA.
The Province filed a motion for reconsideration,95 which the Court of Appeals denied in
the resolution96 dated April 16, 2009 for lack of merit.
In its petition for review on certiorari with this court,97 the Province of Bataan insists that
the Court of Appeals had no jurisdiction to take cognizance of the PEZAs petition for
certiorari. The Province maintains that the Court of Tax Appeals had jurisdiction to hear
the PEZAs petition since it involved a local tax case decided by a Regional Trial Court.98
The Province reiterates that the PEZA is not exempt from payment of real property taxes.
The Province points out that the EPZA, the PEZAs predecessor, had to be categorically
exempted from payment of real property taxes. The EPZA, therefore, was not inherently
exempt from payment of real property taxes and so is the PEZA. Since Congress omitted
from the Special Economic Zone Act of 1995 a provision specifically exempting the
PEZA from payment of real property taxes, the Province argues that the PEZA is a
taxable entity. It cited the rule in statutory construction that provisions omitted in revised
statutes are deemed repealed.99
With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting
tax exemptions and benefits, the Province argues that these provisions only apply to
business establishments operating within special economic zones,100 not to the PEZA.
This court ordered the PEZA tocomment on the Provinces petition for review on
certiorari.101 In its comment,102 the PEZA argues that the Court of Appeals had jurisdiction
to hear its petition for certiorari since the issue was whether the trial court committed
grave abuse of discretion in denying its petition for injunction. The PEZA maintains thatit
is exempt from payment of real property taxes under Section 21 of Presidential Decree
No. 66 and Section 51 of the Special Economic Zone Act of 1995.
The Province filed its reply,103 reiterating its arguments in its petition for review on
certiorari. On the PEZAs motion,104 this court consolidated the petitions filed by the City of
Lapu-Lapu and the Province of Bataan.105
The issues for our resolution are the following:
I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapus
appeal for raising pure questions of law;
II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to
hear, try, and decide the City of Lapu-Lapus petition for declaratory relief;
 III. Whether the petition for injunction filed before the Regional Trial Court,
Branch 115, Pasay City, is a local tax case appealable to the Court of Tax
Appeals; and
IV. Whether the PEZA is exempt from payment of real property taxes.
We deny the consolidated petitions.
I.
The Court of Appeals did not err in
dismissing the City of Lapu-Lapus
appeal for raising pure questions of law
Under the Rules of Court, there are three modes of appeal from Regional Trial Court
decisions. The first mode is through an ordinary appeal before the Court of Appeals
where the decision assailed was rendered in the exercise of the Regional Trial Courts
original jurisdiction. Ordinary appeals are governed by Rule 41, Sections 3 to 13 of the
Rules of Court. In ordinary appeals, questions of fact or mixed questions of fact and law
may be raised.106
The second mode is through a petition for review before the Court of Appeals where the
decision assailed was rendered by the Regional Trial Court in the exercise of its
appellate jurisdiction. Rule 42 of the Rules of Court governs petitions for review before
the Court of Appeals. In petitions for review under Rule 42, questions of fact, of law, or
mixed questions of fact and law may be raised.107
The third mode is through an appealby certiorari before this court under Rule 45 where
only questions of law shall be raised.108
A question of fact exists when there is doubt as to the truth or falsity of the alleged
facts.109 On the other hand, there is a question of law if the appeal raises doubt as to the
applicable law on a certain set of facts.110
Under Rule 50, Section 2, an improper appeal before the Court of Appeals is dismissed
outright and shall not be referred to the proper court:
SEC. 2. Dismissal of improper appeal to the Court of Appeals. An appeal under Rule
41 taken from the Regional Trial Court to the Court of Appeals raising only questions of
law shall be dismissed, issues purely of law not being reviewable by said court. Similarly,
an appeal by notice of appeal instead of by petition for review from the appellate
judgment of a Regional Trial Court shall be dismissed.
An appeal erroneously taken to the Court of Appeals shall not be transferred to the
appropriate court but shall be dismissed outright.
Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules of Court, which
provided that improper appeals to the Court of Appeals shall not be dismissed but shall
be certified to the proper court for resolution:
Sec. 3. Where appealed case erroneously, brought. Where the appealed case has
been erroneously brought to the Court of Appeals, it shall not dismiss the appeal, but
shall certify the case to the proper court, with a specific and clear statement of the
grounds therefor.
With respect to appeals by certiorari directly filed before this court but which raise
questions of fact, paragraph 4(b) of Circular No. 2-90 dated March 9, 1990 states that
this court "retains the option, in the exercise of its sound discretion and considering the
attendant circumstances, either itself to take cognizance of and decide such issues or to
refer them to the Court of Appeals for determination." In Indoyon, Jr. v. Court of
Appeals,111 we said that this court "cannot tolerate ignorance of the law on appeals."112 It is
not this courts task to determine for litigants their proper remedies under the Rules.113
We agree that the City availed itself of the wrong mode of appeal before the Court of
Appeals. The City raised pure questions of law in its appeal. The issue of whether the
Regional Trial Court of Pasay had jurisdiction over the PEZAs petition for declaratory
relief is a question of law, jurisdiction being a matter of law.114 The issue of whether the
PEZA is a government instrumentality exempt from payment of real property taxes is
likewise a question of law since this question is resolved by examining the provisions of
the PEZAs charter as well as other laws relating to the PEZA.115
The Court of Appeals, therefore, did not err in dismissing the Citys appeal pursuant to
Rule 50, Section 2 of the Rules of Court.
Nevertheless, considering the important questions involved in this case, we take
cognizance of the Citys petition for review on certiorari in the interest of justice.
In Municipality of Pateros v. The Honorable Court of Appeals,116 the Municipality of
Pateros filed an appeal under Rule 42 before the Court of Appeals, which the Court of
Appeals denied outright for raising pure questions of law. This court agreed that the
Municipality of Pateros "committed a procedural infraction"117 and should have directly
filed a petition for review on certiorari before this court. Nevertheless, "in the interest of
justice and in order to write finisto [the] controversy,"118 this court "opt[ed] to relax the
rules"119 and proceeded to decide the case. This court said:
While it is true that rules of procedure are intended to promote rather than frustrate the
ends of justice, and while the swift unclogging of the dockets of the courts is a laudable
objective, it nevertheless must not be met at the expense of substantial justice.
The Court has allowed some meritorious cases to proceed despite inherent procedural
defects and lapses. Thisis in keeping with the principle that rules of procedure are mere
tools designed to facilitate the attainment of justice, and that strict and rigid application
ofrules which should result in technicalities that tend to frustrate rather than promote
substantial justice must always be avoided. It is a far better and more prudent cause of
action for the court to excuse a technical lapse and afford the parties a review of the
case to attain the ends of justice, rather than dispose of the case on technicality and
cause grave injustice to the parties, giving a false impression of speedy disposal of
cases while actually resulting in more delay, if not a miscarriage of justice.120
Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA
operates or otherwise administers special economic zones all over the country.
Resolving the substantive issue of whether the PEZA is taxable for real property taxes
will clarify the taxing powers of all local government units where special economic zones
are operated. This case, therefore, should be decided on the merits.
II.
The Regional Trial Court of Pasay had no
jurisdiction to hear, try, and decide the
PEZAs petition for declaratory relief
against the City of Lapu-Lapu
Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63
provides:
SECTION 1. Who may file petition. Any person interested under a deed, will, contract
or other written instrument, or whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or
violation, thereof, bring an action in the appropriate Regional Trial Court to determine any
question of construction or validity arising, and for a declaration of his rights or duties,
thereunder.
An action for reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be
brought under this Rule.
The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court,
the subject matter of litigation in an action for declaratory relief being incapable of
pecuniary estimation.121 Section 19 of the Judiciary Reorganization Act of 1980 provides:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive
original jurisdiction:
(1) In all civil actions in which the subject of litigation is incapable of pecuniary
estimation[.]
Consistent with the law, the Rules state that a petition for declaratory relief is filed "in the
appropriate Regional Trial Court."122
A special civil action for declaratory relief is filed for a judicial determination of any
question of construction or validity arising from, and for a declaration of rights and duties,
under any of the following subject matters: a deed, will, contract or other written
instrument, statute, executive order or regulation, ordinance, orany other governmental
regulation.123 However, a declaratory judgment may issue only if there has been "no
breach of the documents in question."124 If the contract or statute subject matter of the
action has already been breached, the appropriate ordinary civil action must be filed.125 If
adequate relief is available through another form of action or proceeding, the other action
must be preferred over an action for declaratory relief.126
In Ollada v. Central Bank of the Philippines,127 the Central Bank issued CB-IED Form No.
5 requiring certified public accountants to submit an accreditation under oath before they
were allowed to certify financial statements submitted to the bank. Among those financial
statements the Central Bank disallowed were those certified by accountant Felipe B.
Ollada.128 Claiming that the requirement "restrained the legitimate pursuit of ones
trade,"129
Ollada filed a petition for declaratory relief against the Central Bank.
This court ordered the dismissal of Olladas petition "without prejudice to [his] seeking
relief in another appropriate action."130 According to this court, Olladas right had already
been violated when the Central Bank refused to accept the financial statements he
prepared. Since there was already a breach, a petition for declaratory relief was not
proper. Ollada must pursue the "appropriate ordinary civil action or proceeding."131 This
court explained:
Petitioner commenced this action as, and clearly intended it to be one for Declaratory
Relief under the provisions of Rule 66 of the Rules of Court. On the question of when a
special civil action of this nature would prosper, we have already held that the complaint
for declaratory relief will not prosper if filed after a contract, statute or right has been
breached or violated. In the present case such is precisely the situation arising from the
facts alleged in the petition for declaratory relief. As vigorously claimed by petitioner
himself, respondent had already invaded or violated his right and caused him injury all
these giving him a complete cause of action enforceable in an appropriate ordinary civil
action or proceeding. The dismissal of the action was, therefore, proper in the lightof our
ruling in De Borja vs. Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R. No. L-
3439, July 31, 1951, where we held that an action for declaratory relief should be filed
before there has been a breach of a contract, statutes or right, and that it is sufficient
tobar such action, that there had been a breach which would constitute actionable
violation. The rule is that an action for Declaratory Relief is proper only if adequate relief
is not available through the means of other existing forms of action or proceeding (1
C.J.S. 1027-1028).132
It is also required that the parties to the action for declaratory relief be those whose rights
or interests are affected by the contract or statute in question.133 "There must be an actual
justiciable controversy or the ripening seeds of one"134 between the parties. The issue
between the parties "must be ripe for judicial determination."135 An action for declaratory
relief based on theoreticalor hypothetical questions cannot be filed for our courts are not
advisory courts.136
In Republic v. Roque,137 this court dismissed respondents petition for declaratory relief for
lack of justiciable controversy. According to this court, "[the respondents] fear of
prospective prosecution [under the Human Security Act] was solely based on remarks of
certain government officials which were addressed to the general public."138
In Velarde v. Social Justice Society,139 this court refused to resolve the issue of "whether
or not [a religious leaders endorsement] of a candidate for elective office or in urging or
requiring the members of his flock to vote for a specific candidate is violative [of the
separation clause]."140 According to the court, there was no justiciable controversy and
ordered the dismissal of the Social Justice Societys petition for declaratory relief. This
court explained: Indeed, SJS merely speculated or anticipated without factual moorings
that, as religious leaders, the petitioner and his co-respondents below had endorsed or
threatened to endorse a candidate or candidates for elective offices; and that such actual
or threatened endorsement "will enable [them] to elect men to public office who [would] in
turn be forever beholden to their leaders, enabling them to control the government"[;] and
"pos[ing] a clear and present danger ofserious erosion of the peoples faith in the
electoral process[;] and reinforc[ing] their belief that religious leaders determine the
ultimate result of elections," which would then be violative of the separation clause.
Such premise is highly speculative and merely theoretical, to say the least. Clearly, it
does not suffice to constitute a justiciable controversy. The Petition does not even allege
any indication or manifest intent on the part of any of the respondents below to champion
an electoral candidate, or to urge their so-called flock to vote for, or not to vote for, a
particular candidate. It is a time-honored rule that sheer speculation does not give rise to
an actionable right.
Obviously, there is no factual allegation that SJS rights are being subjected to any
threatened, imminent and inevitable violation that should be prevented by the declaratory
relief sought. The judicial power and duty of the courts to settle actual controversies
involving rights that are legally demandable and enforceable cannot be exercised when
there is no actual or threatened violation of a legal right.
All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9
hereof be resolved." In other words, it merely sought an opinion of the trial court on
whether the speculated acts of religious leaders endorsing elective candidates for
political offices violated the constitutional principle on the separation of church and state.
SJS did not ask for a declaration of its rights and duties; neither did it pray for the
stoppage of any threatened violation of its declared rights. Courts, however, are
proscribed from rendering an advisory opinion.141 In sum, a petition for declaratory relief
must satisfy six requisites:
[F]irst, the subject matter of the controversy must be a deed, will, contract or other written
instrument, statute, executive order or regulation, or ordinance; second, the terms of said
documents and the validity thereof are doubtful and require judicial construction; third,
there must have been no breach of the documents in question; fourth, there must be an
actual justiciable controversy or the "ripening seeds" of one between persons whose
interests are adverse; fifth, the issue must be ripe for judicial determination; and sixth,
adequate relief is not available through other means or other forms of action or
proceeding.142 (Emphases omitted)
We rule that the PEZA erred in availing itself of a petition for declaratory relief against the
City. The City had already issued demand letters and real property tax assessment
against the PEZA, in violation of the PEZAs alleged tax-exempt status under its charter.
The Special Economic Zone Act of 1995, the subject matter of PEZAs petition for
declaratory relief, had already been breached. The trial court, therefore, had no
jurisdiction over the petition for declaratory relief. There are several aspects of
jurisdiction.143 Jurisdiction over the subject matter is "the power to hear and determine
cases of the general class to which the proceedings in question belong."144 It is conferred
by law, which may either be the Constitution or a statute.145 Jurisdiction over the subject
matter means "the nature of the cause of action and the relief sought."146 Thus, the cause
of action and character of the relief sought as alleged in the complaint are examinedto
determine whether a court had jurisdiction over the subject matter.147 Any decision
rendered by a court without jurisdiction over the subjectmatter of the action is void.148
Another aspect of jurisdiction is jurisdiction over the person. It is "the power of [a] court to
render a personal judgment or to subject the parties in a particular action to the judgment
and other rulings rendered in the action."149A court automatically acquires jurisdiction over
the person of the plaintiff upon the filing of the initiatory pleading.150With respect to the
defendant, voluntary appearance in court or a valid service of summons vests the court
with jurisdiction over the defendants person.151 Jurisdiction over the person of the
defendant is indispensable in actions in personamor those actions based on a partys
personal liability.152 The proceedings in an action in personamare void if the court had no
jurisdiction over the person of the defendant.153
Jurisdiction over the resor the thing under litigation is acquired either "by the seizure of
the property under legal process, whereby it is brought into actual custody of the law; or
asa result of the institution of legal proceedings, in which the power of the court is
recognized and made effective."154 Jurisdiction over the res is necessary in actions in
remor those actions "directed against the thing or property or status of a person and seek
judgments with respect thereto as against the whole world."155 The proceedings in an
action in rem are void if the court had no jurisdiction over the thing under litigation.156
In the present case, the Regional Trial Court had no jurisdiction over the subject matter
of the action, specifically, over the remedy sought. As this court explained in Malana v.
Tappa:157
. . . an action for declaratory relief presupposes that there has been no actual breach of
the instruments involved or of rights arising thereunder. Since the purpose of an action
for declaratory relief is to secure an authoritative statement of the rights and obligations
of the parties under a statute, deed, or contract for their guidance in the enforcement
thereof, or compliance therewith, and not to settle issues arising from an alleged breach
thereof, it may be entertained only before the breach or violation of the statute, deed, or
contract to which it refers. A petition for declaratory relief gives a practical remedy for
ending controversies that have not reached the state where another relief is immediately
available; and supplies the need for a form of action that will set controversies at rest
before they lead to a repudiation of obligations, an invasion of rights, and a commission
of wrongs.
Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the courts can no longer assume jurisdiction over the action. In other
words, a court has no more jurisdiction over an action for declaratory relief if its subject
has already been infringed or transgressed before the institution of the
action.158 (Emphasis supplied)
The trial court should have dismissed the PEZAs petition for declaratory relief for lack of
jurisdiction.
Once an assessment has already been issued by the assessor, the proper remedy of a
taxpayer depends on whether the assessment was erroneous or illegal.
An erroneous assessment "presupposes that the taxpayer is subject to the tax but is
disputing the correctness of the amount assessed."159 With an erroneous assessment, the
taxpayer claims that the local assessor erred in determining any of the items for
computing the real property tax, i.e., the value of the real property or the portion thereof
subject to tax and the proper assessment levels. In case of an erroneous assessment,
the taxpayer must exhaust the administrative remedies provided under the Local
Government Code before resorting to judicial action.
The taxpayer must first pay the realproperty tax under protest. Section 252 of the Local
Government Code provides:
SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the
taxpayer first paysthe tax. There shall be annotated on the tax receipts the words "paid
under protest". The protest in writing must be filed within thirty (30) days from payment of
the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality
within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from
receipt.
(b) The tax or a portion thereof paidunder protest, shall be held in trust by the
treasurer concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer, the
amount or portion of the tax protested shall be refunded to the protestant, or
applied as tax credit against his existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse of the sixty day period
prescribed in subparagraph (a), the taxpayer may avail of the remedies as
provided for in Chapter 3, Title II, Book II of this Code.
Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may
appeal with the Local Board of Assessment Appeals within 60 days from receipt of the
decision on the protest:
SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may, within sixty (60) days from the
date of receipt of the written notice of assessment, appeal to the Board of Assessment
Appeals of the provincial or city by filing a petition under oath in the form prescribed for
the purpose, together with copies of the tax declarations and such affidavits or
documents submitted in support of the appeal.
Payment under protest and appeal to the Local Board of Assessment Appeals are
"successive administrative remedies to a taxpayer who questions the correctness of an
assessment."160 The Local Board Assessment Appeals shall not entertain an appeal
"without the action of the local assessor"161 on the protest.
If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment
Appeals, the taxpayer may appeal with the Central Board of Assessment Appeals within
30 days from receipt of the Local Boards decision:
SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall
decide the appeal within one hundred twenty (120) days from the date of receipt of such
appeal. The Board, after hearing, shall render its decision based on substantial evidence
or such relevant evidence on record as a reasonable mind might accept as adequate to
support the conclusion. (b) In the exercise ofits appellate jurisdiction, the Board shall
have the power to summon witnesses, administer oaths, conduct ocular inspection, take
depositions, and issue subpoena and subpoena duces tecum. The proceedings of the
Board shall be conducted solely for the purpose of ascertaining the facts without
necessarily adhering to technical rules applicable in judicial proceedings.
(c) The secretary of the Board shall furnish the owner of the property or the person
having legal interest therein and the provincial or city assessor with a copy of the
decision of the Board. In case the provincial or city assessor concurs in the revision or
the assessment, it shall be his duty to notify the owner of the property or the person
having legal interest therein of such factusing the form prescribed for the purpose. The
owner of the property or the person having legal interest therein or the assessor who is
not satisfied with the decision of the Board, may, within thirty (30) days after receipt of
the decision of said Board, appeal to the Central Board of Assessment Appeals, as
herein provided. The decision of the Central Board shall be final and executory.
(Emphasis supplied)
On the other hand, an assessment is illegal if it was made without authority under the
law.162 In case of an illegal assessment, the taxpayer may directly resort to judicial action
without paying under protest the assessed tax and filing an appeal with the Local and
Central Board of Assessment Appeals.
In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of
assessment with respect to Tys real properties in Pasig. Without resorting to the
administrative remedies under the Local Government Code, Ty filed before the Regional
Trial Court a petition, praying that the trial court nullify the notice of assessment. In
assessing the real property taxes due, the Municipal Assessor used a schedule of
market values solely prepared by him. This, Ty argued, was void for being contrary to the
Local Government Code requiring that the schedule of market values be jointly prepared
by the provincial, city, and municipal assessors of the municipalities within the
Metropolitan Manila Area.
This court ruled that the assessmentwas illegal for having been issued without authority
of the Municipal Assessor. Reconciling provisions of the Real Property Tax Code and the
Local Government Code, this court held that the schedule of market valuesmust be
jointly prepared by the provincial, city, and municipal assessors of the municipalities
within the Metropolitan Manila Area.
As to the issue of exhaustion of administrative remedies, this court held that Ty did not
err in directly resorting to judicial action. According to this court, payment under protest is
required only "where there is a question as to the reasonableness of the amount
assessed."164 As to appeals before the Local and Central Board of Assessment Appeals,
they are "fruitful only where questions of fact are involved."165
Ty raised the issue of the legality of the notice of assessment, an issue that did not go
into the reasonableness of the amount assessed. Neither did the issue involve a
question of fact. Ty raised a question of law and, therefore, need not resort to the
administrative remedies provided under the Local Government Code.
In the present case, the PEZA did not avail itself of any of the remedies against a notice
of assessment. A petition for declaratory relief is not the proper remedy once a notice of
assessment was already issued.
Instead of a petition for declaratory relief, the PEZA should have directly resorted to a
judicial action. The PEZA should have filed a complaint for injunction, the "appropriate
ordinary civil action"166 to enjoin the City from enforcing its demand and collecting the
assessed taxes from the PEZA. After all, a declaratory judgment as to the PEZAs tax-
exempt status is useless unless the City isenjoined from enforcing its demand.
Injunction "is a judicial writ, process or proceeding whereby a party is ordered to do or
refrain from doing a certain act."167 "It may be the main action or merely a provisional
remedy for and as incident in the main action."168 The essential requisites of a writ of
injunction are: "(1) there must be a right in esseor the existence of a right to be protected;
and (2) the act against which the injunction is directed to constitute a violation of such
right."169
We note, however, that the City confused the concepts of jurisdiction and venue in
contending that the Regional Trial Court of Pasay had no jurisdiction because the real
properties involved in this case are located in the City of Lapu-Lapu.
On the one hand, jurisdiction is "the power to hear and determine cases of the general
class to which the proceedings in question belong."170 Jurisdiction is a matter of
substantive law.171 Thus, an action may be filed only with the court or tribunal where the
Constitution or a statute says it can be brought.172 Objections to jurisdiction cannot be
waived and may be brought at any stage of the proceedings, even on appeal.173 When a
case is filed with a court which has no jurisdiction over the action, the court shall motu
propriodismiss the case.174
On the other hand, venue is "the place of trial or geographical location in which an action
or proceeding should be brought." 175 In civil cases, venue is a matter of procedural
law.176 A partys objections to venue must be brought at the earliest opportunity either in a
motion to dismiss or in the answer; otherwise the objection shall be deemed
waived.177 When the venue of a civil action is improperly laid, the court cannot motu
propriodismiss the case.178
The venue of an action depends on whether the action is a real or personal action.
Should the action affect title to or possession of real property, or interest therein, it is a
real action. The action should be filed in the proper court which has jurisdiction over the
area wherein the real property involved, or a portion thereof, is situated.179 If the action is
a personal action, the action shall be filed with the proper court where the plaintiff or any
of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found,
at the election of the plaintiff.180
The City was objecting to the venue of the action, not to the jurisdiction of the Regional
Trial Court of Pasay. In essence, the City was contending that the PEZAs petition is a
real action as it affects title to or possession of real property, and, therefore, the PEZA
should have filed the petition with the Regional Trial Court of Lapu-Lapu City where the
real properties are located. However, whatever objections the City has against the venue
of the PEZAs action for declaratory relief are already deemed waived. Objections to
venue must be raised at the earliest possible opportunity.181 The City did not file a motion
to dismiss the petition on the ground that the venue was improperly laid. Neither did the
City raise this objection in its answer.
In any event, the law sought to be judicially interpreted in this case had already been
breached. The Regional Trial Court of Pasay, therefore, had no jurisdiction over the
PEZAs petition for declaratory relief against the City.
III.
The Court of Appeals had no jurisdiction
over the PEZAs petition for certiorari
against the Province of Bataan
Appeal is the remedy "to obtain a reversal or modification of a judgment on the
merits."182 A judgment on the merits is one which "determines the rights and liabilities of
the parties based on the disclosed facts, irrespective of the formal, technical or dilatory
objections."183 It is not even necessary that the case proceeded to trial.184 So long as the
"judgment is general"185 and "the parties had a full legal opportunity to be heard on their
respective claims and contentions,"186 the judgment is on the merits.
On the other hand, certiorari is a special civil action filed to annul or modify a proceeding
of a tribunal, board, or officer exercising judicial or quasi-judicial functions.187 Certiorari,
which in Latin means "to be more fully informed,"188was originally a remedy in the
common law. This court discussed the history of the remedy of certiorari in Spouses
Delos Santos v. Metropolitan Bank and Trust Company:189
In the common law, from which the remedy of certiorari evolved, the writ of certiorari was
issued out of Chancery, or the Kings Bench, commanding agents or officers of the
inferior courts to return the record of a cause pending before them, so as to give the
party more sure and speedy justice, for the writ would enable the superior court to
determine froman inspection of the record whether the inferior courts judgment was
rendered without authority. The errors were of such a nature that, if allowed to stand,
they would result in a substantial injury to the petitioner to whom no other remedy was
available. If the inferior court acted without authority, the record was then revised and
corrected in matters of law. The writ of certiorari was limited to cases in which the inferior
court was said to be exceeding its jurisdiction or was not proceeding according to
essential requirements of law and would lie only to review judicial or quasi-judicial acts.190
In our jurisdiction, the term "certiorari" is used in two ways. An appeal before this court
raising pure questions of law is commenced by filing a petition for reviewon certiorari
under Rule 45 of the Rules of Court. An appeal by certiorari, which continues the
proceedings commenced before the lower courts,191 is filed to reverse or modify
judgments or final orders.192 Under the Rules, an appeal by certiorarimust be filed within
15 days from notice of the judgment or final order, or of the denial of the appellants
motion for new trial or reconsideration.193
A petition for certiorari under Rule 65, on the other hand, is an independent and original
action filed to set aside proceedings conducted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction.194 Under the Rules,
a petition for certiorari may only be filed if there is no appeal or any plain, speedy, or
adequate remedy in the ordinary course of law.195 The petition must be filed within 60
days from notice of the judgment, order, or resolution.196
Because of the longer period to file a petition for certiorari, some litigants attempt to file
petitions for certiorari as substitutes for lost appeals by certiorari. However, Rule 65 is
clear that a petition for certiorari will not prosper if appeal is available. Appealis the
proper remedy even if the error, or one of the errors, raised is grave abuse of discretion
on the part of the court rendering judgment.197 If appeal is available, a petition for
certiorari cannot be filed.
In this case, the trial courts decision dated January 31, 2007 is a judgment on the merits.
Based on the facts disclosed by the parties, the trial court declared the PEZA liable to the
Province of Bataan for real property taxes. The PEZAs proper remedy against the trial
courts decision, therefore, is appeal.
Since the PEZA filed a petition for certiorari against the trial courts decision, it availed
itself of the wrong remedy. As the Province of Bataan contended, the trial courts
decision dated January 31, 2007 "is only an error of judgment appealable to the higher
level court and may not be corrected by filing a petition for certiorari."198 That the trial
court judge allegedly committed grave abuse of discretion does not make the petition for
certiorari the correct remedy. The PEZA should haveraised this ground in an appeal filed
within 15 days from notice of the assailed resolution.
This court, "in the liberal spirit pervading the Rules of Court and in the interest of
substantial justice,"199 has treated petitions for certiorari as an appeal: "(1) if the petition
for certiorari was filed within the reglementary period within which to file a petition for
review on certiorari; (2) when errors of judgment are averred; and (3) when there is
sufficient reason to justify the relaxation of the rules."200 Considering that "the nature of an
action is determined by the allegationsof the complaint or the petition and the character
of the relief sought,"201 a petition which "actually avers errors of judgment rather than
errors than that of jurisdiction"202 may be considered a petition for review.
However, suspending the application of the Rules has its disadvantages. Relaxing
procedural rules may reduce the "effective enforcement of substantive rights,"203 leading
to "arbitrariness, caprice, despotism, or whimsicality in the settlement of
disputes."204 Therefore, for this court to suspend the application of the Rules, the
accomplishment of substantial justice must outweigh the importance of predictability of
court procedures.
The PEZAs petition for certiorari may be treated as an appeal. First, the petition for
certiorari was filed withinthe 15-day reglementary period for filing an appeal. The PEZA
filed its petition for certiorari before the Court of Appeals on October 15, 2007,205 which
was 12 days from October 3, 2007206 when the PEZA had notice of the trial courts order
denying the motion for reconsideration.
Second, the petition for certiorari raised errors of judgment. The PEZA argued that the
trial court erred in ruling that it is not exempt from payment of real property taxes given
Section 21 of Presidential Decree No. 66 and Sections 11 and 51 of the Special
Economic Zone Act of 1995.207
Third, there is sufficient reason to relax the rules given the importance of the substantive
issue presented in this case.
However, the PEZAs petition for certiorari was filed before the wrong court. The PEZA
should have filed its petition before the Court of Tax Appeals.
The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases
decided by Regional Trial Courts. Section 7, paragraph (a)(3) of Republic Act No. 1125,
as amended by Republic Act No. 9282, provides:
Sec. 7. Jurisdiction. The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
....
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction[.]
The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125,
as amended, include cases involving real property taxes. Real property taxation is
governed by Book II of the Local Government Code on "Local Taxation and Fiscal
Matters." Real property taxes are collected by the Local Treasurer,208 not by the Bureau of
Internal Revenue in charge of collecting national internal revenue taxes, fees, and
charges.209
Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act No.
9282, separately provides for the exclusive appellate jurisdiction of the Court of Tax
Appeals over decisions of the Central Board of Assessment Appeals involving the
assessment or collection of real property taxes:
Sec. 7. Jurisdiction. The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
....
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals[.]
This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking
cognizance of trial court decisions involving the collection of real property tax cases.
Sections 256210 and 266211 of the Local Government Code expressly allow
localgovernment units to file "in any court of competent jurisdiction" civil actions to collect
basic real property taxes. Should the trial court rule against them, local government units
cannot be barred from appealing before the Court of Tax Appeals the "highly
specialized body specifically created for the purpose of reviewing tax cases."212
We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the
exclusive original jurisdiction over petitions for certiorari assailing interlocutory orders
issued by Regional Trial Courts in a local tax case. We explained in The City of Manila v.
Hon. Grecia-Cuerdo213 that while the Court of Tax Appeals has no express grant of power
to issue writs of certiorari under Republic Act No. 1125,214 as amended, the tax courts
judicial power as defined in the Constitution215 includes the power to determine "whether
or not there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the [Regional Trial Court] in issuing an interlocutory order of
jurisdiction in cases falling within the exclusive appellate jurisdiction of the tax
court."216 We further elaborated:
Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it
must have the authority to issue, among others, a writ of certiorari. In transferring
exclusive jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed
that the law intended to transfer also such power as is deemed necessary, if not
indispensable, in aid of such appellate jurisdiction. There is no perceivable reason why
the transfer should only be considered as partial, not total.
....
If this Court were to sustain petitioners' contention that jurisdiction over their certiorari
petition lies with the CA, this Court would be confirming the exercise by two judicial
bodies, the CA and the CTA, of jurisdiction over basically the same subject matter
precisely the split-jurisdiction situation which is anathema to the orderly administration of
justice.The Court cannot accept that such was the legislative motive, especially
considering that the law expressly confers on the CTA, the tribunal with the specialized
competence over tax and tariff matters, the role of judicial review over local tax cases
without mention of any other court that may exercise such power. Thus, the Court agrees
with the ruling of the CA that since appellate jurisdiction over private respondents'
complaint for tax refund is vested in the CTA, it follows that a petition for certiorari
seeking nullification of an interlocutory order issued in the said case should, likewise, be
filed with the same court. To rule otherwise would lead to an absurd situation where one
court decides an appeal in the main case while another court rules on an incident in the
very same case.
Stated differently, it would be somewhat incongruent with the pronounced judicial
abhorrence to split jurisdiction to conclude that the intention of the law is to divide the
authority over a local tax case filed with the RTC by giving to the CA or this Court
jurisdiction to issue a writ of certiorari against interlocutory orders of the RTC but giving
to the CTA the jurisdiction over the appeal from the decision of the trial court in the same
case. It is more in consonance with logic and legal soundness to conclude that the grant
of appellate jurisdiction to the CTA over tax cases filed in and decided by the RTC
carries withit the power to issue a writ of certiorari when necessary in aid of such
appellate jurisdiction. The supervisory power or jurisdiction of the CTA to issue a writ of
certiorari in aid of its appellate jurisdiction should co-exist with, and be a complement to,
its appellate jurisdiction to review, by appeal, the final orders and decisionsof the RTC, in
order to have complete supervision over the acts of the latter.217 (Citations omitted)
In this case, the petition for injunction filed before the Regional Trial Court of Pasay was
a local tax case originally decided by the trial court in its original jurisdiction. Since the
PEZA assailed a judgment, not an interlocutory order, of the Regional Trial Court, the
PEZAs proper remedy was an appeal to the Court of Tax Appeals.
Considering that the appellate jurisdiction of the Court of Tax Appeals is to the exclusion
of all other courts, the Court of Appeals had no jurisdiction to take cognizance of the
PEZAs petition. The Court of Appeals acted without jurisdiction in rendering the decision
in CA-G.R. SP No. 100984. Its decision in CA-G.R. SP No. 100984 is void.218
The filing of appeal in the wrong court does not toll the period to appeal. Consequently,
the decision of the Regional Trial Court, Branch 115, Pasay City, became final and
executory after the lapse of the 15th day from the PEZAs receipt of the trial courts
decision.219 The denial of the petition for injunction became final and executory.
IV.
The remedy of a taxpayer depends on the
stage in which the local government unit
is enforcing its authority to impose real
property taxes
The proper remedy of a taxpayer depends on the stage in which the local government
unit is enforcing its authority to collect real property taxes. For the guidance of the
members of the bench and the bar, we reiterate the taxpayers remedies against the
erroneous or illegal assessment of real property taxes.
Exhaustion of administrative remedies under the Local Government Code is necessary in
cases of erroneous assessments where the correctness of the amount assessed is
assailed. The taxpayer must first pay the tax then file a protest with the Local Treasurer
within 30 days from date of payment of tax.220 If protest is denied or upon the lapse of the
60-day period to decide the protest, the taxpayer may appeal to the Local Board of
Assessment Appeals within 60 days from the denial of the protest or the lapse of the 60-
day period to decide the protest.221 The Local Board of Assessment Appeals has 120
days to decide the appeal.222
If the taxpayer is unsatisfied withthe Local Boards decision, the taxpayer may appeal
before the Central Board of Assessment Appeals within 30 days from receipt of the Local
Boards decision.223
The decision of the Central Board of Assessment Appeals is appealable before the Court
of Tax Appeals En Banc.224 The appeal before the Court of Tax Appeals shall be filed
following the procedure under Rule 43 of the Rules of Court.225
The Court of Tax Appeals decision may then be appealed before this court through a
petition for review on certiorari under Rule 45 of the Rules of Court raising pure
questions of law.226
In case of an illegal assessment where the assessment was issued without authority,
exhaustion of administrative remedies is not necessary and the taxpayer may directly
resort to judicial action.227 The taxpayer shall file a complaint for injunction before the
Regional Trial Court228 to enjoin the local government unit from collecting real property
taxes.
The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not
a petition for certiorari, before the Court of Tax Appeals, the complaint being a local tax
case decided by the Regional Trial Court.229 The appeal shall be filed within fifteen (15)
days from notice of the trial courts decision.
The Court of Tax Appeals decision may then be appealed before this court through a
petition for review on certiorari under Rule 45 of the Rules of Court raising pure
questions of law.230
In case the local government unit has issued a notice of delinquency, the taxpayer may
file a complaint for injunction to enjoin the impending sale of the real property at public
auction. In case the local government unit has already sold the property at public auction,
the taxpayer must first deposit with the court the amount for which the real property was
sold, together with interest of 2% per month from the date ofsale to the time of the
institution of action. The taxpayer may then file a complaint to assail the validity of the
public auction.231 The decisions of the Regional Trial Court in these cases shall be
appealable before the Court of Tax Appeals,232 and the latters decisions appealable
before this court through a petition for review on certiorari under Rule 45 of the Rules of
Court.233
V.
The PEZA is exempt from payment of
real property taxes
The jurisdictional errors in this case render these consolidated petitions moot. We do not
review void decisions rendered without jurisdiction.
However, the PEZA alleged that several local government units, including the City of
Baguio and the Province of Cavite, have issued their respective real property tax
assessments against the PEZA. Other local government units will likely follow suit, and
either the PEZA or the local government units taxing the PEZA may file their respective
actions against each other.
In the interest of judicial economy234 and avoidance of conflicting decisions involving the
same issues,235 we resolve the substantive issue of whether the PEZA is exempt from
payment of real property taxes.
Real property taxes are annual taxes levied on real property such as lands, buildings,
machinery, and other improvements not otherwise specifically exempted under the Local
Government Code.236 Real property taxes are ad valorem, with the amount charged
based on a fixed proportion of the value of the property.237 Under the law, provinces,
cities, and municipalities within the Metropolitan Manila Area have the power to levy real
property taxes within their respective territories.238
The general rule is that real properties are subject to real property taxes. This is true
especially since the Local Government Code has withdrawn exemptions from real
property taxes of all persons, whether natural or juridical:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from
payment of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, nonprofit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used
by local water districts and government-owned or controlled corporations
engaged in the supply and distribution of water and/or generation and
transmission of electric power;
 (d) All real property owned by duly registered cooperatives as provided under
R.A. No. 6938; and
(e) Machinery and equipment usedfor pollution control and environmental
protection.
Except as provided herein, any exemption from payment of real property taxes
previously granted to, or presently enjoyed by, all persons, whether natural or juridical,
including government-owned or -controlled corporations are hereby withdrawn upon the
effectivity of this Code. (Emphasis supplied)
The person liable for real property taxes is the "taxable person who had actual or
beneficial use and possession [of the real property for the taxable period,] whether or not
[the person owned the property for the period he or she is being taxed]."239
The exceptions to the rule are provided in the Local Government Code. Under Section
133(o), local government units have no power to levy taxes of any kind on the national
government, its agencies and instrumentalities and local government units:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
....
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.
Specifically on real property taxes, Section 234 enumerates the persons and real
property exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from
payment of 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, nonprofitor 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 under
R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental
protection.
Except as provided herein, any exemption from payment of real property tax previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including all
government-owned or -controlled corporations are hereby withdrawn upon the effectivity
of this Code. (Emphasis supplied)
For persons granted tax exemptions or incentives before the effectivity of the Local
Government Code, Section 193 withdrew these tax exemption privileges. These persons
consist of both natural and juridical persons, including government-owned or controlled
corporations:
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. 6938, non stock and
non profit hospitals and educational institutions, are hereby withdrawn upon effectivity of
this Code.
As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.
Nevertheless, local government units may grant tax exemptions under such terms and
conditions asthey may deem necessary:
SEC. 192. Authority to Grant Tax Exemption Privileges. Local government units may,
through ordinances duly approved, grant tax exemptions, incentives or reliefs under such
terms and conditions as they may deem necessary.
In Mactan Cebu International Airport Authority v. Hon. Marcos,240 this court classified the
exemptions from real property taxes into ownership, character, and usage exemptions.
Ownership exemptions are exemptions based on the ownership of the real property. The
exemptions of real property owned by the Republic of the Philippines, provinces, cities,
municipalities, barangays, and registered cooperatives fall under this
classification.241 Character exemptions are exemptions based on the character of the real
property. Thus, no real property taxes may be levied on charitable institutions, houses
and temples of prayer like churches, parsonages, or convents appurtenant thereto,
mosques, and non profitor religious cemeteries.242
Usage exemptions are exemptions based on the use of the real property. Thus, no real
property taxes may be levied on real property such as: (1) lands and buildings actually,
directly, and exclusively used for religious, charitable or educational purpose; (2)
machineries and equipment actually, directly and exclusively used by local water districts
or by government-owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power; and (3)
machinery and equipment used for pollution control and environmental protection.243
Persons may likewise be exempt from payment of real properties if their charters, which
were enacted or reenacted after the effectivity of the Local Government Code, exempt
them payment of real property taxes.244
V.
(A) The PEZA is an instrumentality of the national government
An instrumentality is "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."245
Examples of instrumentalities of the national government are the Manila International
Airport Authority,246 the Philippine Fisheries Development Authority,247 the Government
Service Insurance System,248 and the Philippine Reclamation Authority.249 These entities
are not integrated within the department framework but are nevertheless vested with
special functions to carry out a declared policy of the national government.
Similarly, the PEZA is an instrumentality of the national government. It is not integrated
within the department framework but is an agency attached to the Department of Trade
and Industry.250 Book IV, Chapter 7, Section 38(3)(a) of the Administrative Code of 1987
defines "attachment": SEC. 38. Definition of Administrative Relationship. Unless
otherwise expressly stated in the Code or in other laws defining the special relationships
of particular agencies, administrative relationships shall be categorized and defined as
follows:
....
(3) Attachment. (a) This refers to the lateral relationship between the department or its
equivalent and the attached agency or corporation for purposes of policy and program
coordination. The coordination may be accomplished by having the department
represented in the governing board of the attached agency or corporation, either as
chairman or as a member, with or without voting rights, if this is permitted by the charter;
having the attached corporation or agency comply with a system of periodic reporting
which shall reflect the progress of the programs and projects; and having the department
or its equivalent provide general policies through its representative in the board, which
shall serve as the framework for the internal policies of the attached corporation or
agency[.]
Attachment, which enjoys "a larger measure of independence"251 compared with other
administrative relationships such as supervision and control, is further explained in Beja,
Sr. v. Court of Appeals:252
An attached agency has a larger measure of independence from the Department to
which it is attached than one which is under departmental supervision and control or
administrative supervision. This is borne out by the "lateral relationship" between the
Department and the attached agency. The attachment is merely for "policy and program
coordination." With respect to administrative matters, the independence of an attached
agency from Departmental control and supervision is further reinforced by the fact that
even an agency under a Departments administrative supervision is free from
Departmental interference with respect to appointments and other personnel actions "in
accordance with the decentralization of personnel functions" under the Administrative
Code of 1987. Moreover, the Administrative Code explicitly provides that Chapter 8 of
Book IV on supervision and control shall not apply to chartered institutions attached to a
Department.253
With the PEZA as an attached agency to the Department of Trade and Industry, the 13-
person PEZA Board is chaired by the Department Secretary.254 Among the powers and
functions of the PEZA is its ability to coordinate with the Department of Trade and
Industry for policy and program formulation and implementation.255 In strategizing and
prioritizing the development of special economic zones, the PEZA coordinates with the
Department of Trade and Industry.256
The PEZA also administers its own funds and operates autonomously, with the PEZA
Board formulating and approving the PEZAs annual budget.257 Appointments and other
personnel actions in the PEZA are also free from departmental interference, with the
PEZA Board having the exclusive and final authority to promote, transfer, assign and
reassign officers of the PEZA.258
As an instrumentality of the national government, the PEZA is vested with special
functions or jurisdiction by law. Congress created the PEZA to operate, administer,
manage and develop special economic zones in the Philippines.259 Special economic
zones are areas with highly developed or which have the potential to be developed into
agro-industrial, industrial tourist/recreational, commercial, banking, investment and
financial centers.260 By operating, administering, managing, and developing special
economic zones which attract investments and promote use of domestic labor, the PEZA
carries out the following policy of the Government: SECTION 2. Declaration of Policy.
It is the declared policy of the government to translate into practical realities the following
State policies and mandates in the 1987 Constitution, namely:
(a) "The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments."
(Sec. 20, Art. II)
(b) "The State shall promote the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt measures that help make them
competitive." (Sec. 12, Art. XII) In pursuance of these policies, the government
shall actively encourage, promote, induce and accelerate a sound and balanced
industrial, economic and social development of the country in order to provide
jobs to the people especially those in the rural areas, increase their productivity
and their individual and family income, and thereby improve the level and quality
of their living condition through the establishment, among others, of special
economic zones in suitable and strategic locations in the country and through
measures that shall effectively attract legitimate and productive foreign
investments.261
Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some corporate powers,262 the PEZA is not a
government-owned or controlled corporation taxable for real property taxes.
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines
the term "government-owned or controlled corporation":
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:
....
(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) per cent of its capital stock: Provided,
That government owned or controlled corporations may be further categorized by the
Department of the Budget, the Civil Service Commission, and the Commission on Audit
for purposes of the exercise and discharge of their respective powers, functions and
responsibilities with respect to such corporations.
Government entities are created by law, specifically, by the Constitution or by statute. In
the case of government-owned or controlled corporations, they are incorporated by virtue
of special charters263 to participate in the market for special reasons which may be related
to dysfunctions or inefficiencies of the market structure. This is to adjust reality as against
the concept of full competition where all market players are price takers. Thus, under the
Constitution, government-owned or controlled corporations are created in the interest of
the common good and should satisfy the test of economic viability.264 Article XII, Section
16 of the Constitution provides:
Section 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability.
Economic viability is "the capacity to function efficiently in business."265 To be
economically viable, the entity "should not go into activities which the private sector can
do better."266
To be considered a government-owned or controlled corporation, the entity must have
been organized as a stock or non-stock corporation.267
Government instrumentalities, on the other hand, are also created by law but partake of
sovereign functions. When a government entity performs sovereign functions, it need not
meet the test of economic viability. In Manila International Airport Authority v. Court of
Appeals,268 this court explained:
In contrast, government instrumentalities vested with corporate powers and performing
governmental orpublic 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 meetthe
test of economic viability because they compete in the market place.
....
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.
....
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 noneconomic viability of rendering such essential public service does not
excuse the State from withholding such essential services from the public.269 (Emphases
and citations omitted)
The law created the PEZAs charter. Under the Special Economic Zone Act of 1995, the
PEZA was established primarily to perform the governmental function of
operating,administering, managing, and developing special economic zones to attract
investments and provide opportunities for preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with some corporate
powers. However, it was not organized as a stock270 or non-stock271 corporation. Nothing
in the PEZAs charter provides that the PEZAs capital is divided into shares.272 The PEZA
also has no members who shall share in the PEZAs profits.
The PEZA does not compete with other economic zone authorities in the country. The
government may even subsidize the PEZAs operations. Under Section 47 of the Special
Economic Zone Act of 1995, "any sum necessary to augment [the PEZAs] capital outlay
shall be included in the General Appropriations Act to be treated as an equity of the
national government."273
The PEZA, therefore, need not be economically viable. It is not a government-owned or
controlled corporation liable for real property taxes.
V. (B)
The PEZA assumed the non-profit character, including the tax exempt status, of the
EPZA
The PEZAs predecessor, the EPZA, was declared non-profit in character with all its
revenues devoted for its development, improvement, and maintenance. Consistent with
this non-profit character, the EPZA was explicitly declared exempt from real property
taxes under its charter. Section 21 of Presidential Decree No. 66 provides:
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority
shall be non-profit and shall devote and use all its returns from its capital investment, as
well as excess revenues from its operations, for the development, improvement and
maintenance and other related expenditures of the Authority to pay its indebtedness and
obligations and in furtherance and effective implementation of the policy enunciated in
Section 1 of this Decree. In consonance therewith, the Authority is hereby declared
exempt:
....
(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and
licenses to be paid to the National Government, its provinces, cities, municipalities and
other government agencies and instrumentalities[.]
The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt
the PEZA from payment of real property taxes.
Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its
charter. A provision in the Special Economic Zone Act of 1995 explicitly exempting the
PEZA is unnecessary. The PEZA assumed the real property exemption of the EPZA
under Presidential Decree No. 66.
Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA "to evolve into
the PEZA in accordance with the guidelines and regulations set forth in an executive
order issued for this purpose." President Ramos then issued Executive Order No. 282 in
1995, ordering the PEZA to assume the EPZAs powers, functions, and responsibilities
under Presidential Decree No. 66 not inconsistent with the Special Economic Zone Act of
1995:
SECTION 1. Assumption of EPZAs Powers and Functions by PEZA. All the powers,
functions and responsibilities of EPZA as provided under its Charter, Presidential Decree
No. 66, as amended, insofar as they are not inconsistent with the powers,functions and
responsibilities of the PEZA, as mandated under Republic Act No. 7916, shall hereafter
be assumed and exercised by the PEZA. Henceforth, the EPZA shall be referred to as
the PEZA.
The following sections of the Special Economic Zone Act of 1995 provide for the PEZAs
powers,functions, and responsibilities:
SEC. 5. Establishment of ECOZONES. To ensure the viability and geographical
dispersal of ECOZONES through a system of prioritization, the following areas are
initially identified as ECOZONES, subject to the criteria specified in Section 6:
....
The metes and bounds of each ECOZONE are to be delineated and more particularly
described in a proclamation to be issued by the President of the Philippines, upon the
recommendation of the Philippine Economic Zone Authority (PEZA), which shall be
established under this Act, in coordination with the municipal and / or city council,
National Land Use Coordinating Committee and / or the Regional Land Use Committee.
SEC. 6. Criteria for the Establishment of Other ECOZONES. In addition to the
ECOZONES identified in Section 5 of this Act, other areas may be established as
ECOZONES in a proclamation to be issued by the President of the Philippines subject to
the evaluation and recommendation of the PEZA, based on a detailed feasibility and
engineering study which must conform to the following criteria:
(a) The proposed area must be identified as a regional growth center in the
Medium-Term Philippine Development Plan or by the Regional Development
Council;
(b) The existence of required infrastructure in the proposed ECOZONE, such as
roads, railways, telephones, ports, airports, etc., and the suitability and capacity
of the proposed site to absorb such improvements;
(c) The availability of water source and electric power supply for use of the
ECOZONE;
(d) The extent of vacant lands available for industrial and commercial
development and future expansion of the ECOZONE as well as of lands adjacent
to the ECOZONE available for development of residential areas for the
ECOZONE workers;
(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in
and around the ECOZONE;
(f) The area must have a significant incremental advantage over the existing
economic zones and its potential profitability can be established;
(g) The area must be strategically located; and
(h) The area must be situated where controls can easily be established to curtail
smuggling activities.
Other areas which do not meet the foregoing criteria may be established as
ECOZONES: Provided, That the said area shall be developed only through local
government and/or private sector initiative under any of the schemes allowed in Republic
Act No. 6957 (the build-operate-transfer law), and without any financial exposure on the
part of the national government: Provided, further, That the area can be easily secured to
curtail smuggling activities: Provided, finally, That after five (5) years the area must have
attained a substantial degree of development, the indicators of which shall be formulated
by the PEZA.
SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial /
Trading, Tourist, Investment and Financial Community. - Within the framework of the
Constitution, the interest of national sovereignty and territorial integrity of the Republic,
ECOZONE shall be developed, as much as possible, into a decentralized, self-reliant
and self-sustaining industrial, commercial/trading, agro-industrial, tourist, banking,
financial and investment center with minimum government intervention. Each ECOZONE
shall be provided with transportation, telecommunications, and other facilities needed to
generate linkage with industries and employment opportunitiesfor its own inhabitants and
those of nearby towns and cities.
The ECOZONE shall administer itself on economic, financial, industrial, tourism
development and such other matters within the exclusive competence of the national
government.
The ECOZONE may establish mutually beneficial economic relations with other entities
within the country, or, subject to the administrative guidance of the Department of
Foreign Affairs and/or the Department of Trade and Industry, with foreign entities or
enterprises.
Foreign citizens and companies owned by non-Filipinos in whatever proportion may set
up enterprises in the ECOZONE, either by themselves or in joint venture with Filipinos in
any sector of industry, international trade and commerce within the ECOZONE. Their
assets, profits and other legitimate interests shall be protected: Provided, That the
ECOZONE through the PEZA may require a minimum investment for any ECOZONE
enterprises in freely convertible currencies: Provided, further, That the new investment
shall fall under the priorities, thrusts and limits provided for in the Act.
SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. The
ECOZONE shall be managed and operated by the PEZA as separate customs territory.
The PEZA is hereby vested with the authority to issue certificate of origin for products
manufactured or processed in each ECOZONE in accordance with the prevailing rules or
origin, and the pertinent regulations of the Department of Trade and Industry and/or the
Department of Finance.
SEC. 9. Defense and Security. The defense of the ECOZONE and the security of its
perimeter fence shall be the responsibility of the national government in coordination with
the PEZA. Military forces sent by the national government for the purpose of defense
shall not interfere in the internal affairs of any of the ECOZONE and expenditure for
these military forces shall be borne by the national government. The PEZA may provide
and establish the ECOZONES internal security and firefighting forces.
SEC. 10. Immigration. Any investor within the ECOZONE whose initial investment shall
not be less than One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and
dependent children under twenty-one (21) years of age shall be granted permanent
resident status within the ECOZONE. They shall have freedom of ingress and egress to
and from the ECOZONE without any need of special authorization from the Bureau of
Immigration.
The PEZA shall issue working visas renewable every two (2) years to foreign executives
and other aliens, processing highly-technical skills which no Filipino within the
ECOZONE possesses, as certified by the Department of Labor and Employment. The
names of aliens granted permanent resident status and working visas by the PEZA shall
be reported to the Bureau of Immigration within thirty (30) days after issuance thereof.
SEC. 13. General Powers and Functions of the Authority. The PEZA shall have the
following powers and functions:
(a) To operate, administer, manage and develop the ECOZONE according to the
principles and provisions set forth in this Act;
(b) To register, regulate and supervise the enterprises in the ECOZONE in an
efficient and decentralized manner;
(c) To coordinate with local government units and exercise general supervision
over the development, plans, activities and operations of the ECOZONES,
industrial estates, export processing zones, free trade zones, and the like;
(d) In coordination with local government units concerned and appropriate
agencies, to construct,acquire, own, lease, operate and maintain on its own or
through contract, franchise, license, bulk purchase from the private sector and
build-operate-transfer scheme or joint venture, adequate facilities and
infrastructure, such as light and power systems, water supply and distribution
systems, telecommunication and transportation, buildings, structures,
warehouses, roads, bridges, ports and other facilities for the operation and
development of the ECOZONE;
(e) To create, operate and/or contractto operate such agencies and functional
units or offices of the authority as it may deem necessary;
(f) To adopt, alter and use a corporate seal; make contracts, lease, own or
otherwise dispose of personal or real property; sue and be sued; and otherwise
carry out its duties and functions as provided for in this Act;
(g) To coordinate the formulation and preparation of the development plans of the
different entities mentioned above;
(h) To coordinate with the National Economic Development Authority (NEDA), the
Department of Trade and Industry (DTI), the Department of Science and
Technology (DOST), and the local government units and appropriate government
agencies for policy and program formulation and implementation; and
(i) To monitor and evaluate the development and requirements of entities in
subsection (a) and recommend to the local government units or other appropriate
authorities the location, incentives, basic services, utilities and infrastructure
required or to be made available for said entities.
SEC. 17. Investigation and Inquiries. Upon a written formal complaint made under
oath, which on its face provides reasonable basis to believe that some anomaly or
irregularity might have been committed, the PEZA or the administrator of the ECOZONE
concerned, shall have the power to inquire into the conduct of firms or employees of the
ECOZONE and to conduct investigations, and for that purpose may subpoena witnesses,
administer oaths, and compel the production of books, papers, and other evidences:
Provided, That to arrive at the truth, the investigator(s) may grant immunity from
prosecution to any person whose testimony or whose possessions of documents or other
evidence is necessary or convenient to determine the truth in any investigation
conducted by him or under the authority of the PEZA or the administrator of the
ECOZONE concerned.
SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of
development of each ECOZONE established pursuant to this Act shall be formulated by
the PEZA, in coordination with the Department of Trade and Industry and the National
Economic and Development Authority; Provided, That such development strategy is
consistent with the priorities of the national government as outlined in the medium-term
Philippine development plan. It shall be the policy of the government and the PEZA to
encourage and provide Incentives and facilitate private sector participation in the
construction and operation of public utilities and infrastructure in the ECOZONE, using
any of the schemes allowed in Republic Act No. 6957 (the build-operate-transfer law).
SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate
authorities and neighboring cities and municipalities, immediately conduct a survey of the
physical, natural assets and potentialities of the ECOZONE areas under its jurisdiction.
SEC. 26. Domestic Sales. Goods manufactured by an ECOZONE enterprise shall be
made available for immediate retail sales in the domestic market, subject to payment of
corresponding taxes on the raw materials and other regulations that may be adopted by
the Board of the PEZA. However, in order to protect the domestic industry, there shall be
a negative list of Industries that willbe drawn up by the PEZA. Enterprises engaged in the
industries included in the negative list shall not be allowed to sell their products locally.
Said negative list shall be regularly updated by the PEZA.
The PEZA, in coordination with the Department of Trade and Industry and the Bureau of
Customs, shall jointly issue the necessary implementing rules and guidelines for the
effective Implementation of this section.
SEC. 29. Eminent Domain. The areas comprising an ECOZONE may be expanded or
reduced when necessary. For this purpose, the government shall have the power to
acquire, either by purchase, negotiation or condemnation proceedings, any private lands
within or adjacent to the ECOZONE for:
a. Consolidation of lands for zone development purposes;
b. Acquisition of right of way to the ECOZONE; and
c. The protection of watershed areas and natural assets valuable to the
prosperity of the ECOZONE.
If in the establishment of a publicly-owned ECOZONE, any person or group of persons
who has been occupying a parcel of land within the Zone has to be evicted, the PEZA
shall provide the person or group of persons concerned with proper disturbance
compensation: Provided, however, That in the case of displaced agrarian reform
beneficiaries, they shall be entitled to the benefits under the Comprehensive Agrarian
Reform Law, including but not limited to Section 36 of Republic Act No. 3844, in addition
to a homelot in the relocation site and preferential employment in the project being
undertaken.
SEC. 32. Shipping and Shipping Register. Private shipping and related business
including private container terminals may operate freely in the ECOZONE, subject only to
such minimum reasonable regulations of local application which the PEZA may
prescribe.
The PEZA shall, in coordination with the Department of Transportation and
Communications, maintain a shipping register for each ECOZONE as a business register
of convenience for ocean-going vessels and issue related certification.
Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the
ECOZONE, subject only to such reasonable requirement as may be prescribed by the
PEZA In coordination with the appropriate agencies of the national government.
SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate
agencies, shall take concrete and appropriate steps and enact the proper measure for
the protection of the local environment.
SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to terminate
business or operations shall comply with such requirements and procedures which the
PEZA shall set, particularly those relating to the clearing of debts. The assets of the
closed enterprise can be transferred and the funds con be remitted out of the ECOZONE
subject to the rules, guidelines and procedures prescribed jointly by the Bangko Sentral
ng Pilipinas, the Department of Finance and the PEZA.
SEC. 35. Registration of Business Enterprises. - Business enterprises within a
designated ECOZONE shall register with the PEZA to avail of all incentives and benefits
provided for in this Act.
SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for
the purpose of facilitating the registration of new enterprises in the ECOZONE. Thus, all
appropriate government agencies that are Involved In registering, licensing or issuing
permits to investors shall assign their representatives to the ECOZONE to attend to
Investors requirements.
SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the
Department of Tabor and Employment, shall prescribe a master employment contract for
all ECOZONE enterprise staff members and workers, the terms of which provide salaries
and benefits not less than those provided under this Act, the Philippine Labor Code, as
amended, and other relevant issuances of the national government.
SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of Labor and
Employment, shall promulgate appropriate measures and programs leading to the
expansion of the services of the ECOZONE to help the local governments of nearby
areas meet the needs of the migrant workers.
SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the
value of training expenses incurred in developing skilled or unskilled labor or for
managerial or other management development programs incurred by enterprises in the
ECOZONE can be deducted from the national government's share of three percent (3%)
as provided In Section 24.
The PEZA, the Department of Labor and Employment, and the Department of Finance
shall jointly make a review of the incentive scheme provided In this section every two (2)
years or when circumstances so warrant.
SEC. 43. Relationship with the Regional Development Council. - The PEZA shall
determine the development goals for the ECOZONE within the framework of national
development plans, policies and goals, and the administrator shall, upon approval by the
PEZA Board, submit the ECOZONE plans, programs and projects to the regional
development council for inclusion in and as inputs to the overall regional development
plan.
SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the
local government units comprising the ECOZONE shall retain their basic autonomy and
identity. The cities shall be governed by their respective charters and the municipalities
shall operate and function In accordance with Republic Act No. 7160, otherwise known
as the Local Government Code of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. Privately-owned
industrial estates shall retain their autonomy and independence and shall be monitored
by the PEZA for the implementation of incentives.
SEC. 46. Transfer of Resources. - The relevant functions of the Board of Investments
over industrial estates and agri-export processing estates shall be transferred to the
PEZA. The resources of government owned Industrial estates and similar bodies except
the Bases Conversion Development Authority and those areas identified under Republic
Act No. 7227, are hereby transferred to the PEZA as the holding agency. They are
hereby detached from their mother agencies and attached to the PEZA for policy,
program and operational supervision.
The Boards of the affected government-owned industrial estates shall be phased out and
only the management level and an appropriate number of personnel shall be retained.
Government personnel whose services are not retained by the PEZA or any government
office within the ECOZONE shall be entitled to separation pay and such retirement and
other benefits theyare entitled to under the laws then in force at the time of their
separation: Provided, That in no case shall the separation pay be less than one and one-
fourth (1 1/4) month of every year of service.
The non-profit character of the EPZA under Presidential Decree No. 66 is not
inconsistent with any of the powers, functions, and responsibilities of the PEZA. The
EPZAs non-profit character, including the EPZAs exemption from real property taxes,
must be deemed assumed by the PEZA.
In addition, the Local Government Code exempting instrumentalities of the national
government from real property taxes was already in force274 when the PEZAs charter was
enacted in 1995. It would have been redundant to provide for the PEZAs exemption in
its charter considering that the PEZA is already exempt by virtue of Section 133(o) of the
Local Government Code.
As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when
the EPZAs charter was enacted. Unlike the Local Government Code, Commonwealth
Act No. 470 does not contain a provision specifically exempting instrumentalities of the
national government from payment of real property taxes.275 It was necessary to put an
exempting provision in the EPZAs charter.
Contrary to the PEZAs claim, however, Section 24 of the Special Economic Zone Act of
1995 is not a basis for the PEZAs exemption. Section 24 of the Special Economic Zone
Act of 1995 provides:
Sec. 24. Exemption from National and Local Taxes. Except for real property taxes on
land owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the
gross income earned by all business enterprises within the ECOZONEshall be paid and
remitted as follows:
(a) Three percent (3%) to the National Government;
 (b) Two percent (2%) which shall be directly remitted by the business
establishments to the treasurer's office of the municipality or city where the
enterprise is located. (Emphasis supplied)
Tax exemptions provided under Section 24 apply only to business establishments
operating within economic zones. Considering that the PEZA is not a business
establishment but an instrumentality performing governmental functions, Section 24 is
inapplicable to the PEZA. Also, contrary to the PEZAs claim, developers ofeconomic
zones, whether public or private developers, are liable for real property taxes on lands
they own. Section 24 does not distinguish between a public and private developer. Thus,
courts cannot distinguish.276 Unless the public developer is exempt under the Local
Government Code or under its charter enacted after the Local Government Codes
effectivity, the public developer must pay real property taxes on their land.
At any rate, the PEZA cannot be taxed for real property taxes even if it acts as a
developer or operator of special economic zones. The PEZA is an instrumentality of the
national government exempt from payment of real property taxes under Section 133(o) of
the Local Government Code. As this court said in Manila International Airport Authority,
"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."277
V. (C)
Real properties under the PEZAs title are owned by the Republic of the Philippines
Under Section 234(a) of the LocalGovernment Code, real properties owned by the
Republic of the Philippines are exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from
payment of 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[.]
Properties owned by the state are either property of public dominion or patrimonial
property. Article 420 of the Civil Code of the Philippines enumerates property of public
dominion:
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 belonging for public use, and are
intended for some public service or for the development of the national wealth.
Properties of public dominion are outside the commerce of man. These properties are
exempt from "levy, encumbrance or disposition through public or private sale."278 As this
court explained in Manila International Airport Authority:
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[.]279
On the other hand, all other properties of the state that are not intended for public use or
are not intended for some public service or for the development of the national wealth
are patrimonial properties. Article 421 of the Civil Code of the Philippines provides:
Art. 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
Patrimonial properties are also properties of the state, but the state may dispose of its
patrimonial property similar to private persons disposing of their property. Patrimonial
properties are within the commerce of man and are susceptible to prescription, unless
otherwise provided.280
In this case, the properties sought to be taxed are located in publicly owned economic
zones. These economic zones are property of public dominion. The City seeks to tax
properties located within the Mactan Economic Zone,281 the site of which was reserved by
President Marcos under Proclamation No. 1811, Series of 1979. Reserved lands are
lands of the public domain set aside for settlement or public use, and for specific public
purposes by virtue of a presidential proclamation.282 Reserved lands are inalienable and
outside the commerce of man,283 and remain property of the Republic until withdrawn
from publicuse either by law or presidential proclamation.284 Since no law or presidential
proclamation has been issued withdrawing the site of the Mactan Economic Zone from
public use, the property remains reserved land.
As for the Bataan Economic Zone, the law consistently characterized the property as a
port. Under Republic Act No. 5490, Congress declared Mariveles, Bataan "a principal
port of entry"285 to serve as site of a foreign trade zone where foreign and domestic
merchandise may be brought in without being subject to customs and internal revenue
laws and regulations of the Philippines.286
Section 4 of Republic Act No. 5490 provided that the foreign trade zone in Mariveles,
Bataan "shall at all times remain to be owned by the Government":
SEC. 4. Powers and Duties. The Foreign Trade Zone Authority shall have the following
powers and duties:
a. To fix and delimit the site of the Zone which at all times remain to be owned by the
Government, and which shall have a contiguous and adequate area with well defined
and policed boundaries, with adequate enclosures to segregate the Zone from the
customs territory for protection of revenues, together with suitable provisions for ingress
and egress of persons, conveyance, vessels and merchandise sufficient for the purpose
of this Act[.] (Emphasis supplied)
The port in Mariveles, Bataan then became the Bataan Economic Zone under the
Special Economic Zone Act of 1995.287 Republic Act No. 9728 then converted the Bataan
Economic Zone into the Freeport Area of Bataan.288
A port of entry, where imported goods are unloaded then introduced in the market for
public consumption, is considered property for public use. Thus, Article 420 of the Civil
Code classifies a port as property of public dominion. The Freeport Area of Bataan,
where the government allows tax and duty-free importation of goods,289 is considered
property of public dominion. The Freeport Area of Bataan is owned by the state and
cannot be taxed under Section 234(a) of the Local Government Code.
Properties of public dominion, even if titled in the name of an instrumentality as in this
case, remain owned by the Republic of the Philippines. If property registered in the name
of an instrumentality is conveyed to another person,the property is considered conveyed
on behalf of the Republic of the Philippines. Book I, Chapter 12, Section 48 of the
Administrative Code of 1987 provides:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the
government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:
....
(2) For property belonging to the Republic of the Philippines, but titled in the name of any
political subdivision orof any corporate agency or instrumentality, by the executive head
of the agency or instrumentality. (Emphasis supplied)
In Manila International Airport Authority, this court explained:
[The exemption under Section 234(a) of the Local Government Code] should be read in
relation with Section 133(o) of the same Code, which prohibits local governments from
imposing "[t]axes, fess or charges of any kind on the National Government, its agencies
and instrumentalitiesx 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 remained owned by the Republic of the Philippines
and continue to be exempt from real estate tax.
The Republic may grant the beneficialuse 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." . . .290 (Emphasis in the original; italics
supplied)
Even the PEZAs lands and buildings whose beneficial use have been granted to other
persons may not be taxed with real property taxes. The PEZA may only lease its lands
and buildings to PEZA-registered economic zone enterprises and entities.291 These
PEZA-registered enterprises and entities, which operate within economic zones, are not
subject to real property taxes. Under Section 24 of the Special Economic Zone Act of
1995, no taxes, whether local or national, shall be imposed on all business
establishments operating within the economic zones: SEC. 24. Exemption from National
and Local Taxes. Except for real property on land owned by developers, no taxes, local
and national, shall be imposed on business establishments operating within the
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business
enterprises within the ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to
the treasurers office of the municipality or city where the enterprise is
located.292 (Emphasis supplied)
In lieu of revenues from real property taxes, the City of Lapu-Lapu collects two-fifths of
5% final tax on gross income paid by all business establishments operating withinthe
Mactan Economic Zone:
SEC. 24. Exemption from National and Local Taxes. Except for real property on land
owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the
gross income earned by all business enterprises within the ECOZONE shall be paid and
remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business
establishments to the treasurers office of the municipality or city where the
enterprise is located.293 (Emphasis supplied)
For its part, the Province of Bataan collects a fifth of the 5% final tax on gross income
paid by all business establishments operating within the Freeport Area of Bataan:
Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No
taxes, local and national, shall be imposed on business establishments operating
withinthe FAB. In lieu thereof, said business establishments shall pay a five percent (5%)
final tax on their gross income earned in the following percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;
(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles;
and
(d) Two per centum (2%) to the Authority of the Freeport of Area of
Bataan.294 (Emphasis supplied)
Petitioners, therefore, are not deprived of revenues from the operations of economic
zones within their respective territorial jurisdictions.
The national government ensured that loeal government units comprising economic
zones shall retain their basic autonomy and identity.295
All told, the PEZA is an instrumentality of the national government. Furthermore, the
1w phi 1
lands owned by the PEZA are real properties owned by the Republic of the Philippines.
The City of Lapu-Lapu and the Province of Bataan cannot collect real property taxes
from the PEZA.
WHEREFORE, the consolidated petitions are DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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.
DECISION
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. 9091 and
2982 amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and
equipment within the NAIA Complex. The MIAA Charter transferred to MIAA
approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands
and Buildings") then under the Bureau of Air Transportation.4 The MIAA Charter further
provides that no portion of the land transferred to MIAA shall be disposed of through sale
or any other mode unless specifically approved by the President of the Philippines.5
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 order. The petition sought to restrain the City of Paraaque from imposing real estate tax
City of Paraaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency on, levying against, and auctioning for public sale the Airport Lands and Buildings. The
is broken down as follows: petition was docketed as CA-G.R. SP No. 66878.

TAX On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it
TAXABLE YEAR TAX DUE PENALTY TOTAL beyond the 60-day reglementary period. The Court of Appeals also denied on 27
DECLARATION
September 2002 MIAA's motion for reconsideration and supplemental motion for
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.7
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
Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 Barangay Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the
93,621,740.00
public market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall.
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
The City of Paraaque published the notices in the 3 and 10 January 2003 issues of
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 notices announced the public auction sale of the Airport Lands and Buildings to the
6,959,700.00
highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
Paraaque City.
*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
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before
*E-016-01396 1998-2001 75,240.00 33,858.00 this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary
109,098.00
Restraining Order. The motion sought to restrain respondents the City of Paraaque,
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42
City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of
Paraaque, and the City Assessor of Paraaque ("respondents") from auctioning the
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for Airport Lands and Buildings.
P4,207,028.75
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective
#9476101 for P28,676,480.00 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
#9476103 for P49,115.006 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 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 On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
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 On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the
OGCC Opinion No. 061. directive issued during the hearing, MIAA, respondent City of Paraaque, and the
Solicitor General subsequently submitted their respective Memoranda.
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 MIAA admits that the MIAA Charter has placed the title to the Airport Lands and
exempt from real estate tax to show proof of exemption. The OGCC opined that Section Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership
21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. 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
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for Lands and Buildings for the benefit of the general public. Since the Airport Lands and
prohibition and injunction, with prayer for preliminary injunction or temporary restraining Buildings are devoted to public use and public service, the ownership of these properties
remains with the State. The Airport Lands and Buildings are thus inalienable and are not
subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from
the payment of real estate tax. MIAA insists that it is also exempt from real estate tax
under Section 234 of the Local Government Code because the Airport Lands and
Buildings are owned by the Republic. To justify the exemption, MIAA invokes the
principle that the government cannot tax itself. MIAA points out that the reason for tax
exemption of public property is that its taxation would not inure to any public advantage,
since in such a case the tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly
withdrew the tax exemption privileges of "government-owned and-controlled
corporations" upon the effectivity of the Local Government Code. Respondents also
argue that a basic rule of statutory construction is that the express mention of one
person, thing, or act excludes all others. An international airport is not among the
exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents
assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real
estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v.
Marcos8 where we held that the Local Government Code has withdrawn the exemption
from real estate tax granted to international airports. Respondents further argue that
since MIAA has already paid some of the real estate tax assessments, it is now estopped
from claiming that the Airport Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of
MIAA are exempt from real estate tax under existing laws. If so exempt, then the real
estate tax assessments issued by the City of Paraaque, and all proceedings taken
pursuant to such assessments, are void. In such event, the other issues raised in this
petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax
imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but
an instrumentality of the National Government and thus exempt from local
taxation. Second, the real properties of MIAA are owned by the Republic of the
Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is
not exempt from real estate tax. Respondents claim that the deletion of the phrase "any
government-owned or controlled so exempt by its charter" in Section 234(e) of the Local
Government Code withdrew the real estate tax exemption of government-owned or
controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real
Property Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt
from real estate tax. However, MIAA is not a government-owned or controlled
corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of
1987 defines a government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature, and
owned by the Government directly or through its instrumentalities either wholly,
or, where applicable as in the case of stock corporations, to the extent of at least
fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-
stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is
not a stock corporation because it has no capital stock divided into shares. MIAA has
no stockholders or voting shares. Section 10 of the MIAA Charter9 provides:
SECTION 10. Capital. The capital of the Authority to be contributed by the
National Government shall be increased from Two and One-half Billion
(P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist
of:
(a) The value of fixed assets including airport facilities, runways and equipment
and such other properties, movable and immovable[,] which may be contributed
by the National Government or transferred by it from any of its agencies, the
valuation of which shall be determined jointly with the Department of Budget and
Management and the Commission on Audit on the date of such contribution or
transfer after making due allowances for depreciation and other deductions
taking into account the loans and other liabilities of the Authority at the time of the
takeover of the assets and other properties;
 (b) That the amount of P605 million as of December 31, 1986 representing about
seventy percentum (70%) of the unremitted share of the National Government
from 1983 to 1986 to be remitted to the National Treasury as provided for in
Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the
National Government in the Authority. Thereafter, the Government contribution to
the capital of the Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital
stock is divided into shares and x x x authorized to distribute to the holders of
such shares dividends x x x." MIAA has capital but it is not divided into shares of stock.
MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the
Corporation Code defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." A non-stock corporation
must have members. Even if we assume that the Government is considered as the sole
member of MIAA, this will not make MIAA a non-stock corporation. Non-stock
corporations cannot distribute any part of their income to their members. Section 11 of
the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to
the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized
for charitable, religious, educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like
chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is
organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation. What then is the legal status of MIAA within
the National Government?
MIAA is a government instrumentality vested with corporate powers to perform
efficiently its governmental functions. MIAA is like any other government instrumentality,
the only difference is that MIAA is vested with corporate powers. Section 2(10) of the
Introductory Provisions of the Administrative Code defines a government
"instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through
a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain,12 police authority13 and the levying of fees and
charges.14 At the same time, MIAA exercises "all the powers of a corporation under the
Corporation Law, insofar as these powers are not inconsistent with the provisions of this
Executive Order."15
Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government machinery
although not integrated with the department framework. The MIAA Charter expressly
states that transforming MIAA into a "separate and autonomous body"16 will make its
operation more "financially viable."17
Many government instrumentalities are vested with corporate powers but they do not
become stock or non-stock corporations, which is a necessary condition before an
agency or instrumentality is deemed a government-owned or controlled corporation.
Examples are the Mactan International Airport Authority, the Philippine Ports Authority,
the University of the Philippines and Bangko Sentral ng Pilipinas. All these government
instrumentalities exercise corporate powers but they are not organized as stock or non-
stock corporations as required by Section 2(13) of the Introductory Provisions of the
Administrative Code. These government instrumentalities are sometimes loosely called
government corporate entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative Code, which is
the governing law defining the legal relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local
Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing powers
of provinces, cities, municipalities, and barangays shall not extend to the
levy of the following:
xxxx
 (o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalitiesand 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, Jr.:
The reason for the rule does not apply in the case of exemptions running to the
benefit of the government itself or its agencies. In such case the practical effect
of an exemption is merely to reduce the amount of money that has to be handled
by government in the course of its operations. For these reasons, provisions
granting exemptions to government agencies may be construed liberally, in favor
of non tax-liability of such agencies.19
There is, moreover, no point in national and local governments taxing each other, unless
a sound and compelling policy requires such transfer of public funds from one
government pocket to another.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of local
governments. The only exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential public services for
sound and compelling policy considerations. There must be express language in the
law empowering local governments to tax national government instrumentalities. Any
doubt whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise
provided" in the Code, local governments cannot tax national government
instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming
Corporation:
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over
local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable activities
or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez,
340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy"
(Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or
creation of the very entity which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
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 encumber26 the Airport Lands and Buildings, the President must
first withdraw from public usethe 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 instrumentalitiesx 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:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its agencies
and instrumentalities, and local government units. (Emphasis and underscoring
supplied)
By express mandate of the Local Government Code, local governments cannot impose
any kind of tax on national government instrumentalities like the MIAA. Local
governments are devoid of power to tax the national government, its agencies and
instrumentalities. The taxing powers of local governments do not extend to the national
government, its agencies and instrumentalities, "[u]nless otherwise provided in this
Code" as stated in the saving clause of Section 133. The saving clause refers to Section
234(a) on the exception to the exemption from real estate tax of real property owned by
the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical
persons are subject to tax by local governments. The minority insists that the juridical
persons exempt from local taxation are limited to the three classes of entities specifically
enumerated as exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b)
cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and
non-profit hospitals and educational institutions. It would be belaboring the
obvious why the MIAA does not fall within any of the exempt entities under
Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the
Local Government Code. This theory will result in gross absurdities. It will make the
national government, which itself is a juridical person, subject to tax by local
governments since the national government is not included in the enumeration of exempt
entities in Section 193. Under this theory, local governments can impose any kind of
local tax, and not only real estate tax, on the national government.
Under the minority's theory, many national government instrumentalities with juridical
personalities will also be subject to any kind of local tax, and not only real estate tax.
Some of the national government instrumentalities vested by law with juridical
personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research
Institute,31Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases Conversion
Development Authority,34Philippine Ports Authority,35 Cagayan de Oro Port
Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine National
Railways.39
The minority's theory violates Section 133(o) of the Local Government Code which
expressly prohibits local governments from imposing any kind of tax on national
government instrumentalities. Section 133(o) does not distinguish between national
government instrumentalities with or without juridical personalities. Where the law does
not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national
government instrumentalities, with or without juridical personalities. The determinative
test whether MIAA is exempt from local taxation is not whether MIAA is a juridical
person, but whether it is a national government instrumentality under Section 133(o) of
the Local Government Code. Section 133(o) is the specific provision of law prohibiting
local governments from imposing any kind of tax on the national government, its
agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless
otherwise provided in this Code." This means that unless the Local Government Code
grants an express authorization, local governments have no power to tax the national
government, its agencies and instrumentalities. Clearly, the rule is local governments
have no power to tax the national government, its agencies and instrumentalities. As an
exception to this rule, local governments may tax the national government, its agencies
and instrumentalities only if the Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section
234(a) of the Code, which makes the national government subject to real estate tax
when it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of
the Local Government Code provides:
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:
xxxx
The minority then concludes that reliance on the Administrative Code definition is
"flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code
recognizes that a statute may require a different meaning than that defined in the
Administrative Code. However, this does not automatically mean that the definition in the
Administrative Code does not apply to the Local Government Code. Section 2 of the
Administrative Code clearly states that "unless the specific words x x x of a particular
statute shall require a different meaning," the definition in Section 2 of the Administrative
Code shall apply. Thus, unless there is specific language in the Local Government Code
defining the phrase "government-owned or controlled corporation" differently from the
definition in the Administrative Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the
phrase "government-owned or controlled corporation" differently from the definition in the
Administrative Code. Indeed, there is none. The Local Government Code is silent on the
definition of the phrase "government-owned or controlled corporation." The
Administrative Code, however, expressly defines the phrase "government-owned or
controlled corporation." The inescapable conclusion is that the Administrative Code
definition of the phrase "government-owned or controlled corporation" applies to the
Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates
in a unified document the major structural, functional and procedural principles and rules
of governance." Thus, the Administrative Code is the governing law defining the status
and relationship of government departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly provides for a different status and
relationship for a specific government unit or entity, the provisions of the Administrative
Code prevail.
The minority also contends that the phrase "government-owned or controlled
corporation" should apply only to corporations organized under the Corporation Code,
the general incorporation law, and not to corporations created by special charters. The
minority sees no reason why government corporations with special charters should have
a capital stock. Thus, the minority declares:
I submit that the definition of "government-owned or controlled corporations"
under the Administrative Code refer to those corporations owned by the
government or its instrumentalities which are created not by legislative
enactment, but formed and organized under the Corporation Code through
registration with the Securities and Exchange Commission. In short, these are
GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a capital
structure for GOCCs whose full ownership is limited by its charter to the State or
Republic. Such GOCCs are not empowered to declare dividends or alienate their
capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution
and existing legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled
corporation" does not distinguish between one incorporated under the Corporation Code
or under a special charter. Where the law does not distinguish, courts should not
distinguish.
Second, Congress has created through special charters several government-owned
corporations organized as stock corporations. Prime examples are the Land Bank of the
Philippines and the Development Bank of the Philippines. The special charter40 of the
Land Bank of the Philippines provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine
billion pesos, divided into seven hundred and eighty million common shares with
a par value of ten pesos each, which shall be fully subscribed by the
Government, and one hundred and twenty million preferred shares with a par
value of ten pesos each, which shall be issued in accordance with the provisions
of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of the
Bank shall be Five Billion Pesos to be divided into Fifty Million common shares
with par value of P100 per share. These shares are available for subscription by
the National Government. Upon the effectivity of this Charter, the National
Government shall subscribe to Twenty-Five Million common shares of stock
worth Two Billion Five Hundred Million which shall be deemed paid for by the
Government with the net asset values of the Bank remaining after the transfer of
assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their
special charters are the Philippine Crop Insurance Corporation,42 Philippine International
Trading Corporation,43 and the Philippine National Bank44 before it was reorganized as a
stock corporation under the Corporation Code. All these government-owned corporations
organized under special charters as stock corporations are subject to real estate tax on
real properties owned by them. To rule that they are not government-owned or controlled
corporations because they are not registered with the Securities and Exchange
Commission would remove them from the reach of Section 234 of the Local Government
Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters
are those that meet the two conditions prescribed in Section 16, Article XII of the
Constitution. The first condition is that the government-owned or controlled corporation
must be established for the common good. The second condition is that the government-
owned or controlled corporation must meet the test of economic viability. Section 16,
Article XII of the 1987 Constitution provides:
 SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-owned
or controlled corporations may be created or established by special charters in
the interest of the common good and subject to the test of economic viability.
(Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or
controlled corporations" through special charters only if these entities are required to
meet the twin conditions of common good and economic viability. In other words,
Congress has no power to create government-owned or controlled corporations with
special charters unless they are made to comply with the two conditions of common
good and economic viability. The test of economic viability applies only to government-
owned or controlled corporations that perform economic or commercial activities and
need to compete in the market place. Being essentially economic vehicles of the State
for the common good meaning for economic development purposes these
government-owned or controlled corporations with special charters are usually organized
as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that
every modern State must provide its citizens. These instrumentalities need not be
economically viable since the government may even subsidize their entire operations.
These instrumentalities are not the "government-owned or controlled corporations"
referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or
public functions. Congress has plenary authority to create government instrumentalities
vested with corporate powers provided these instrumentalities perform essential
government functions or public services. However, when the legislature creates through
special charters corporations that perform economic or commercial activities, such
entities known as "government-owned or controlled corporations" must meet the
test of economic viability because they compete in the market place.
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 fees47 and not income from commercial
transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. x x
x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a
government-owned or controlled corporation. Without a change in its capital structure,
MIAA remains a government instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code. More importantly, as long as MIAA renders
essential public services, it need not comply with the test of economic viability. Thus,
MIAA is outside the scope of the phrase "government-owned or controlled corporations"
under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-
owned or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The
1987 Constitution prescribes explicit conditions for the creation of "government-owned or
controlled corporations." The Administrative Code defines what constitutes a
"government-owned or controlled corporation." To belittle this phrase as "clarificatory or
illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section
2(13) of the Introductory Provisions of the Administrative Code because it is not
organized as a stock or non-stock corporation. Neither is MIAA a government-owned or
controlled corporation under Section 16, Article XII of the 1987 Constitution because
MIAA is not required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential public services
pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a
government instrumentality, MIAA is not subject to any kind of tax by local governments
under Section 133(o) of the Local Government Code. The exception to the exemption in
Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the
Local Government Code. Such exception applies only if the beneficial use of real
property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. Properties of public dominion are owned by the
State or the Republic. Article 420 of the Civil Code provides:
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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as
Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST
CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT
PROPERTIES IN JAPAN, respondents.
Arturo M. Tolentino for petitioner in 92013.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents, their
representatives and agents from proceeding with the bidding for the sale of the
3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan
scheduled on February 21, 1990. We granted the prayer for a temporary restraining
order effective February 20, 1990. One of the petitioners (in G.R. No. 92047)
likewise prayes for a writ of mandamus to compel the respondents to fully
disclose to the public the basis of their decision to push through with the sale of
the Roppongi property inspire of strong public opposition and to explain the
proceedings which effectively prevent the participation of Filipino citizens and
entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the
Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et
al. was filed, the respondents were required to file a comment by the Court's
resolution dated February 22, 1990. The two petitions were consolidated on March
27, 1990 when the memoranda of the parties in the Laurel case were deliberated
upon.
The Court could not act on these cases immediately because the respondents filed
a motion for an extension of thirty (30) days to file comment in G.R. No. 92047,
followed by a second motion for an extension of another thirty (30) days which we
granted on May 8, 1990, a third motion for extension of time granted on May 24,
1990 and a fourth motion for extension of time which we granted on June 5, 1990
but calling the attention of the respondents to the length of time the petitions have
been pending. After the comment was filed, the petitioner in G.R. No. 92047 asked
for thirty (30) days to file a reply. We noted his motion and resolved to decide the
two (2) cases.
I undeveloped since that time.
The subject property in this case is one of the four (4) properties in Japan acquired
by the Philippine government under the Reparations Agreement entered into with
Japan on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which
has an area of approximately 2,489.96 square meters, and is at present the site of
the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around
764.72 square meters and categorized as a commercial lot now being used as a
warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku,
Kobe, a residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese
government for national development projects are part of the indemnification to
the Filipino people for their losses in life and property and their suffering during
World War II.
The Reparations Agreement provides that reparations valued at $550 million would
be payable in twenty (20) years in accordance with annual schedules of
procurements to be fixed by the Philippine and Japanese governments (Article 2,
Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the
national policy on procurement and utilization of reparations and development
loans. The procurements are divided into those for use by the government
sector and those for private parties in projects as the then National Economic
Council shall determine. Those intended for the private sector shall be made
available by sale to Filipino citizens or to one hundred (100%) percent Filipino-
owned entities in national development projects.
The Roppongi property was acquired from the Japanese government under the
Second Year Schedule and listed under the heading "Government Sector",
through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property
consists of the land and building "for the Chancery of the Philippine Embassy"
(Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site
of the Philippine Embassy until the latter was transferred to Nampeidai on July 22,
1976 when the Roppongi building needed major repairs. Due to the failure of our
government to provide necessary funds, the Roppongi property has remained
A proposal was presented to President Corazon C. Aquino by former Philippine
Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a
lease agreement with a Japanese firm - Kajima Corporation which shall
construct two (2) buildings in Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai. The consideration of the
construction would be the lease to the foreign corporation of one (1) of the
buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai.
The other building in Roppongi shall then be used as the Philippine Embassy
Chancery. At the end of the lease period, all the three leased buildings shall be
occupied and used by the Philippine government. No change of ownership or title
shall occur. (See Annex "B" to Reply to Comment) The Philippine government
retains the title all throughout the lease period and thereafter. However, the
government has not acted favorably on this proposal which is pending approval
and ratification between the parties. Instead, on August 11, 1986, President Aquino
created a committee to study the disposition/utilization of Philippine government
properties in Tokyo and Kobe, Japan through Administrative Order No. 3, followed
by Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-
Filipino citizens or entities to avail of separations' capital goods and services in
the event of sale, lease or disposition. The four properties in Japan including the
Roppongi were specifically mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government
has been pushing, with great vigor, its decision to sell the reparations properties
starting with the Roppongi lot. The property has twice been set for bidding at a
minimum floor price of $225 million. The first bidding was a failure since only one
bidder qualified. The second one, after postponements, has not yet materialized.
The last scheduled bidding on February 21, 1990 was restrained by his Court.
Later, the rules on bidding were changed such that the $225 million floor price
became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The
petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to
anyone while the petitioner in G.R. No. 92047 adds as a principal objection the
alleged unjustified bias of the Philippine government in favor of selling the
property to non-Filipino citizens and entities. These petitions have been
consolidated and are resolved at the same time for the objective is the same - to
stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine
Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and
jurisdiction, to sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of
the government to alienate the Roppongi property assails the constitutionality of
Executive Order No. 296 in making the property available for sale to non-Filipino
citizens and entities. He also questions the bidding procedures of the Committee
on the Utilization or Disposition of Philippine Government Properties in Japan for
being discriminatory against Filipino citizens and Filipino-owned entities by
denying them the right to be informed about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the
related lots were acquired as part of the reparations from the Japanese
government for diplomatic and consular use by the Philippine government. Vice-
President Laurel states that the Roppongi property is classified as one of public
dominion, and not of private ownership under Article 420 of the Civil Code (See
infra).
The petitioner submits that the Roppongi property comes under "property
intended for public service" in paragraph 2 of the above provision. He states that
being one of public dominion, no ownership by any one can attach to it, not even
by the State. The Roppongi and related properties were acquired for "sites for
chancery, diplomatic, and consular quarters, buildings and other improvements"
(Second Year Reparations Schedule). The petitioner states that they continue to be
intended for a necessary service. They are held by the State in anticipation of an
opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is
outside the commerce of man, or to put it in more simple terms, it cannot be
alienated nor be the subject matter of contracts (Citing Municipality of Cavite v.
Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the
moment, the petitioner avers that the same remains property of public dominion
so long as the government has not used it for other purposes nor adopted any
measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that
the subject property is not governed by our Civil Code but by the laws of Japan
where the property is located. They rely upon the rule of lex situs which is used in
determining the applicable law regarding the acquisition, transfer and devolution
of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated
January 27, 1988 of the Secretary of Justice which used the lex situs in explaining
the inapplicability of Philippine law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil
Code is applicable, the Roppongi property has ceased to become property of
public dominion. It has become patrimonial property because it has not been used
for public service or for diplomatic purposes for over thirteen (13) years now
(Citing Article 422, Civil Code) and because the intention by the Executive
Department and the Congress to convert it to private use has been manifested by
overt acts, such as, among others: (1) the transfer of the Philippine Embassy to
Nampeidai (2) the issuance of administrative orders for the possibility of alienating
the four government properties in Japan; (3) the issuance of Executive Order No.
296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive
Agrarian Reform Law] on June 10, 1988 which contains a provision stating that
funds may be taken from the sale of Philippine properties in foreign countries; (5)
the holding of the public bidding of the Roppongi property but which failed; (6) the
deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus
an acknowledgment by the Senate of the government's intention to remove the
Roppongi property from the public service purpose; and (7) the resolution of this
Court dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478
which sought to enjoin the second bidding of the Roppongi property scheduled on
March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the
constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R.
No. 87478 which the Court dismissed on August 1, 1989. He now avers that the
executive order contravenes the constitutional mandate to conserve and develop
the national patrimony stated in the Preamble of the 1987 Constitution. It also
allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the
public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution;
Sections 22 and 23 of Commonwealth Act 141).
itc-a sl
(2) The preference for Filipino citizens in the grant of rights, privileges and
concessions covering the national economy and patrimony (Section 10, Article VI,
Constitution);
(3) The protection given to Filipino enterprises against unfair competition and
trade practices;
(4) The guarantee of the right of the people to information on all matters of public
concern (Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly
owned by Filipino citizens of capital goods received by the Philippines under the
Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions
involving public interest (Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an
unconstitutional executive order is a misapplication of public funds He states that
since the details of the bidding for the Roppongi property were never publicly
disclosed until February 15, 1990 (or a few days before the scheduled bidding), the
bidding guidelines are available only in Tokyo, and the accomplishment of
requirements and the selection of qualified bidders should be done in Tokyo,
interested Filipino citizens or entities owned by them did not have the chance to
comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi
shall be sold for a minimum price of $225 million from which price capital gains tax
under Japanese law of about 50 to 70% of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the
Roppongi site and the three related properties were through reparations
agreements, that these were assigned to the government sector and that the
Roppongi property itself was specifically designated under the Reparations
Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled
out. It is dictated by the terms of the Reparations Agreement and the
corresponding contract of procurement which bind both the Philippine
government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown
that the property has become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man.
It cannot be alienated. Its ownership is a special collective ownership for general
use and enjoyment, an application to the satisfaction of collective needs, and
resides in the social group. The purpose is not to serve the State as a juridical
person, but the citizens; it is intended for the common and public welfare and
cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in
Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II,
p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private
ownership.
ART. 420. The following things are property of public dominion
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks shores
roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use,
and are intended for some public service or for the development of
the national wealth.
ART. 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of
the Civil Code as property belonging to the State and intended for some public
service.
Has the intention of the government regarding the use of the property been
changed because the lot has been Idle for some years? Has it become
patrimonial?
The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any
such conversion happens only if the property is withdrawn from public use (Cebu
Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues
to be part of the public domain, not available for private appropriation or
ownership until there is a formal declaration on the part of the government to
withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public
officials insinuating a change of intention. We emphasize, however, that an
abandonment of the intention to use the Roppongi property for public service and
to make it patrimonial property under Article 422 of the Civil Code must be
definiteAbandonment cannot be inferred from the non-use alone specially if the
non-use was attributable not to the government's own deliberate and indubitable
will but to a lack of financial support to repair and improve the property (See Heirs
of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a
certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not
relinquishment of the Roppongi property's original purpose. Even the failure by
the government to repair the building in Roppongi is not abandonment since as
earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of
government properties in Japan were merely directives for investigation but did
not in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell", does not
have a provision in its text expressly authorizing the sale of the four properties
procured from Japan for the government sector. The executive order does not
declare that the properties lost their public character. It merely intends to make the
properties available to foreigners and not to Filipinos alone in case of a sale, lease
or other disposition. It merely eliminates the restriction under Rep. Act No. 1789
that reparations goods may be sold only to Filipino citizens and one hundred
(100%) percent Filipino-owned entities. The text of Executive Order No. 296
provides:
Section 1. The provisions of Republic Act No. 1789, as amended,
and of other laws to the contrary notwithstanding, the above-
mentioned properties can be made available for sale, lease or any
other manner of disposition to non-Filipino citizens or to entities
owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the
Roppongi and the three other properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for
the government sector and the private sector (Sections 2 and 12, Rep. Act No.
1789). Only the private sector properties can be sold to end-users who must be
Filipinos or entities owned by Filipinos. It is this nationality provision which was
amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the
sources of funds for its implementation, the proceeds of the disposition of the
properties of the Government in foreign countries, did not withdraw the Roppongi
property from being classified as one of public dominion when it mentions
Philippine properties abroad. Section 63 (c) refers to properties which are
alienable and not to those reserved for public use or service. Rep Act No. 6657,
therefore, does not authorize the Executive Department to sell the Roppongi
property. It merely enumerates possible sources of future funding to augment (as
and when needed) the Agrarian Reform Fund created under Executive Order No.
299. Obviously any property outside of the commerce of man cannot be tapped as
a source of funds.
The respondents try to get around the public dominion character of the Roppongi
property by insisting that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be
the ones to insist that in the sale of extremely valuable government property,
Japanese law and not Philippine law should prevail. The Japanese law - its
coverage and effects, when enacted, and exceptions to its provision is not
presented to the Court It is simply asserted that the lex loci rei sitae or Japanese
law should apply without stating what that law provides. It is a ed on faith that
Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law
situation exists. A conflict of law situation arises only when: (1) There is a dispute
over the title or ownership of an immovable, such that the capacity to take and
transfer immovables, the formalities of conveyance, the essential validity and
effect of the transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2)
A foreign law on land ownership and its conveyance is asserted to conflict with a
domestic law on the same matters. Hence, the need to determine which law should
apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no
question that the property belongs to the Philippines. The issue is the authority of
the respondent officials to validly dispose of property belonging to the State. And
the validity of the procedures adopted to effect its sale. This is governed by
Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the
relevance of the lex situs rule is misplaced. The opinion does not tackle
the alienability of the real properties procured through reparations nor the
existence in what body of the authority to sell them. In discussing who are
capable of acquiring the lots, the Secretary merely explains that it is the foreign
law which should determine who can acquire the properties so that the
constitutional limitation on acquisition of lands of the public domain to Filipino
citizens and entities wholly owned by Filipinos is inapplicable. We see no point in
belaboring whether or not this opinion is correct. Why should we discuss who can
acquire the Roppongi lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the
recommendation by the investigating committee to sell the Roppongi property was
premature or, at the very least, conditioned on a valid change in the public
character of the Roppongi property. Moreover, the approval does not have the
force and effect of law since the President already lost her legislative powers. The
Congress had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no
longer of public dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government
is a party. In cases in which the Government of the Republic of
the Philippines is a party to any deed or other instrument conveying
the title to real estate or to any other property the value of which is
in excess of one hundred thousand pesos, the respective
Department Secretary shall prepare the necessary papers which,
together with the proper recommendations, shall be submitted to
the Congress of the Philippines for approval by the same. Such
deed, instrument, or contract shall be executed and signed by the
President of the Philippines on behalf of the Government of the
Philippines unless the Government of the Philippines unless the
authority therefor be expressly vested by law in another officer.
(Emphasis supplied)
The requirement has been retained in Section 48, Book I of the Administrative
Code of 1987 (Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. Whenever
real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name of the Republic
of the Philippines, by the President, unless the authority therefor is
expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but
titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real property of the government on
his or her own sole will. Any such conveyance must be authorized and approved
by a law enacted by the Congress. It requires executive and legislative
concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the
sale of the Roppongi property does not withdraw the property from public domain
much less authorize its sale. It is a mere resolution; it is not a formal declaration
abandoning the public character of the Roppongi property. In fact, the Senate
Committee on Foreign Relations is conducting hearings on Senate Resolution No.
734 which raises serious policy considerations and calls for a fact-finding
investigation of the circumstances behind the decision to sell the Philippine
government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not
pass upon the constitutionality of Executive Order No. 296. Contrary to
respondents' assertion, we did not uphold the authority of the President to sell the
Roppongi property. The Court stated that the constitutionality of the executive
order was not the real issue and that resolving the constitutional question was
"neither necessary nor finally determinative of the case." The Court noted that
"[W]hat petitioner ultimately questions is the use of the proceeds of the
disposition of the Roppongi property." In emphasizing that "the decision of the
Executive to dispose of the Roppongi property to finance the CARP ... cannot be
questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not
acknowledge the fact that the property became alienable nor did it indicate that the
President was authorized to dispose of the Roppongi property. The resolution
should be read to mean that in case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the proceeds of a sale may be used
for national economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the
proposed 1990 sale of the Roppongi property. We are resolving the issues raised
in these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a need for legislative
authority to allow the sale of the property, we see no compelling reason to tackle
the constitutional issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these
questions are properly raised in appropriate cases and their resolution is
necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The
Court will not pass upon a constitutional question although properly presented by
the record if the case can be disposed of on some other ground such as the
application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213
U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be
sold:
The Roppongi property is not just like any piece of property. It was
given to the Filipino people in reparation for the lives and blood of
Filipinos who died and suffered during the Japanese military
occupation, for the suffering of widows and orphans who lost their
loved ones and kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the Filipino people in the
face of an invader; like the monuments of Rizal, Quezon, and other
Filipino heroes, we do not expect economic or financial benefits
from them. But who would think of selling these monuments?
Filipino honor and national dignity dictate that we keep our
properties in Japan as memorials to the countless Filipinos who
died and suffered. Even if we should become paupers we should not
think of selling them. For it would be as if we sold the lives and
blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the Japanese
government in atonement for its past belligerence for the valiant
sacrifice of life and limb and for deaths, physical dislocation and
economic devastation the whole Filipino people endured in World
War II.
It is for what it stands for, and for what it could never bring back to
life, that its significance today remains undimmed, inspire of the
lapse of 45 years since the war ended, inspire of the passage of 32
years since the property passed on to the Philippine government.
Roppongi is a reminder that cannot should not be dissipated ...
(Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the
inflated prices fetched by real property in Tokyo but more so because of its
symbolic value to all Filipinos veterans and civilians alike. Whether or not the
Roppongi and related properties will eventually be sold is a policy determination
where both the President and Congress must concur. Considering the properties'
importance and value, the laws on conversion and disposition of property of
public dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of
prohibition is issued enjoining the respondents from proceeding with the sale of
the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary
Restraining Order is made PERMANENT.
SO ORDERED.
Melencio-Herrera, Paras, Bidin, Grio-Aquino and Regalado, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172931 June 18, 2009
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES (DENR), Petitioner,
vs.
REGIONAL TRIAL COURT, BRANCH 18, ROXAS CITY, CAPIZ, RIZAL RECIO,
TERESITA RECIO, PACIENCIA RECIO, and HEIR OF OSCAR RECIO, HARRIET
VILLANUEVA vda. DE RECIO, and the REGISTER OF DEEDS, ROXAS CITY,
CAPIZ, Respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari, filed by the Department of Environment and Natural
Resources on behalf of the Republic of the Philippines (RP), seeks to annul and set
aside the Decision1 dated May 25, 2006 of the Court of Appeals, Cebu City, 18th
Division, in CA-G.R. SP No. 72691. The Court of Appeals had dismissed RPs petition for
annulment of judgment2 of the Decision3 dated September 14, 1984 of the Regional Trial
Court (RTC) of Roxas City, Branch 18, which ordered the confirmation and registration of
title to Lot No. 900 of the Pilar Cadastre, LRC Cadastral Record No. 50963 located at
Marita, Pilar, Capiz in the names of the applicants and private respondents herein Rizal
Recio, Teresita L. Recio, Paciencia L. Recio, and the only heir of Oscar L. Recio, his
mother, Harriet Villanueva Vda. de Recio.
The undisputed facts are as follows:
On September 14, 1984, said RTC rendered a decision in Land Registration Case (LRC)
No. N-785 granting the Application for Registration of Title4 dated June 20, 1977 filed by
Rizal Recio for himself and in behalf of his brother Oscar Recio and sisters Teresita
Recio and Paciencia Recio. The RTC decreed:
WHEREFORE, judgment is hereby rendered ordering the confirmation and registration of
title to land, Lot No. 900 of Pilar Cadastre, LRC Cadastral Record No. 50963 situated in
Marita, Municipality of Pilar, Province of Capiz, Island of Panay, described in the
technical description (Exhibit "E") and the approved plan AP-06-000028 (Exhibit "X") in
the names of the applicants Rizal Recio, of legal age, married to Alita B. Laada, with
residence in Loctugan Hills, Roxas City; Teresita L. Recio, of legal age, Filipino, married
to Pio Acelentaba and a resident of Panay, Capiz; Paciencia L. Recio, of legal age,
Filipino, married to Nestor Donado and a resident of Dayao, Roxas City, and to the only
heir of Oscar L. Recio, his mother Harriet Villanueva Vda. de Recio, who is of legal age,
Filipino, a widow and a resident of Roxas City, and a decree may issue after this decision
shall have become final.
SO ORDERED.5
The abovementioned decision became final, and pursuant thereto, Original Certificate of
Title (OCT) No. 0-21076covering the 11,189-square meter piece of land, was issued in
the Recios names on April 17, 1985.
In 1997, a number of occupants of Lot No. 900, namely Joselito Alba, Virginia Bengora,
Teodosia Alba, Celso Bullos, Elizabeth Barrosa, Noel Gallardo, Paquita Ducit and Arturo
Borleo filed a protest before the DENR, Roxas City against the issuance of OCT No. 0-
2107 on the ground that the land covered therein is within forest lands or timberlands,
hence it cannot be the subject of private appropriation.
Acting on the protest, Lorna L. Jomento, Special Investigator II of the Lands
Management Department (LMD), DENR, Region VI, Iloilo City conducted an ocular
inspection and investigation on the status of Lot No. 900.
On January 19, 1998, Jomento rendered a written report7 that Lot No. 900 falls within the
forest lands of Project No. 20-A, established on January 17, 1986 under Forestry
Administrative Order No. 4-1777, per Land Classification (LC) Map No. 3132.8 Jomento
recommended that an action be instituted in the proper court for the cancellation of OCT
No. 0-2107.
On September 9, 2002, RP, represented by the DENR, through the Office of the Solicitor
General (OSG), filed a petition for annulment of judgment before the Court of Appeals
seeking to annul the Decision dated September 14, 1984 on the ground that the RTC
had no jurisdiction to adjudicate title over the subject parcel of land which forms part of
the public forest.9 In the petition, the OSG cited Section 1410 of Presidential Decree No.
152911 which allows the court to adjudicate only alienable and disposable lands of the
public domain in favor of those who have successfully acquired title to said lands by
acquisitive prescription. The OSG argued that the trial court exceeded its jurisdiction
when it adjudicated the subject land which is forest land and, accordingly, its decision is
null and void.12
In their Answer to the Petition for Annulment of Judgment,13 the Recios argued that the
RTC of Roxas City, Branch 18 has jurisdiction over the case. They contended that
petitioner hastily and negligently filed the petition without first examining the records of
LRC No. N-785 and despite its knowledge of their duly approved Plan LRC-SWO-14402
for Lot No. 900 of the Pilar Cadastre. They pointed out that said approved plan clearly
showed that Lot No. 900 was not within LC Project No. 20-A, but LC Project No. 20
which was duly certified as alienable and disposable on September 28, 1960 as per BFD
Map LC-2401. They also argued that the Decision dated September 14, 1984, has been
declared final and executory, and OCT No. 0-2107 has been issued on April 17, 1985, in
their names. Hence, LRC No. N-785 is already a closed case and res judicata has set
in.14
On September 24, 2003, the Court of Appeals issued a Resolution15 directing the
Executive Judge of the RTC in Roxas City to conduct a pre-trial conference and
reception of evidence. However, since the Executive Judge presides in the same branch
where the decision in LRC No. N-785 was rendered, the incident was assigned by raffle
to another judge in the RTC of Roxas City.16 In a Report and Recommendation17 dated
December 13, 2005, Judge Juliana C. Azarraga, RTC of Roxas City, Branch 15,
recommended that the petition for annulment of judgment be dismissed. 1avvphi1
Subsequently, on May 25, 2006, the Court of Appeals dismissed the petition for lack of
sufficient evidence. The decision states:
After going over the evidence offered by both parties, the Court finds it proper to dismiss
the petition.
Petitioner failed to sufficiently prove its allegation that Lot 900 forms part of the forest
lands of the public domain. The evidence offered by the petitioner that Lot 900 falls within
forest lands consists only of the testimonies of its two witnesses, the written report of
Lorna Jomento (Exhibit A), and the ordinary photocopy of the sketch plan of Lot 900
(Exhibit E) and the verification (Exhibit E-1) appearing on it.
The mere photocopy of the sketch plan of Lot 900 (Exhibit E) as well as the verification
(Exhibit E-1) appearing thereon is without probative value and inadmissible in evidence
pursuant to the best evidence rule. In Philippine Banking Corporation vs. Court of
Appeals, the Supreme Court held:
"The Best Evidence Rule provides that the court shall not receive any evidence that is
merely substitutionary in its nature, such as photocopies, as long as the original evidence
can be had. Absent a clear showing that the original writing has been lost, destroyed or
cannot be produced in court, the photocopy must be disregarded, being unworthy of any
probative value and being an inadmissible evidence."
The testimonies of petitioners two witnesses and the written report of Lorna Jomento, a
Special Investigator, stating that based on the records Lot 900 falls within the forest
lands reserved for fishpond created under Project 20-A dated January 17, 1986 under
Forestry Administrative Order No. 4-1777 per Land Classification Map No. 3132 do not
overcome the Certification (Exhibit 1-D for private respondents) dated November 8, 1976
of the then Bureau of Forest Development, Department of Natural Resources (now
DENR, the representative of herein petitioner) certifying that Lot 900 falls within the
alienable and disposable land Block LC Project No. 20 of Pilar, Capiz certified as such
on September 28, 1960 per BFD Map LC-2401. If, indeed, Lot 900 falls within the forest
lands reserved for fishpond purposes created under Project 20-A dated January 17,
1986 under Forestry Administrative Order No. 4-1777 per Land Classification Map No.
3132, petitioner should have presented such land classification map indicating that Lot
900 lies therein and not in Block LC No. 20 of Pilar Cadastre per BFD Map LC-4201 as
stated in the Certification dated November 8, 1976 of the then Bureau of Forest
Development, Department of Natural Resources.
Thus, for failure of the petitioner to adduce sufficient evidence to prove its allegation that
Lot 900 falls within the forest lands the petition has to be dismissed.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED.
SO ORDERED.18
Hence, this petition.
Petitioner raises the following issues for our resolution:
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE
PETITION FOR THE ANNULMENT OF JUDGMENT OF THE REGIONAL TRIAL
COURT, BRANCH 18, IN ROXAS CITY BECAUSE:
A. SAID RTC JUDGMENT WAS ISSUED WITHOUT JURISDICTION AS
IT ALLOWED THE REGISTRATION OF INALIENABLE LAND IN FAVOR
OF PRIVATE INDIVIDUALS.
 B. PETITIONER HAD DISCHARGE[D] THE BURDEN OF
ESTABLISHING THE INALIENABLE AND INDISPOSABLE
CHARACTER OF SUBJECT PARCEL OF LAND BY THE QUANTUM OF
EVIDENCE REQUIRED BY LAW.19
Simply stated, the issues raised are: (1) Did the RTC act without jurisdiction in allowing
the registration of the subject land? And (2) Did petitioner fail to discharge the burden of
establishing the inalienable character of the land?
Petitioner, through the OSG, contends in its Memorandum20 that it is a well-entrenched
rule that the classification of public lands is an exclusive prerogative of the executive
department of the government and not of the courts.21 In this case, it was ascertained in
the investigation conducted by Special Investigator Jomento that the land in question
falls within the forest land reserved for fishpond purposes created under Project No. 20-A
dated January 17, 1986, under Forestry Administrative Order No. 4-1777 per Land
Classification (LC) Map No. 3123 dated August 25, 1983. The land, therefore, is
inalienable and indisposable and can never be subject to appropriation. The OSG
reiterates that under Section 14 of P.D. No. 1529, the court is allowed to adjudicate only
"alienable and disposable lands of the public domain" in favor of those who have
successfully acquired title thereto by acquisitive prescription. In adjudicating forest land
in favor of the private respondents, the RTC of Roxas City, Branch 18 exceeded its
jurisdiction, and its decision confirming title to the subject land in favor of private
respondents is null and void and should have been annulled by the Court of
Appeals.22 Petitioner also argues that the claim of private respondents that the present
appeal is barred by res judicata is incorrect since the present petition ultimately seeks
the nullification of the decision of the RTC of Roxas City, Branch 18, allowing the
registration of inalienable land in their favor.23
The OSG also argues that it had discharged the burden of establishing the inalienable
character of the subject parcel of land by the quantum of evidence required. The actual
presentation of LC Map No. 3132 is no longer necessary because the determination of
the nature and character of public land in a land investigation conducted by government
authorities on land classification is binding on the courts.24 It further argues that Special
Investigators Lorna L. Jomento and Eugenio B. Bernas were merely performing their
official duties as special land investigators of the LMD, DENR, Region VI, in Iloilo City
when they conducted an investigation on the land in question; hence, in the absence of
any evidence showing that said special investigators were biased in favor of one party,
their testimonies and the investigation report should be accorded the presumption of
regularity in the performance of their duties as public officers.25
Private respondents, in their Memorandum26 dated June 14, 2007, for their part maintain
that the Decision dated September 14, 1984 had become final, the Land Registration
Commission had issued a final decree of registration after one year and OCT No. 0-2017
was issued by the Register of Deeds of Capiz in their names on May 14, 1985. The
decision in LRC No. N-785 has therefore become the law between RP, the applicants
and the whole world, and is already a closed case that could no longer be revived in
subsequent unnecessary litigations.27
As to the first issue, did the RTC act without jurisdiction in allowing the registration of
inalienable land?
Petitioner contends that the RTC acted without jurisdiction in allowing the registration of
the subject land because the land is forest land and thus, inalienable. Verily,
jurisprudence is replete with cases which iterate that forest lands or forest reserves are
not capable of private appropriation, and possession thereof, however long, cannot
convert them into private property.28
If indeed the subject land is forest land, then the decision of the RTC is void. A void
judgment may be assailed or impugned at any time either directly or collaterally, by
means of a petition filed in the same case or by means of a separate action, or by
resisting such judgment in any action or proceeding wherein it is invoked.29
Moreover, an action for reversion filed by the State to recover property registered in favor
of any party which is part of the public forest or of a forest reservation never prescribes.
Verily, non-disposable public lands registered under the Land Registration Act may be
recovered by the State at any time and the defense of res judicata would not apply as
courts have no jurisdiction to dispose of such lands of the public domain.30
Under the facts and circumstances of this case, however, we disagree with petitioner
that the subject land is inalienable.
lawphil
At the time of application for registration of the subject land by the Recios in 1977, the
land was classified as alienable public land. The Recios presented a Certification31 dated
November 8, 1976 from the then Bureau of Forest Development certifying that the
subject land containing an area of 11,189 square meters and described as Lot No. 900,
Pilar Cadastre is found to be within the alienable and disposable land block of LC Project
No. 20 of Pilar, Capiz certified as such on September 28, 1960 per BFD Map LC-2401. In
contrast, petitioner presented Jomentos report which stated that Lot No. 900 falls within
forest lands for fishpond development of Project 20-A, established on January 17,
1986 under Forestry Administrative Order No. 4-1777 per LC Map No. 3132.32
It is clear that at the time the Recios filed their application for registration of title in 1977
and at the time the RTC rendered its decision in 1984, the land was not inalienable forest
land but was alienable land. Hence, the RTC had jurisdiction to adjudicate title to the
land.
As to the second issue, we agree with the Court of Appeals that petitioner failed to
discharge the burden of establishing the inalienable character of the land.
In an action to annul a judgment, the burden of proving the judgments nullity rests upon
the petitioner. The petitioner has to establish by clear and convincing evidence that the
judgment being challenged is fatally defective.33
The Court of Appeals ruled that petitioner failed to sufficiently prove its allegation that Lot
No. 900 forms part of the forest lands of the public domain since its evidence consists
only of the testimonies of two witnesses, a written report of Jomento, and a photocopy of
the sketch plan of Lot No. 900. It ruled that a mere photocopy is without probative value
and inadmissible in evidence and petitioner should have presented a land classification
map indicating where Lot No. 900 lies to refute the Certification dated November 8, 1976
of the then Bureau of Forest Development.
The ruling of the Court of Appeals, based on the abovementioned findings of fact, is
upheld by this Court. The jurisdiction of this Court in cases brought before it from the
Court of Appeals is limited to reviewing or revising errors of law. The findings of facts of
the latter are conclusive for it is not the function of this Court to analyze and weigh such
evidence all over again.34 Our jurisdiction is in principle limited to reviewing errors of law
that might have been committed by the Court of Appeals. Factual findings of courts,
when adopted and confirmed by the Court of Appeals, are final and conclusive on this
Court unless these findings are not supported by the evidence on record.35
Finding no reason to deviate from the ruling of the Court of Appeals that petitioner failed
to adduce sufficient evidence to prove its allegation that Lot No. 900 falls within forest
lands, we affirm such ruling.
WHEREFORE, the petition is DENIED. The Decision dated May 25, 2006 of the Court of
Appeals, Cebu City, Eighteenth Division, in CA-G.R. SP No. 72691 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 145838 July 20, 2001
NICASIO I. ALCANTARA, petitioner,
vs.
COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS, SECRETARY OF
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES ANTONIO
CERILLES, THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES,
ROLANDO PAGLANGAN, ET AL., respondents.
----------------------------------------
HEIRS OF DATU ABDUL S. PENDATUN, REP. BY DATU NASSER B. PENDATUN,
AL HAJ., HEIRS OF SABAL MULA, and GAWAN CLAN, REP. BY TRIBAL
CHIEFTAIN LORETO GAWAN, intervenors.
KAPUNAN, J.:
This is a petition for review on certiorari assailing the Decision of the Court of Appeals
dated June 22, 2000 in CA-G.R. SP No. 531591 and its Resolution dated October 16,
2000 denying petitioner's motion for reconsideration.
The facts of the case are as follows:
Sometime in 1993, petitioner Nicasio Alcantara was granted Forest Land Grazing Lease
Agreement No. 542 (FLGLA No. 542) by the Department of Environment and Natural
Resources (DENR). Under said FLGLA, Alcantara was allowed to lease Nine Hundred
Twenty-Three (923) hectares of public forest land at Sitio Lanton, Barrio Apopong,
General Santos City for grazing purposes for a period of twenty-five (25) years to expire
on 31 December 2018.
As early as 1990, however, private respondent Rolando Paglangan together with Esmael
Sabel and Lasid Acop filed a letter-complaint with the Commission on Settlement of Land
Problems (COSLAP) seeking the cancellation of FLGLA No. 542 and the reversion of the
entire 923 hectares to the B'laan and Maguindanaoan tribes. The case was docketed as
COSLAP Case No. 98-052. 1w phi1.nt
Petitioner filed his Answer questioning the jurisdiction of the COSLAP over the case,
since the dispute involved a claim for recovery of ancestral land. Petitioner claimed that
the case should have been filed with the DENR since it is the latter which has jurisdiction
to administer and dispose of public lands, including grazing lands.
Notwithstanding petitioner's objection to the COSLAP's exercise of jurisdiction over the
case, said body continued the hearings thereon. Petitioner alleged that COSLAP did not
conduct formal hearings on the case, and that he was not notified nor given the
opportunity to be present and participate in the field interviews and ocular inspections
conducted by COSLAP.2
On August 3, 1998, the COSLAP issued a Decision ordering the cancellation of FLGLA
No. 542. Petitioner appealed the same to the Court of Appeals by petition for review on
certiorari.
The Court of Appeals dismissed the petition in its Decision dated June 22, 2000, and
also denied petitioners motion for reconsideration in a Resolution dated October 16,
2000.3
Hence, the present petition.
Petitioner contends that the Court of Appeals erred in ruling that he had earlier
recognized the jurisdiction of the COSLAP over the case. He stated further that the
appellate court should have considered that the COSLAP does not possess the
historical, genealogical and anthropological expertise to act on ancestral land claims, and
that it is the National Commission on Indigenous Peoples (NCIP), under the Indigenous
People's Rights Act of 19974 which has jurisdiction over such claims. Petitioner thus
submits that the COSLAP's decision ordering the cancellation of FLGLA No. 542 and
declaring the area being claimed by private respondent as ancestral land is void for
having been issued by a body which does not have jurisdiction over said matters.5
In his Comment, private respondent Rolando Paglangan argued that the petition should
be dismissed since the petition for certiorari filed by petitioner in the Court of Appeals
was filed out of time.6 He also contended that the COSLAP has the power to entertain
cases involving indigenous cultural communities when the DENR or the NCIP fails or
refuses to act on a complaint or grievance brought before them.7 He alleged that the
dispute between petitioner and the B'laan tribe antedated the creation of the NCIP,
hence, filing of the petition for cancellation of the FLGLA with the COSLAP.8
On April 6, 2001, a Motion for Leave to Intervene and to File Complaint-in-Intervention
was filed with this Court by the Heirs of Datu Abdul S. Pendatun, represented by Datu
Nasser B. Pendatun, Al Haj; the Heirs of Sabal Mula, represented by Hadji Latip K. Mula;
and the Gawan Clan, represented by their Tribal Chieftain Loreto Gawan.
Subsequently, on May 24, 2001, they filed an Amended Motion for Leave to Intervene
and to File Amended Complaint-in-Intervention. In their Amended Complaint-in-
Intervention, they allege that the parcels of land in dispute form part of their ancestral
lands, and that they have been in open, continuous, exclusive and notorious possession
under claim of ownership of the same. They stated further that private respondent
Rolando Paglangan acts only as agent of the Mula clan, and not of the other
intervenors.9
The Court finds no reason to disturb the ruling of the Court of Appeals.
The Court of Appeals did not commit any reversible error in the assailed decision. The
Court agrees with the appellate court that petitioner is estopped from questioning the
jurisdiction of the COSLAP since he participated actively in the proceedings before said
body by filing an Answer, a Motion for Reconsideration of the COSLAP's decision and a
Supplement to Respondent's Motion for Reconsideration. The Court also notes the
appellate court's observation that petitioner began to question the jurisdiction of the
COSLAP only when he realized that his period to appeal the COSLAP's decision had
already lapsed.10 It has been repeatedly held by this Court that the active participation of
a respondent in the case pending against him before a court or a quasi-judicial body is
tantamount to a recognition of that court's or body's recognition and a willingness to
abide by the resolution of the case and will bar said party from later on impugning the
court's or body's jurisdiction.11
Moreover, Executive Order No. 561 creating the COSLAP, the law then prevailing when
private respondents filed their complaint for cancellation of FLGLA No. 542, provides in
Section 3, paragraph 2(a) thereof that said Commission may assume jurisdiction over
land disputes involving occupants of the land in question and pasture lease agreement
holders:
Sec. 3. Powers and Functions. -- The Commission shall have the following
powers and functions:
xxx
2. Refer and follow-up for immediate action by the agency having appropriate
jurisdiction any land problem or dispute referred to the
Commission: Provided, That the Commission, may, in the following cases,
assume jurisdiction and resolve land problems or disputes which are critical and
explosive in nature considering, for instance, the large number of the parties
involved, the presence or emergence of social tension or unrest, or other similar
critical situations requiring immediate action:
(a) Between occupants/squatters and pasture lease agreement
holders or timber concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the
public domain; and
 (e) Other similar land problems of grave urgency and magnitude.
The Commission shall promulgate such rules of procedure as will insure
expeditious resolution and action on the above cases. The resolution, order or
decision of the Commission on any of the foregoing cases shall have the force
and effect of a regular administrative resolution, order or decision and shall be
binding upon the parties therein and upon the agency having jurisdiction over the
same. Said resolution, order or decision shall become final and executory within
thirty (30) days from its promulgation and shall be appealable by certiorari only to
the Supreme Court. (Emphasis supplied.)
The Court of Appeals also stated that based on the records, the land area being claimed
by private respondents belongs to the B'laan indigenous cultural community since they
have been in possession of, and have been occupying and cultivating the same since
time immemorial, a fact has not been disputed by petitioner.12 It was likewise declared by
the appellate court that FLGLA No. 542 granted to petitioner violated Section 1 of
Presidential Decree No. 41013 which states that all unappropriated agricultural lands
forming part of the public domain are declared part of the ancestral lands of the
indigenous cultural groups occupying the same, and these lands are further declared
alienable and disposable, to be distributed exclusively among the members of the
indigenous cultural group concerned.
The Court finds no reason to depart from such finding by the appellate court, it being a
settled rule that findings of fact of the Court of Appeals are binding and conclusive upon
the Supreme Court absent any showing that such findings are not supported by the
evidence on record.14
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171304 October 10, 2007
IN THE MATTER OF REVERSION/RECALL OF RECONSTITUTED OCT NO. 0-116
DECREE NO. 3999 OF LOT 4239; DECREE NO. 59327; OCT NO. 388; IN THE
TARLAC REGISTRY OF DEEDS HEIRS OF THE LATE SPS. TIMOTEA L.
PALAGANAS, WIFE OF RAMON PARAGAS, ET AL.; GLORIFICADOR D.
PALAGANAS; ROSELYN E. MENDOZA and DANILO M. MARCELO, representing in
this act as Attorneys-in-Fact,, petitioners,
vs.
REGISTRY OF DEEDS - TARLAC CITY; RTC-BR. 67 PANIQUI, TARLAC; and
MUNICIPALITY OF PANIQUI TARLAC, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal of (1) the 29 April 2005 Resolution1 of the Court of Appeals in CA-G.R. SP
UDK No. 5314, which dismissed petitioners Petition for Annulment of Judgment and (2)
the 5 August 2005 Resolution2 of the appellate court which denied petitioners Motion for
Reconsideration. The Petition for Annulment of Judgment filed by the petitioners with the
Court of Appeals was, in turn, directed against the 29 October 1993 Decision3 of the
Regional Trial Court (RTC) of Tarlac, Branch 67, in Land Case No. 274-P93, which
ordered the reconstitution of the Original Certificates of Title (OCTs) in the name of the
Municipality of Paniqui, Tarlac over the subject property.
The factual and procedural antecedents of the case are as follows:
Sometime in 1910, officials of the Municipal Government of Paniqui, headed by Maximo
Parazo, built a school, a public market, and a cemetery on an untitled parcel of land.
Thereafter, OCTs No. R0-532 (O-116) and No. 388 were issued on 17 February 1911
and 7 June 1915, respectively, in the name of the Municipal Government of Paniqui, by
virtue of the judicial confirmation of its title to the subject property. OCTs No. R0-532 (O-
116) and No. 388 covered the property being claimed by petitioners.
On 29 October 1993, pursuant to a Verified Petition for Reconstitution filed by the
Municipality of Paniqui, represented by Mayor Cesar E. Cuchapin, the RTC issued a
Decision resolving that OCTs No. R0-532 (O-116) and No. 388 were indeed lost, and
ordering the cancellation and the reconstitution of the same as Transfer Certificates of
Title (TCTs) No. 259969, No. 259970, No. 260900, No. 260901, No. 260902, No.
260903, and No. 336772 of the Registry of Deeds of Tarlac City, registered in the name
of the Municipality of Paniqui.
On 3 February 2005, the Municipality of Paniqui demolished its old Public Market in order
to build a new one. Around this time, a former Board Member of the municipality
inadvertently showed a close friend of the petitioners the cancelled OCTs No. RO-532
(O-116) and No. 338 covering the lot where the public market is located. The said OCTs
allegedly named the petitioners ascendants as the former owners of the subject
property.
On 28 March 2005, petitioners filed the Petition for Annulment of Judgment4 with the
Court of Appeals, praying for the cancellation of the TCTs and for the reconveyance in
their favor of the title to the parcels of land.
Petitioners based their petition on the claim that their alleged ascendants were the
original pioneers/settlers/occupants of the land in question since 1843 as its indigenous
inhabitants. In 1910, however, officials of the Municipal Government of Paniqui, headed
by Maximo Parazo, ordered the occupants of the land to vacate their property so that the
municipality could build thereon a school, a public market, and a cemetery. According to
petitioners, their ascendants were not given a chance or opportunity to appear or answer
and present their side at the cadastral proceedings involving the subject properties, from
which resulted the issuance of the OCTs in the name of the Municipality of Paniqui.
On 29 April 2005, the Court of Appeals issued the first assailed Resolution, wherein it
dismissed the Petition for Annulment of Judgment on the following grounds:
1. The Petition was not verified, contrary to Section 4, Rule 47 of the Rules of
Court;
2. The attached copy of the assailed RTC Decision is a mere photocopy and not
a certified true copy, also contrary to Section 4, Rule 47 of the Rules of Court;
3. The corresponding Special Powers of Attorney of the alleged Attorneys-in-Fact
were not attached; and
4. Petitioners failed to indicate the material dates pertinent to the filing of the
Petition, hence, failing to prove that the same was brought within four years from
the discovery of the extrinsic fraud alleged in the assailed 29 October 1993
Decision, contrary to Section 3, Rule 47 of the Rules of Court.
Petitioners filed a Motion for Reconsideration of the dismissal of their Petition, attaching
thereto the following:
1. a copy of page 7 of the Petition containing the Verification of the same5;
2. a photocopy of the assailed 29 October 1993 RTC Decision6;
3. Special Power of Attorney of petitioners Conrado Rivera and Perseveranda
Domingo, appointing and constituting Glorificador D. Palaganas, Roselynne E.
Mendoza, and Danilo M. Marcelo as their Attorneys-in-Fact7; and
4. Special Power of Attorney of petitioners Jose Velasquez, Demetria de Vera
and Luz P. Labutong, appointing and constituting Paciano P. Paragas and
Benedicto P. Manuel as their Attorneys-in-Fact.8
The Court of Appeals, noting that the attached copy of the assailed RTC Decision is still
only a photocopy of a certified xerox copy, held that even if the technicalities were
brushed aside, the Petition would still be dismissed for lack of substantial merit, for the
following reasons:
1. Petitioners failed to show that they are the real parties-in-interest authorized to
institute the Petition for Annulment of Judgment. The Petition did not establish
that the petitioners are truly the successors-in-interest of the individuals indicated
in the technical descriptions of OCT No. R0-532 (0-116) and OCT No. 388.
Although the surnames appearing in the technical descriptions are the same as
those of some of the petitioners, there was no allegation of how the alleged
original inhabitants and the petitioners were related nor was any proof thereof
presented;
2. Petitioners failed to allege fraud in connection with the proceedings in Land
Case No. 274-P93 which culminated in the rendition of the assailed Decision
dated 29 October 1993 by the RTC. The fraud averred by the petitioners was
allegedly committed in the cadastral proceedings for the judicial confirmation of
title to the subject property conducted on 17 February 1911, 7 June 1915 and 20
September 1917, and not in the rendition of the judgment dated 29 October 1993
by the RTC in Land Case No. 274-P93 which petitioners seek to annul; and
3. The claim of petitioners had already been barred by laches. Although
petitioners discovered their supposed right to the disputed property only recently,
their alleged ascendants should have instituted an action against the Municipal
Government of Paniqui, Tarlac, or against Maximo Parazo for the purportedly
unlawful taking of the property way back in the 1920s. The petitioners make no
allegation as to any action taken by the alleged ascendants to recover the subject
property.
The Motion for Reconsideration thus having been denied for lack of merit, petitioners
filed the present Petition for Review on Certiorari.
Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the annulment of a
judgment may "be based only on the grounds of extrinsic fraud and lack of jurisdiction."9
A perusal of the records of the case reveals that petitioners did not allege, much less
prove, either extrinsic fraud or lack of jurisdiction by the RTC in Land Case No. 274-P93.
Petitioners claim was that municipal officials ordered their alleged ascendants to vacate
the subject property way back in 1910 to build a school, a public market and a cemetery
thereon, and that the municipality was subsequently issued OCTs after a judicial
confirmation of its title in 1911 and 1915. Petitioners allege that their ascendants were
defrauded when they were not given a chance or opportunity to appear or answer and
present their side at the cadastral proceedings involving the subject property. It is
apparent that what petitioners are actually challenging are the cadastral proceedings in
which the OCTs over the subject property were issued in the name of the Municipality of
Paniqui. Their Petition was, however, directed against the Decision of the RTC 78 years
later decreeing reconstitution of said OCTs.
Even if we consider that the petition for annulment was, in effect, filed against the 1911
and 1915 judicial decrees confirming the title of the Municipality of Paniqui over the
subject property, as petitioners imply in their Memorandum, their petition must still be
dismissed.
Petitioners failed to prove either extrinsic fraud or lack of jurisdiction, the grounds for a
petition for annulment of judgment, even with respect to the 1911 and 1915 Decrees.
There is extrinsic fraud when the unsuccessful party had been prevented from exhibiting
fully his case, by fraud or deception practiced on him by his opponent, as by keeping him
away from court, or where the defendant never had knowledge of the suit, being kept in
ignorance by the acts of the plaintiff.10 Petitioners presented no proof to substantiate their
allegation that their ascendants were not given a chance or opportunity to appear or
answer and present their side at the cadastral proceedings involving the subject
property.
Likewise, petitioners presented neither any evidence nor any legal argument in support
of their claim of lack of jurisdiction of the court which took cognizance of the cadastral
proceedings in which the OCTs over the subject property were issued in the name of the
Municipality of Paniqui.
In order to cover up for the lack of evidence to prove the grounds for an annulment of
judgment, petitioners relied on an erroneous interpretation of a very old case. Citing the
1906 case, Nicolas v. Jose,11 petitioners claim that extrinsic fraud and lack of jurisdiction
are shown by the mere fact that a municipality had a real property devoted to public use
registered in its name.12
In Nicolas, the then Municipality of Cavite sought to be inscribed as the owner of a
certain track of land situated within said municipality. Finding that the property in
question is a public square, this Court, applying a provision in the Spanish Civil Code,
held that:
The evidence shows, and the court below so found, that at the time the Kiosko
Cafe and the theater were built, they were built upon a public street or square
known as the Paseo Plaza de la Soledad."
xxxx
The question remains as to whether the municipality is entitled to have the land
upon which the Kiosko Caf stands registered in its name. Article 344 of the Civil
Code is as follows:
"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 the said towns or provinces.
"All other property possessed by either is patrimonial, and shall be governed by
the provisions of this code, unless otherwise prescribed in special laws."
The land in question, upon which this Kiosko Caf stands, being dedicated to
public use, we do not think it is subject to inscription by the municipality. Article
25 of the regulations for the execution of the Mortgage Law prohibits the
inscription of public streets in the old registry. Public streets are not bienes
patrimoniales of the municipality so long as they are destined to public use.13
Properties of local government units under the Spanish Civil Code were limited to
properties for public use and patrimonial property.14 The same is still true under the 1950
Civil Code which governs us today. The principle has remained constant: property for
public use can be used by everybody, even by strangers or aliens, in accordance with its
nature; but nobody can exercise over it the rights of a private owner.15 As aptly held by
this court in The Province of Zamboanga del Norte v. City of Zamboanga16:
The Civil Code classification is embodied in its Arts. 423 and 424 which provide:
"ART. 423. The property of provinces, cities and municipalities, is divided into
property for public use and patrimonial property. "
"ART. 424. Property for public use, in the provinces, cities, and municipalities,
consists of the provincial roads, city streets, municipal streets, the squares,
fountains, public waters, promenades, and public works for public service paid for
by said provinces, cities, or municipalities.
"All other property possessed by any of them is patrimonial and shall be
governed by this Code, without prejudice to the provisions of special laws."
 Applying the above cited norm, all the properties in question, except the two (2)
lots used as High School playgrounds, could be considered as patrimonial
properties of the former Zamboanga province. Even the capitol site, the hospital
and leprosarium sites, and the school sites will be considered patrimonial for they
are not for public use. They would not fall under the phrase "public works for
public service" for it has been held that under the ejusdem generis rule, such
public works must be for free and indiscriminate use by anyone, just like the
preceeding enumerated properties in the first paragraph of Art. 424. The
playgrounds, however, would fit into this category.17
While this Court in Province of Zamboanga del Norte ended up using the Municipal
Corporation Law classification instead of that of the Civil Code
classification,18 Nicolas has settled the application of the Civil Code classification with
respect to the provision of the then-in-effect regulations for the execution of the Mortgage
Law.
In the case at bar, a school, a public market, and a cemetery were built upon the subject
property. Unlike a public square as that in Nicolas or a playground as that in the Province
of Zamboanga del Norte, schools, public markets and cemeteries are not for the free and
indiscriminate use of everyone. The determination of the persons allowed to study in
such schools, or put up stalls in the public market, or bury their dead in public cemeteries
are regulated by the government. As such, the subject property is, under the Civil Code
classification, patrimonial property, and the Municipality may have the same registered in
its name.
As neither extrinsic fraud nor lack of jurisdiction had been proven by petitioners, we hold
that the Court of Appeals was correct in dismissing petitioners Petition for Annulment of
Judgment.
We likewise affirm the finding of the Court of Appeals that the claim of petitioners had
already been barred by laches. Laches is defined as failure or neglect for an
unreasonable and unexplained length of time to do that which, by exercising due
diligence, could or should have been done earlier. It is negligence or omission to assert a
right within a reasonable time, warranting the presumption that the party entitled to assert
it has either abandoned or declined to assert it.19
The recent discovery by petitioners of their supposed right to the disputed property
notwithstanding, petitioners alleged ascendants should have instituted an action against
the Municipal Government of Paniqui or against Maximo Parazo for the allegedly
unlawful taking of the property way back in the 1920s. As asserted by petitioners
themselves, the Municipality of Paniqui had openly taken over the property and
exercised rights over the same. The period of the omission of petitioners purported
predecessors-in-interest since the taking of the property in 1910 up to the filing of the
petition is certainly an unreasonable time. Being the purported successors-in-interest of
the former owners of the subject property, petitioners merely stepped into the shoes of
their predecessors-in-interest, and are bound by their actions and inactions.20
This brings us to the final reason for the denial of the present petition. The records of the
case are bereft of any proof on the part of petitioners that they are indeed the
successors-in-interest of the supposed former owners of the subject property. Bearing
the same surnames as the individuals indicated in the technical descriptions of the OCTs
being reconstituted is woefully inadequate to prove their relationship. As petitioners failed
to establish that they are the descendants of the supposed former owners of the subject
property, the case at bar cannot be prosecuted in their name, as they are not the real
parties-in-interest as provided in Section 2, Rule 3 of the Rules of Court.
A real party-in-interest is one who stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit. By real interest is meant a present
substantial interest, as distinguished from a mere expectancy; or a future, contingent,
subordinate, or consequential interest.21 Rule 3, Section 2, of the Rules of Court provides
explicitly that every action must be prosecuted and defended in the name of the real
party-in-interest. Petitioners failure to prove such real interest constrained the Court of
Appeals to dismiss the petition.
WHEREFORE, the Petition is DENIED. The 29 April 2005 Resolution of the Court of
Appeals dismissing petitioners Petition for Annulment of Judgment in CA-G.R. SP UDK
No. 5314 and the 5 August 2005 Resolution of the same court denying petitioners
Motion for Reconsideration are AFFIRMED.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Carpio-Morales, Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF
INTERNAL REVENUE,defendants-appellants.
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.
Office of the Solicitor General for defendants-appellants.
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used
to be the provincial capital of the then Zamboanga Province. On October 12, 1936,
Commonwealth Act 39 was approved converting the Municipality of Zamboanga into
Zamboanga City. Sec. 50 of the Act also provided that
Buildings and properties which the province shall abandon upon the
transfer of the capital to another place will be acquired and paid for by the City of
Zamboanga at a price to be fixed by the Auditor General.
The properties and buildings referred to consisted of 50 lots and some buildings
constructed thereon, located in the City of Zamboanga and covered individually by
Torrens certificates of title in the name of Zamboanga Province. As far as can be
gleaned from the records, 1 said properties were being utilized as follows
No. of Lots Use
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School
2 ................................................ Burleigh School
2 ................................................ High School Playground
9 ................................................ Burleighs
1 ................................................ Hydro-Electric Site (Magay)
1 ................................................ San Roque
23 ................................................ vacant
It appears that in 1945, the capital of Zamboanga Province was transferred to
Dipolog. 2 Subsequently, or on June 16, 1948, Republic Act 286 was approved creating
the municipality of Molave and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor General,
pursuant to Commonwealth Act 39, fixed the value of the properties and buildings in
question left by Zamboanga Province in Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of
Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the
assets and obligations of the old province were to be divided between the two new ones,
Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and
the obligations of the province of Zamboanga shall be divided equitably between
the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by
the President of the Philippines, upon the recommendation of the Auditor
General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the
assets and obligations of the defunct Province of Zamboanga as follows: 54.39% for
Zamboanga del Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte
therefore became entitled to 54.39% of P1,294,244.00, the total value of the lots and
buildings in question, or P704,220.05 payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a
ruling 4 holding that Zamboanga del Norte had a vested right as owner (should be co-
owner pro-indiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39, and
is entitled to the price thereof, payable by Zamboanga City. This ruling revoked the
previous Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and buildings
thereon to Zamboanga City for P1.00, effective as of 1945, when the provincial capital of
the then Zamboanga Province was transferred to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue
to deduct an amount equal to 25% of the regular internal revenue allotment for the City of
Zamboanga for the quarter ending March 31, 1960, then for the quarter ending June 30,
1960, and again for the first quarter of the fiscal year 1960-1961. The deductions, all
aggregating P57,373.46, was credited to the province of Zamboanga del Norte, in partial
payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50
of Commonwealth Act 39 by providing that
All buildings, properties and assets belonging to the former province of
Zamboanga and located within the City of Zamboanga are hereby transferred,
free of charge, in favor of the said City of Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the
Commissioner of Internal Revenue to stop from effecting further payments to
Zamboanga del Norte and to return to Zamboanga City the sum of P57,373.46 taken
from it out of the internal revenue allotment of Zamboanga del Norte. Zamboanga City
admits that since the enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has
already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962,
a complaint entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the
Court of First Instance of Zamboanga del Norte against defendants-appellants
Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue. It
was prayed that: (a) Republic Act 3039 be declared unconstitutional for depriving plaintiff
province of property without due process and just compensation; (b) Plaintiff's rights and
obligations under said law be declared; (c) The Secretary of Finance and the Internal
Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to
defendant City; and (d) The latter be ordered to continue paying the balance of
P704,220.05 in quarterly installments of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as
prayed for. After defendants filed their respective answers, trial was held. On August 12,
1963, judgment was rendered, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No.
3039 unconstitutional insofar as it deprives plaintiff Zamboanga del Norte of its
private properties, consisting of 50 parcels of land and the improvements thereon
under certificates of title (Exhibits "A" to "A-49") in the name of the defunct
province of Zamboanga; ordering defendant City of Zamboanga to pay to the
plaintiff the sum of P704,220.05 payment thereof to be deducted from its regular
quarterly internal revenue allotment equivalent to 25% thereof every quarter until
said amount shall have been fully paid; ordering defendant Secretary of Finance
to direct defendant Commissioner of Internal Revenue to deduct 25% from the
regular quarterly internal revenue allotment for defendant City of Zamboanga and
to remit the same to plaintiff Zamboanga del Norte until said sum of P704,220.05
shall have been fully paid; ordering plaintiff Zamboanga del Norte to execute
through its proper officials the corresponding public instrument deeding to
defendant City of Zamboanga the 50 parcels of land and the improvements
thereon under the certificates of title (Exhibits "A" to "A-49") upon payment by the
latter of the aforesaid sum of P704,220.05 in full; dismissing the counterclaim of
defendant City of Zamboanga; and declaring permanent the preliminary
mandatory injunction issued on June 8, 1962, pursuant to the order of the Court
dated June 4, 1962. No costs are assessed against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province
filed a motion to reconsider praying that Zamboanga City be ordered instead to pay the
P704,220.05 in lump sum with 6% interest per annum. Over defendants' opposition, the
lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief
filed in the lower court on the assertion that the law had already been violated and that
plaintiff sought to give it coercive effect, since assuming the same to be true, the Rules
anyway authorize the conversion of the proceedings to an ordinary action, 5 We proceed
to the more important and principal question of the validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings
thereon in question. For, the matter involved here is the extent of legislative control over
the properties of a municipal corporation, of which a province is one. The principle itself
is simple: If the property is owned by the municipality (meaning municipal corporation) in
its public and governmental capacity, the property is public and Congress has absolute
control over it. But if the property is owned in its private or proprietary capacity, then it is
patrimonial and Congress has no absolute control. The municipality cannot be deprived
of it without due process and payment of just compensation. 6
The capacity in which the property is held is, however, dependent on the use to
which it is intended and devoted. Now, which of two norms, i.e., that of the Civil Code or
that obtaining under the law of Municipal Corporations, must be used in classifying the
properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide: 1w ph1.t
ART. 423. The property of provinces, cities, and municipalities is divided
into property for public use and patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and
municipalities, consists of the provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public
service paid for by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be governed
by this Code, without prejudice to the provisions of special laws. (Stressed for
emphasis).
Applying the above cited norm, all the properties in question, except the two (2)
lots used as High School playgrounds, could be considered as patrimonial properties of
the former Zamboanga province. Even the capital site, the hospital and leprosarium
sites, and the school sites will be considered patrimonial for they are not for public use.
They would fall under the phrase "public works for public service" for it has been held TCT
that under the ejusdem generis rule, such public works must be for free and Lot Number Use
Number
indiscriminate use by anyone, just like the preceding enumerated properties in the first 2200 ...................................... 4-B ...................................... Capitol Site
paragraph of Art 424. 7 The playgrounds, however, would fit into this category.
2816 ...................................... 149 ...................................... School Site
This was the norm applied by the lower court. And it cannot be said that its 3281 ...................................... 1224 ...................................... Hospital Site
actuation was without jurisprudential precedent for in Municipality of Catbalogan v. 3282 ...................................... 1226 ...................................... Hospital Site
Director of Lands, 8 and in Municipality of Tacloban v. Director of Lands, 9 it was held that 3283 ...................................... 1225 ...................................... Hospital Site
the capitol site and the school sites in municipalities constitute their patrimonial
3748 ...................................... 434-A-1 ...................................... School Site
properties. This result is understandable because, unlike in the classification regarding
State properties, properties for public service in the municipalities are not classified as 5406 ...................................... 171 ...................................... School Site
public. Assuming then the Civil Code classification to be the chosen norm, the lower High School
5564 ...................................... 168 ......................................
court must be affirmed except with regard to the two (2) lots used as playgrounds. Play-ground
157 & Trade
On the other hand, applying the norm obtaining under the principles constituting 5567 ...................................... ......................................
158 School
the law of Municipal Corporations, all those of the 50 properties in question which are High School
devoted to public service are deemed public; the rest remain patrimonial. Under this 5583 ...................................... 167 ......................................
Play-ground
norm, to be considered public, it is enough that the property be held and, devoted for
governmental purposes like local administration, public education, public health, etc. 10 Curuan
6181 ...................................... (O.C.T.) ......................................
School
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. 11942 ...................................... 926 ...................................... Leprosarium
DIRECTOR OF LANDS, 11where it was stated that "... where the municipality has 11943 ...................................... 927 ...................................... Leprosarium
occupied lands distinctly for public purposes, such as for the municipal court house, the 11944 ...................................... 925 ...................................... Leprosarium
public school, the public market, or other necessary municipal building, we will, in the Burleigh
absence of proof to the contrary, presume a grant from the States in favor of the 5557 ...................................... 170 ......................................
School
municipality; but, as indicated by the wording, that rule may be invoked only as to
property which is used distinctly for public purposes...." (2) VIUDA DE TANTOCO V. Burleigh
5562 ...................................... 180 ......................................
MUNICIPAL COUNCIL OF ILOILO 12 held that municipal properties necessary for School
governmental purposes are public in nature. Thus, the auto trucks used by the 5565 ...................................... 172-B ...................................... Burleigh
municipality for street sprinkling, the police patrol automobile, police stations and 5570 ...................................... 171-A ...................................... Burleigh
concrete structures with the corresponding lots used as markets were declared exempt 5571 ...................................... 172-C ...................................... Burleigh
from execution and attachment since they were not patrimonial properties. (3)
MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a municipal lot which 5572 ...................................... 174 ...................................... Burleigh
had always been devoted to school purposes is one dedicated to public use and is not 5573 ...................................... 178 ...................................... Burleigh
patrimonial property of a municipality. 5585 ...................................... 171-B ...................................... Burleigh
5586 ...................................... 173 ...................................... Burleigh
Following this classification, Republic Act 3039 is valid insofar as it affects the lots
5587 ...................................... 172-A ...................................... Burleigh
used as capitol site, school sites and its grounds, hospital and leprosarium sites and the
high school playground sites a total of 24 lots since these were held by the former
Zamboanga province in its governmental capacity and therefore are subject to the We noticed that the eight Burleigh lots above described are adjoining each other
absolute control of Congress. Said lots considered as public property are the following: and in turn are between the two lots wherein the Burleigh schools are built, as per
records appearing herein and in the Bureau of Lands. Hence, there is sufficient basis for
holding that said eight lots constitute the appurtenant grounds of the Burleigh schools,
and partake of the nature of the same.
 Regarding the several buildings existing on the lots above-mentioned, the records 5584 ...................................... 190 ...................................... "
do not disclose whether they were constructed at the expense of the former Province of 5588 ...................................... 184 ...................................... "
Zamboanga. Considering however the fact that said buildings must have been erected
even before 1936 when Commonwealth Act 39 was enacted and the further fact that 5589 ...................................... 187 ...................................... "
provinces then had no power to authorize construction of buildings such as those in the 5590 ...................................... 189 ...................................... "
case at bar at their own expense, 14 it can be assumed that said buildings were erected 5591 ...................................... 192 ...................................... "
by the National Government, using national funds. Hence, Congress could very well 5592 ...................................... 193 ...................................... "
dispose of said buildings in the same manner that it did with the lots in question.
5593 ...................................... 185 ...................................... "
But even assuming that provincial funds were used, still the buildings constitute 7379 ...................................... 4147 ...................................... "
mere accessories to the lands, which are public in nature, and so, they follow the nature
of said lands, i.e., public. Moreover, said buildings, though located in the city, will not be Moreover, the fact that these 26 lots are registered strengthens the proposition
for the exclusive use and benefit of city residents for they could be availed of also by the that they are truly private in nature. On the other hand, that the 24 lots used for
provincial residents. The province then and its successors-in-interest are not really governmental purposes are also registered is of no significance since registration cannot
deprived of the benefits thereof. convert public property to private. 16

But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its
share in the value of the rest of the 26 remaining lots which are patrimonial properties
since they are not being utilized for distinctly, governmental purposes. Said lots are:
TCT Number Lot Number
5577 ...................................... 177 ...................................... Mydro, Magay
13198 ...................................... 127-0 ...................................... San Roque
5569 ...................................... 169 ...................................... Burleigh 15
5558 ...................................... 175 ...................................... Vacant
5559 ...................................... 188 ......................................
5560 ...................................... 183 ......................................
5561 ...................................... 186 ......................................
5563 ...................................... 191 ......................................
5566 ...................................... 176 ......................................
5568 ...................................... 179 ......................................
5574 ...................................... 196 ......................................
5575 ...................................... 181-A ......................................
5576 ...................................... 181-B ......................................
5578 ...................................... 182 ......................................
5579 ...................................... 197 ......................................
5580 ...................................... 195 ......................................
5581 ...................................... 159-B ......................................
5582 ...................................... 194 ......................................
We are more inclined to uphold this latter view. The controversy here is more
along the domains of the Law of Municipal Corporations State vs. Province than
along that of Civil Law. Moreover, this Court is not inclined to hold that municipal property
held and devoted to public service is in the same category as ordinary private property.
Use The consequences are dire. As ordinary private properties, they can be levied upon and
attached. They can even be acquired thru adverse possession all these to the
detriment of the local community. Lastly, the classification of properties other than those
for public use in the municipalities as patrimonial under Art. 424 of the Civil Code is "...
without prejudice to the provisions of special laws." For purpose of this article, the
principles, obtaining under the Law of Municipal Corporations can be considered as
"special laws". Hence, the classification of municipal property devoted for distinctly
"
governmental purposes as public should prevail over the Civil Code classification in this
" particular case.
"
" Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches
" is without merit. Under Commonwealth Act 39, Sec. 50, the cause of action in favor of
the defunct Zamboanga Province arose only in 1949 after the Auditor General fixed the
" value of the properties in question. While in 1951, the Cabinet resolved transfer said
" properties practically for free to Zamboanga City, a reconsideration thereof was
" seasonably sought. In 1952, the old province was dissolved. As successor-in-interest to
" more than half of the properties involved, Zamboanga del Norte was able to get a
reconsideration of the Cabinet Resolution in 1959. In fact, partial payments were effected
" subsequently and it was only after the passage of Republic Act 3039 in 1961 that the
" present controversy arose. Plaintiff brought suit in 1962. All the foregoing, negative
" laches.
"
It results then that Zamboanga del Norte is still entitled to collect from the City of
"
Zamboanga the former's 54.39% share in the 26 properties which are patrimonial in
nature, said share to computed on the basis of the valuation of said 26 properties as
contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed
by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the
P43,030.11 already returned to defendant City. The return of said amount to defendant
was without legal basis. Republic Act 3039 took effect only on June 17, 1961 after a
partial payment of P57,373.46 had already been made. Since the law did not provide for
retroactivity, it could not have validly affected a completed act. Hence, the amount of
P43,030.11 should be immediately returned by defendant City to plaintiff province. The
remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should
then be paid by defendant City in the same manner originally adopted by the Secretary
of Finance and the Commissioner of Internal Revenue, and not in lump sum. Plaintiff's
prayer, particularly pars. 5 and 6, read together with pars. 10 and 11 of the first cause of
action recited in the complaint 17clearly shows that the relief sought was merely the
continuance of the quarterly payments from the internal revenue allotments of defendant
City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify
lump sum payment is inapplicable since there has been so far in legal contemplation no
complete delivery of the lots in question. The titles to the registered lots are not yet in the
name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another
judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga
del Norte in lump sum the amount of P43,030.11 which the former took back from the
latter out of the sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of
whatever balance remains of plaintiff's 54.39% share in the 26 patrimonial properties,
after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated
March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of
quarterly payments from the allotments of defendant City, in the manner originally
adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No
costs. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 97764 August 10, 1992
LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic
Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial
Court of Makati, Metro Manila, MUNICIPALITY OF PARAAQUE, METRO MANILA,
PALANYAG KILUSANG BAYAN FOR SERVICE, respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Paraaque.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment
of the decision of the Regional Trial Court of Makati, Branch 62, which granted the writ of
preliminary injunction applied for by respondents Municipality of Paraaque and
Palanyag Kilusang Bayan for Service (Palanyag for brevity) against petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990
which authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension
and Opena Streets located at Baclaran, Paraaque, Metro Manila and the establishment
of a flea market thereon. The said ordinance was approved by the municipal council
pursuant to MMC Ordinance No. 2, Series of 1979, authorizing and regulating the use of
certain city and/or municipal streets, roads and open spaces within Metropolitan Manila
as sites for flea market and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990
of the municipal council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that
the majority of the residents do not oppose the establishment of the flea
market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area
shall be marked distinctly, and that the 2 meters on both sides of the road
shall be used by pedestrians;
 3. That the time during which the vending area is to be used shall be
clearly designated;
4. That the use of the vending areas shall be temporary and shall be
closed once the reclaimed areas are developed and donated by the
Public Estate Authority.
On June 20, 1990, the municipal council of Paraaque issued a resolution authorizing
Paraaque Mayor Walfrido N. Ferrer to enter into contract with any service cooperative
for the establishment, operation, maintenance and management of flea markets and/or
vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service
cooperative, entered into an agreement whereby the latter shall operate, maintain and
manage the flea market in the aforementioned streets with the obligation to remit dues to
the treasury of the municipal government of Paraaque. Consequently, market stalls
were put up by respondent Palanyag on the said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the
Metropolitan Traffic Command, ordered the destruction and confiscation of stalls along
G.G. Cruz and J. Gabriel St. in Baclaran. These stalls were later returned to respondent
Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent
Palanyag giving the latter ten (10) days to discontinue the flea market; otherwise, the
market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial
court a joint petition for prohibition and mandamus with damages and prayer for
preliminary injunction, to which the petitioner filed his memorandum/opposition to the
issuance of the writ of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin
petitioner from enforcing his letter-order of October 16, 1990 pending the hearing on the
motion for writ of preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the validity of
Ordinance No. 86 s. 1990 of the Municipality' of Paraaque and enjoining petitioner Brig.
Gen. Macasiano from enforcing his letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General
alleging grave abuse of discretion tantamount to lack or excess of jurisdiction on the part
of the trial judge in issuing the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution
issued by the municipal council of Paraaque authorizing the lease and use of public
streets or thoroughfares as sites for flea markets is valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for
public service and are therefore public properties; that as such, they cannot be subject to
private appropriation or private contract by any person, even by the respondent
Municipality of Paraaque. Petitioner submits that a property already dedicated to public
use cannot be used for another public purpose and that absent a clear showing that the
Municipality of Paraaque has been granted by the legislature specific authority to
convert a property already in public use to another public use, respondent municipality is,
therefore, bereft of any authority to close municipal roads for the establishment of a flea
market. Petitioner also submits that assuming that the respondent municipality is
authorized to close streets, it failed to comply with the conditions set forth by the
Metropolitan Manila Authority for the approval of the ordinance providing for the
establishment of flea markets on public streets. Lastly, petitioner contends that by
allowing the municipal streets to be used by market vendors the municipal council of
respondent municipality violated its duty under the Local Government Code to promote
the general welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a
statutory grant of power given to local government units, the Municipality
of Paraaque as such, is empowered under that law to close its roads,
streets or alley subject to limitations stated therein (i.e., that it is in
accordance with existing laws and the provisions of this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though
apparently within its power is in fact an encroachment of power legally
vested to the municipality, precisely because when the municipality
enacted the ordinance in question the authority of the respondent as
Police Superintendent ceases to be operative on the ground that the
streets covered by the ordinance ceases to be a public thoroughfare. (pp.
33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed
municipal ordinance authorizing the flea market on the public streets is valid, it is
necessary to examine the laws in force during the time the said ordinance was enacted,
namely, Batas Pambansa Blg. 337, otherwise known as Local Government Code, in
connection with established principles embodied in the Civil Code an property and
settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use
and patrimonial property (Art. 423, Civil Code). As to what consists of property for public
use, Article 424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities and
municipalities, consists of the provincial roads, city streets, the squares,
fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities or municipalities.
All other property possessed by any of them is patrimonial and shall be
governed by this Code, without prejudice to the provisions of special
laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and
Opena streets are local roads used for public service and are therefore considered public
properties of respondent municipality. Properties of the local government which are
devoted to public service are deemed public and are under the absolute control of
Congress (Province of Zamboanga del Norte v. City of Zamboanga, L-24440, March 28,
1968, 22 SCRA 1334). Hence, local governments have no authority whatsoever to
control or regulate the use of public properties unless specific authority is vested upon
them by Congress. One such example of this authority given by Congress to the local
governments is the power to close roads as provided in Section 10, Chapter II of the
Local Government Code, which states:
Sec. 10. Closure of roads. A local government unit may likewise,
through its head acting pursuant to a resolution of its sangguniang and in
accordance with existing law and the provisions of this Code, close any
barangay, municipal, city or provincial road, street, alley, park or
square. No such way or place or any part of thereof shall be close without
indemnifying any person prejudiced thereby. A property thus withdrawn
from public use may be used or conveyed for any purpose for which other
real property belonging to the local unit concerned might be lawfully used
or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units
to close roads and other similar public places should be read and interpreted in
accordance with basic principles already established by law. These basic principles have
the effect of limiting such authority of the province, city or municipality to close a public
street or thoroughfare. Article 424 of the Civil Code lays down the basic principle that
properties of public dominion devoted to public use and made available to the public in
general are outside the commerce of man and cannot be disposed of or leased by the
local government unit to private persons. Aside from the requirement of due process
which should be complied with before closing a road, street or park, the closure should
be for the sole purpose of withdrawing the road or other public property from public use
when circumstances show that such property is no longer intended or necessary for
public use or public service. When it is already withdrawn from public use, the property
then becomes patrimonial property of the local government unit concerned (Article 422,
Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29,
1975, 66 SCRA 481). It is only then that the respondent municipality can "use or convey
them for any purpose for which other real property belonging to the local unit concerned
might be lawfully used or conveyed" in accordance with the last sentence of Section 10,
Chapter II of Blg. 337, known as Local Government Code. In one case, the City Council
of Cebu, through a resolution, declared the terminal road of M. Borces Street, Mabolo,
Cebu City as an abandoned road, the same not being included in the City Development
Plan. Thereafter, the City Council passes another resolution authorizing the sale of the
said abandoned road through public bidding. We held therein that the City of Cebu is
empowered to close a city street and to vacate or withdraw the same from public use.
Such withdrawn portion becomes patrimonial property which can be the object of an
ordinary contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are
available to the public in general and ordinarily used for vehicular traffic are still
considered public property devoted to public use. In such case, the local government has
no power to use it for another purpose or to dispose of or lease it to private persons. This
limitation on the authority of the local government over public properties has been
discussed and settled by this Court en banc in "Francisco V. Dacanay, petitioner v.
Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654, May 6, 1992." This Court
ruled:
There is no doubt that the disputed areas from which the private
respondents' market stalls are sought to be evicted are public streets, as
found by the trial court in Civil Case No. C-12921. A public street is
property for public use hence outside the commerce of man (Arts. 420,
424, Civil Code). Being outside the commerce of man, it may not be the
subject of lease or others contract (Villanueva, et al. v. Castaeda and
Macalino, 15 SCRA 142 citing the Municipality of Cavite v. Rojas, 30
SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869;
And Muyot v. De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the right to
occupy portions of the public street, the City Government, contrary to law,
has been leasing portions of the streets to them. Such leases or licenses
are null and void for being contrary to law. The right of the public to use
the city streets may not be bargained away through contract. The
interests of a few should not prevail over the good of the greater number
 in the community whose health, peace, safety, good order and general
welfare, the respondent city officials are under legal obligation to protect.
The Executive Order issued by acting Mayor Robles authorizing the use
of Heroes del '96 Street as a vending area for stallholders who were
granted licenses by the city government contravenes the general law that
reserves city streets and roads for public use. Mayor Robles' Executive
Order may not infringe upon the vested right of the public to use city
streets for the purpose they were intended to serve: i.e., as arteries of
travel for vehicles and pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the authority to
pass the disputed ordinance, the same cannot be validly implemented because it cannot
be considered approved by the Metropolitan Manila Authority due to non-compliance by
respondent municipality of the conditions imposed by the former for the approval of the
ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that
the majority of the residents do(es) not oppose the establishment of the
flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area
shall be marked distinctly, and that the 2 meters on both sides of the road
shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be
clearly designated;
4. That the use of the vending areas shall be temporary and shall be
closed once the reclaimed areas are developed and donated by the
Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the
foregoing conditions precedent to the approval of the ordinance. The allegations of
respondent municipality that the closed streets were not used for vehicular traffic and
that the majority of the residents do not oppose the establishment of a flea market on
said streets are unsupported by any evidence that will show that this first condition has
been met. Likewise, the designation by respondents of a time schedule during which the
flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with
people, houses and traffic brought about by the proliferation of vendors occupying the
streets. To license and allow the establishment of a flea market along J. Gabriel, G.G.
Cruz, Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not help in
solving the problem of congestion. We take note of the other observations of the Solicitor
General when he said:
. . . There have been many instances of emergencies and fires where
ambulances and fire engines, instead of using the roads for a more direct
access to the fire area, have to maneuver and look for other streets which
are not occupied by stalls and vendors thereby losing valuable time which
could, otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its
ambulances and the people rushing their patients to the hospital cannot
pass through G.G. Cruz because of the stalls and the vendors. One can
only imagine the tragedy of losing a life just because of a few seconds
delay brought about by the inaccessibility of the streets leading to the
hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls
and vendors, normal transportation flow is disrupted and school children
have to get off at a distance still far from their schools and walk, rain or
shine.
Indeed one can only imagine the garbage and litter left by vendors on the
streets at the end of the day. Needless to say, these cause further
pollution, sickness and deterioration of health of the residents therein.
(pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of
petitioners. Instead, respondents want this Court to focus its attention solely on the
argument that the use of public spaces for the establishment of a flea market is well
within the powers granted by law to a local government which should not be interfered
with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to
limitations laid down by toe Constitution and the laws such as our Civil Code. Moreover,
the exercise of such powers should be subservient to paramount considerations of health
and well-being of the members of the community. Every local government unit has the
sworn obligation to enact measures that will enhance the public health, safety and
convenience, maintain peace and order, and promote the general prosperity of the
inhabitants of the local units. Based on this objective, the local government should refrain
from acting towards that which might prejudice or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to
demand the demolition of the illegally constructed stalls in public roads and streets and
the officials of respondent municipality have the corresponding duty arising from public
office to clear the city streets and restore them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and
illegal for lack of basis and authority in laws applicable during its time. However, at this
point, We find it worthy to note that Batas Pambansa Blg. 337, known as Local
Government Lode, has already been repealed by Republic Act No. 7160 known as Local
Government Code of 1991 which took effect on January 1, 1992. Section 5(d) of the new
Code provides that rights and obligations existing on the date of effectivity of the new
Code and arising out of contracts or any other source of prestation involving a local
government unit shall be governed by the original terms and conditions of the said
contracts or the law in force at the time such rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional
Trial Court dated December 17, 1990 which granted the writ of preliminary injunction
enjoining petitioner as PNP Superintendent, Metropolitan Traffic Command from
enforcing the demolition of market stalls along J. Gabriel, G.G. Cruz, Bayanihan, Lt.
Garcia Extension and Opena streets is hereby RESERVED and SET ASIDE.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-61311 September 2l, 1987
FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA
MIRANDA, RICARDO PUNO, FLORENCIO LAXA, and RENE OCAMPO, petitioners,
vs.
HON. MARIANO CASTAEDA, JR., Presiding Judge of the Court of First Instance
of Pampanga, Branch III, VICENTE A. MACALINO, Officer-in-Charge, Office of the
Mayor, San Fernando, Pampanga, respondents.
CRUZ, J.:
There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado
Street, a strip of land measuring 12 by 77 meters on which stands a conglomeration of
vendors stalls together forming what is commonly known as a talipapa. This is the
subject of the herein petition. The petitioners claim they have a right to remain in and
conduct business in this area by virtue of a previous authorization granted to them by the
municipal government. The respondents deny this and justify the demolition of their stalls
as illegal constructions on public property. At the petitioners' behest, we have issued a
temporary restraining order to preserve the status quo between the parties pending our
decision. 1 Now we shall rule on the merits.
This dispute goes back to November 7, 1961, when the municipal council of San
Fernando adopted Resolution No. 218 authorizing some 24 members of the Fernandino
United Merchants and Traders Association to construct permanent stags and sell in the
above-mentioned place. 2 The action was protested on November 10, 1961, in Civil Case
No. 2040, where the Court of First Instance of Pampanga, Branch 2, issued a writ of
preliminary injunction that prevented the defendants from constructing the said stalls until
final resolution of the controversy. 3 On January 18, 1964, while this case was pending, the
municipal council of San Fernando adopted Resolution G.R. No. 29, which declared the
subject area as "the parking place and as the public plaza of the municipality, 4 thereby
impliedly revoking Resolution No. 218, series of 1961. Four years later, on November 2,
1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land occupied by
the petitioners, being public in nature, was beyond the commerce of man and therefore could
not be the subject of private occupancy. 5 The writ of preliminary injunction was made
permanent. 6
The decision was apparently not enforced, for the petitioners were not evicted from the
place; in fact, according to then they and the 128 other persons were in 1971 assigned
specific areas or space allotments therein for which they paid daily fees to the municipal
government. 7 The problem appears to have festered for some more years under a
presumably uneasy truce among the protagonists, none of whom made any move, for some
reason that does not appear in the record. Then, on January 12, 1982, the Association of
Concerned Citizens and Consumers of San Fernando filed a petition for the immediate
implementation of Resolution No. 29, to restore the subject property "to its original and
customary use as a public plaza. 8
Acting thereon after an investigation conducted by the municipal attorney, 9 respondent
Vicente A. Macalino, as officer-in-charge of the office of the mayor of San Fernando, issued
on June 14, 1982, a resolution requiring the municipal treasurer and the municipal engineer
to demolish the stalls in the subject place beginning July 1, 1982. 10 The reaction of the petitioners
was to file a petition for prohibition with the Court of First Instance of Pampanga, docketed as Civil Case No. 6470, on June
26, 1982. The respondent judge denied the petition on July 19, 1982, 11 and the motion for reconsideration on August 5,
1982, 12 prompting the petitioners to come to this Court on certiorari to challenge his decision. 13
As required, respondent Macalino filed his comment 14 on the petition, and the petitioners countered
with their reply. 15 In compliance with our resolution of February 2, 1983, the petitioners submitted their
memorandum 16 and respondent Macalino, for his part, asked that his comment be considered his memorandum. 17 On
July 28, 1986, the new officer-in-charge of the office of the mayor of San Fernando, Paterno S. Guevarra, was impleaded in
lieu of Virgilio Sanchez, who had himself earlier replaced the original respondent Macalino. 18
After considering the issues and the arguments raised by the parties in their respective
pleadings, we rule for the respondents. The petition must be dismissed.
There is no question that the place occupied by the petitioners and from which they are
sought to be evicted is a public plaza, as found by the trial court in Civil Case No. 2040.
This finding was made after consideration of the antecedent facts as especially
established by the testimony of former San Fernando Mayor Rodolfo Hizon, who later
became governor of Pampanga, that the National Planning Commission had reserved
the area for a public plaza as early as 1951. This intention was reiterated in 1964 through
the adoption of Resolution No. 29. 19
It does not appear that the decision in this case was appealed or has been reversed. In
Civil Case G.R. No. 6740, which is the subject of this petition, the respondent judge saw
no reason to disturb the finding in Civil Case No. 2040 and indeed used it as a basis for
his own decision sustaining the questioned order. 20
The basic contention of the petitioners is that the disputed area is under lease to them by
virtue of contracts they had entered into with the municipal government, first in 1961
insofar as the original occupants were concerned, and later with them and the other
petitioners by virtue of the space allocations made in their favor in 1971 for which they
saw they are paying daily fees. 21 The municipal government has denied making such
agreements. In any case, they argue, since the fees were collected daily, the leases,
assuming their validity, could be terminated at will, or any day, as the claimed rentals
indicated that the period of the leases was from day to day. 22
The parties belabor this argument needlessly.
A public plaza is beyond the commerce of man and so cannot be the subject of lease or
any other contractual undertaking. This is elementary. Indeed, this point was settled as
early as in Municipality of Cavite vs. Rojas, 23decided in 1915, where the Court declared as
null and void the lease of a public plaza of the said municipality in favor of a private person.
Justice Torres said in that case:
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."
Therefore, it must be concluded that the contract, Exhibit C, whereby the
municipality of Cavite leased to Hilaria Rojas a portion of the Plaza
Soledad is null and void and of no force or effect, because it is contrary to
the law and the thing leased cannot be the object of a was held that the
City of contract.
In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a
public sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce of man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from the present of the
City of Manila, to connect booths Nos. 1 and 2, along the premises in
question, and for the use of spaces where the booths were constructed,
they had paid and continued paying the corresponding rentals. Granting
this claim to be true, one should not entertain any doubt that such permit
was not legal, because the City of Manila does not have any power or
authority at all to lease a portion of a public sidewalk. The sidewalk in
question, forming part of the public plaza of Sta. Cruz, could not be a
proper subject matter of the contract, as it was not within the commerce
of man (Article 1347, new Civil Code, and article 1271, old Civil Code).
Any contract entered into by the City of Manila in connection with the
sidewalk, is ipso facto null and ultra vires. (Municipality of Cavite vs.
Roxas, et a1, 30 Phil. 603.) The sidewalk in question was intended for
and was used by the public, in going from one place to another. "The
streets and public places of the city shall be kept free and clear for the
use of the public, and the sidewalks and crossings for the pedestrians,
and the same shall only be used or occupied for other purpose as
provided by ordinance or regulation; ..." (Sec. 1119, Revised Ordinances
 of the City of Manila.) The booths in question served as fruit stands for
their owners and often, if not always, blocked the fire passage of
pedestrians who had to take the plaza itself which used to be clogged
with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of Pozorrubio, 25 where the Supreme
Court declared:
There is absolutely no question that the town plaza cannot be used for
the construction of market stalls, specially of residences, and that such
structures constitute a nuisance subject to abatement according to law.
Town plazas are properties of public dominion, to be devoted to public
use and to be made available to the public in general They are outside
the common of man and cannot be disposed of or even leased by the
municipality to private parties.
Applying this well-settled doctrine, we rule that the petitioners had no right in the first
place to occupy the disputed premises and cannot insist in remaining there now on the
strength of their alleged lease contracts. They should have realized and accepted this
earlier, considering that even before Civil Case No. 2040 was decided, the
municipalcouncil of San Fernando had already adopted Resolution No. 29, series of
1964, declaring the area as the parking place and public plaza of the municipality.
It is the decision in Civil Case No. 2040 and the said resolution of the municipal council
of San Fernando that respondent Macalino was seeking to enforce when he ordered the
demolition of the stags constructed in the disputed area. As officer-in-charge of the office
of the mayor, he had the duty to clear the area and restore it to its intended use as a
parking place and public plaza of the municipality of San Fernando, conformably to the
aforementioned orders from the court and the council. It is, therefore, not correct to say
that he had acted without authority or taken the law into his hands in issuing his order.
Neither can it be said that he acted whimsically in exercising his authority for it has been
established that he directed the demolition of the stalls only after, upon his instructions,
the municipal attorney had conducted an investigation, to look into the complaint filed by
the Association of Concerned Citizens and Consumers of San Fernando. 26 There is
evidence that the petitioners were notified of this hearing, 27which they chose to disregard.
Photographs of the disputed area, 28 which does look congested and ugly, show that the
complaint was valid and that the area really needed to be cleared, as recommended by the
municipal attorney.
The Court observes that even without such investigation and recommendation, the
respondent mayor was justified in ordering the area cleared on the strength alone of its
status as a public plaza as declared by the judicial and legislative authorities. In calling
first for the investigation (which the petitioner saw fit to boycott), he was just scrupulously
paying deference to the requirements of due process, to remove an taint of arbitrariness
in the action he was caged upon to take.
Since the occupation of the place in question in 1961 by the original 24 stallholders
(whose number later ballooned to almost 200), it has deteriorated increasingly to the
great prejudice of the community in general. The proliferation of stags therein, most of
them makeshift and of flammable materials, has converted it into a veritable fire trap,
which, added to the fact that it obstructs access to and from the public market itself, has
seriously endangered public safety. The filthy condition of the talipapa, where fish and
other wet items are sold, has aggravated health and sanitation problems, besides
pervading the place with a foul odor that has spread into the surrounding areas. The
entire place is unsightly, to the dismay and embarrassment of the inhabitants, who want
it converted into a showcase of the town of which they can all be proud. The vendors in
the talipapa have also spilled into the street and obstruct the flow of traffic, thereby
impairing the convenience of motorists and pedestrians alike. The regular stallholders in
the public market, who pay substantial rentals to the municipality, are deprived of a
sizable volume of business from prospective customers who are intercepted by
the talipapa vendors before they can reach the market proper. On top of all these, the
people are denied the proper use of the place as a public plaza, where they may spend
their leisure in a relaxed and even beautiful environment and civic and other communal
activities of the town can be held.
The problems caused by the usurpation of the place by the petitioners are covered by
the police power as delegated to the municipality under the general welfare
clause. 29 This authorizes the municipal council "to enact such ordinances and make such
regulations, not repugnant to law, as may be necessary to carry into effect and discharge the
powers and duties conferred upon it by law and such as shall seem necessary and proper to
provide for the health and safety, promote the prosperity, improve the morals, peace, good
order, comfort, and convenience of the municipality and the inhabitants thereof, and for the
protection of property therein." This authority was validly exercised in this casethrough the
adoption of Resolution No. 29, series of 1964, by the municipal council of San Fernando.
Even assuming a valid lease of the property in dispute, the resolution could have
effectively terminated the agreement for it is settled that the police power cannot be
surrendered or bargained away through the medium of a contract. 30 In fact, every contract
affecting the public interest suffers a congenital infirmity in that it contains an implied
reservation of the police power as a postulate of the existing legal order. 31 This power can be
activated at any time to change the provisions of the contract, or even abrogate it entirely, for
the promotion or protection of the general welfare. Such an act will not militate against the
impairment clause, which is subject to and limited by the paramount police power. 32
We hold that the respondent judge did not commit grave abuse of discretion in denying
the petition for prohibition. On the contrary, he acted correctly in sustaining the right and
responsibility of the mayor to evict the petitioners from the disputed area and clear it of
an the structures illegally constructed therein.
The Court feels that it would have been far more amiable if the petitioners themselves,
recognizing their own civic duty, had at the outset desisted from their original stance and
withdrawn in good grace from the disputed area to permit its peaceful restoration as a
public plaza and parking place for the benefit of the whole municipality. They owned this
little sacrifice to the community in general which has suffered all these many years
because of their intransigence. Regrettably, they have refused to recognize that in the
truly democratic society, the interests of the few should yield to those of the greater
number in deference to the principles that the welfare of the people is the supreme law
and overriding purpose. We do not see any altruism here. The traditional ties of sharing
are absent here. What we find, sad to say, is a cynical disdaining of the spirit of
"bayanihan," a selfish rejection of the cordial virtues of "pakikisama " and "pagbibigayan"
which are the hallmarks of our people.
WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the
order-dated August 5, 1982, are AFFIRMED. The temporary restraining order dated
August 9, 1982, is LIFTED. This decision is immediately executory. Costs against the
petitioners.
SO ORDERED.
Teehankee, C.J., Narvasa and Paras, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 179987 September 3, 2013
HEIRS OF MARIO MALABANAN, (Represented by Sally A. Malabanan), Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
RESOLUTION
BERSAMIN, J.:
For our consideration and resolution are the motions for reconsideration of the parties
who both assail the decision promulgated on April 29, 2009, whereby we upheld the
ruling of the Court of Appeals (CA) denying the application of the petitioners for the
registration of a parcel of land situated in Barangay Tibig, Silang, Cavite on the ground
that they had not established by sufficient evidence their right to the registration in
accordance with either Section 14(1) or Section 14(2) of Presidential Decree No. 1529
(Property Registration Decree).
Antecedents
The property subject of the application for registration is a parcel of land situated in
Barangay Tibig, Silang Cavite, more particularly identified as Lot 9864-A, Cad-452-D,
with an area of 71,324-square meters. On February 20, 1998, applicant Mario
Malabanan, who had purchased the property from Eduardo Velazco, filed an application
for land registration covering the property in the Regional Trial Court (RTC) in Tagaytay
City, Cavite, claiming that the property formed part of the alienable and disposable land
of the public domain, and that he and his predecessors-in-interest had been in open,
continuous, uninterrupted, public and adverse possession and occupation of the land for
more than 30 years, thereby entitling him to the judicial confirmation of his title.1
To prove that the property was an alienable and disposable land of the public domain,
Malabanan presented during trial a certification dated June 11, 2001 issued by the
Community Environment and Natural Resources Office (CENRO) of the Department of
Environment and Natural Resources (DENR), which reads:
This is to certify that the parcel of land designated as Lot No. 9864 Cad 452-D, Silang
Cadastre as surveyed for Mr. Virgilio Velasco located at Barangay Tibig, Silang, Cavite
containing an area of 249,734 sq. meters as shown and described on the Plan Ap-04-
00952 is verified to be within the Alienable or Disposable land per Land Classification
Map No. 3013 established under Project No. 20-A and approved as such under FAO 4-
1656 on March 15, 1982.2
After trial, on December 3, 2002, the RTC rendered judgment granting Malabanans
application for land registration, disposing thusly:
WHEREFORE, this Court hereby approves this application for registration and thus
places under the operation of Act 141, Act 496 and/or P.D. 1529, otherwise known as
Property Registration Law, the lands described in Plan Csd-04-0173123-D, Lot 9864-A
and containing an area of Seventy One Thousand Three Hundred Twenty Four (71,324)
Square Meters, as supported by its technical description now forming part of the record
of this case, in addition to other proofs adduced in the name of MARIO MALABANAN,
who is of legal age, Filipino, widower, and with residence at Munting Ilog, Silang, Cavite.
Once this Decision becomes final and executory, the corresponding decree of
registration shall forthwith issue.
SO ORDERED.3
The Office of the Solicitor General (OSG) appealed the judgment to the CA, arguing that
Malabanan had failed to prove that the property belonged to the alienable and
disposable land of the public domain, and that the RTC erred in finding that he had been
in possession of the property in the manner and for the length of time required by law for
confirmation of imperfect title.
On February 23, 2007, the CA promulgated its decision reversing the RTC and
dismissing the application for registration of Malabanan. Citing the ruling in Republic v.
Herbieto (Herbieto),4 the CA declared that under Section 14(1) of the Property
Registration Decree, any period of possession prior to the classification of the land as
alienable and disposable was inconsequential and should be excluded from the
computation of the period of possession. Noting that the CENRO-DENR certification
stated that the property had been declared alienable and disposable only on March 15,
1982, Velazcos possession prior to March 15, 1982 could not be tacked for purposes of
computing Malabanans period of possession.
Due to Malabanans intervening demise during the appeal in the CA, his heirs elevated
the CAs decision of February 23, 2007 to this Court through a petition for review on
certiorari.
The petitioners assert that the ruling in Republic v. Court of Appeals and Corazon
Naguit5 (Naguit) remains the controlling doctrine especially if the property involved is
agricultural land. In this regard, Naguit ruled that any possession of agricultural land prior
to its declaration as alienable and disposable could be counted in the reckoning of the
period of possession to perfect title under the Public Land Act (Commonwealth Act No.
141) and the Property Registration Decree. They point out that the ruling in Herbieto, to
the effect that the declaration of the land subject of the application for registration as
alienable and disposable should also date back to June 12, 1945 or earlier, was a mere
obiter dictum considering that the land registration proceedings therein were in fact found
and declared void ab initio for lack of publication of the notice of initial hearing.
The petitioners also rely on the ruling in Republic v. T.A.N. Properties, Inc.6 to support
their argument that the property had been ipso jure converted into private property by
reason of the open, continuous, exclusive and notorious possession by their
predecessors-in-interest of an alienable land of the public domain for more than 30
years. According to them, what was essential was that the property had been "converted"
into private property through prescription at the time of the application without regard to
whether the property sought to be registered was previously classified as agricultural
land of the public domain.
As earlier stated, we denied the petition for review on certiorari because Malabanan
failed to establish by sufficient evidence possession and occupation of the property on
his part and on the part of his predecessors-in interest since June 12, 1945, or earlier.
Petitioners Motion for Reconsideration
In their motion for reconsideration, the petitioners submit that the mere classification of
the land as alienable or disposable should be deemed sufficient to convert it into
patrimonial property of the State. Relying on the rulings in Spouses De Ocampo v.
Arlos,7 Menguito v. Republic8 and Republic v. T.A.N. Properties, Inc.,9 they argue that the
reclassification of the land as alienable or disposable opened it to acquisitive prescription
under the Civil Code; that Malabanan had purchased the property from Eduardo Velazco
believing in good faith that Velazco and his predecessors-in-interest had been the real
owners of the land with the right to validly transmit title and ownership thereof; that
consequently, the ten-year period prescribed by Article 1134 of the Civil Code, in relation
to Section 14(2) of the Property Registration Decree, applied in their favor; and that when
Malabanan filed the application for registration on February 20, 1998, he had already
been in possession of the land for almost 16 years reckoned from 1982, the time when
the land was declared alienable and disposable by the State.
The Republics Motion for Partial Reconsideration
The Republic seeks the partial reconsideration in order to obtain a clarification with
reference to the application of the rulings in Naguit and Herbieto.
Chiefly citing the dissents, the Republic contends that the decision has enlarged, by
implication, the interpretation of Section 14(1) of the Property Registration Decree
through judicial legislation. It reiterates its view that an applicant is entitled to registration
only when the land subject of the application had been declared alienable and
disposable since June 12, 1945 or earlier.
Ruling
We deny the motions for reconsideration.
In reviewing the assailed decision, we consider to be imperative to discuss the different
classifications of land in relation to the existing applicable land registration laws of the
Philippines.
Classifications of land according to ownership
Land, which is an immovable property,10 may be classified as either of public dominion or
of private ownership.11Land is considered of public dominion if it either: (a) is intended for
public use; or (b) belongs to the State, without being for public use, and is intended for
some public service or for the development of the national wealth.12 Land belonging to
the State that is not of such character, or although of such character but no longer
intended for public use or for public service forms part of the patrimonial property of the
State.13 Land that is other than part of the patrimonial property of the State, provinces,
cities and municipalities is of private ownership if it belongs to a private individual.
Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first introduced into the
country from the West by Spain through the Laws of the Indies and the Royal
Cedulas,14 all lands of the public domain belong to the State.15This means that the State
is the source of any asserted right to ownership of land, and is charged with the
conservation of such patrimony.16
All lands not appearing to be clearly under private ownership are presumed to belong to
the State. Also, public lands remain part of the inalienable land of the public domain
unless the State is shown to have reclassified or alienated them to private persons.17
Classifications of public lands
according to alienability
Whether or not land of the public domain is alienable and disposable primarily rests on
the classification of public lands made under the Constitution. Under the 1935
Constitution,18 lands of the public domain were classified into three, namely, agricultural,
timber and mineral.19 Section 10, Article XIV of the 1973 Constitution classified lands of
the public domain into seven, specifically, agricultural, industrial or commercial,
residential, resettlement, mineral, timber or forest, and grazing land, with the reservation
that the law might provide other classifications. The 1987 Constitution adopted the
classification under the 1935 Constitution into agricultural, forest or timber, and mineral,
but added national parks.20 Agricultural lands may be further classified by law according
to the uses to which they may be devoted.21 The identification of lands according to their
legal classification is done exclusively by and through a positive act of the Executive
Department.22
Based on the foregoing, the Constitution places a limit on the type of public land that may
be alienated. Under Section 2, Article XII of the 1987 Constitution, only agricultural lands
of the public domain may be alienated; all other natural resources may not be.
Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial
lands of the State, or those classified as lands of private ownership under Article 425 of
the Civil Code,23 without limitation; and (b) lands of the public domain, or the public lands
as provided by the Constitution, but with the limitation that the lands must only be
agricultural. Consequently, lands classified as forest or timber, mineral, or national parks
are not susceptible of alienation or disposition unless they are reclassified as
agricultural.24 A positive act of the Government is necessary to enable such
reclassification,25 and the exclusive prerogative to classify public lands under existing
laws is vested in the Executive Department, not in the courts.26 If, however, public land
will be classified as neither agricultural, forest or timber, mineral or national park, or when
public land is no longer intended for public service or for the development of the national
wealth, thereby effectively removing the land from the ambit of public dominion, a
declaration of such conversion must be made in the form of a law duly enacted by
Congress or by a Presidential proclamation in cases where the President is duly
authorized by law to that effect.27 Thus, until the Executive Department exercises its
prerogative to classify or reclassify lands, or until Congress or the President declares that
the State no longer intends the land to be used for public service or for the development
of national wealth, the Regalian Doctrine is applicable.
Disposition of alienable public lands
Section 11 of the Public Land Act (CA No. 141) provides the manner by which alienable
and disposable lands of the public domain, i.e., agricultural lands, can be disposed of, to
wit:
Section 11. Public lands suitable for agricultural purposes can be disposed of only as
follows, and not otherwise:
(1) For homestead settlement;
(2) By sale;
(3) By lease; and
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).
The core of the controversy herein lies in the proper interpretation of Section 11(4), in
relation to Section 48(b) of the Public Land Act, which expressly requires possession by
a Filipino citizen of the land since June 12, 1945, or earlier, viz:
Section 48. The following-described citizens of the Philippines, occupying lands of the
public domain or claiming to own any such lands or an interest therein, but whose titles
have not been perfected or completed, may apply to the Court of First Instance of the
province where the land is located for confirmation of their claims and the issuance of a
certificate of title thereafter, under the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation of alienable and
disposable lands of the public domain, under a bona fide claim of acquisition of
ownership, since June 12, 1945, or earlier, immediately preceding the filing of the
applications for confirmation of title, except when prevented by war or force majeure.
These shall be conclusively presumed to have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of title under the provisions of this
chapter. (Bold emphasis supplied)
Note that Section 48(b) of the Public Land Act used the words "lands of the public
domain" or "alienable and disposable lands of the public domain" to clearly signify that
lands otherwise classified, i.e., mineral, forest or timber, or national parks, and lands of
patrimonial or private ownership, are outside the coverage of the Public Land Act. What
the law does not include, it excludes. The use of the descriptive phrase "alienable and
disposable" further limits the coverage of Section 48(b) to only the agricultural lands of
the public domain as set forth in Article XII, Section 2 of the 1987 Constitution. Bearing in
mind such limitations under the Public Land Act, the applicant must satisfy the following
requirements in order for his application to come under Section 14(1) of the Property
Registration Decree,28 to wit:
1. The applicant, by himself or through his predecessor-in-interest, has been in
possession and occupation of the property subject of the application;
2. The possession and occupation must be open, continuous, exclusive, and
notorious;
3. The possession and occupation must be under a bona fide claim of acquisition
of ownership;
4. The possession and occupation must have taken place since June 12, 1945,
or earlier; and
5. The property subject of the application must be an agricultural land of the
public domain.
Taking into consideration that the Executive Department is vested with the authority to
classify lands of the public domain, Section 48(b) of the Public Land Act, in relation to
Section 14(1) of the Property Registration Decree, presupposes that the land subject of
the application for registration must have been already classified as agricultural land of
the public domain in order for the provision to apply. Thus, absent proof that the land is
already classified as agricultural land of the public domain, the Regalian Doctrine
applies, and overcomes the presumption that the land is alienable and disposable as laid
down in Section 48(b) of the Public Land Act. However, emphasis is placed on the
requirement that the classification required by Section 48(b) of the Public Land Act is
classification or reclassification of a public land as agricultural.
The dissent stresses that the classification or reclassification of the land as alienable and
disposable agricultural land should likewise have been made on June 12, 1945 or earlier,
because any possession of the land prior to such classification or reclassification
produced no legal effects. It observes that the fixed date of June 12, 1945 could not be
minimized or glossed over by mere judicial interpretation or by judicial social policy
concerns, and insisted that the full legislative intent be respected.
We find, however, that the choice of June 12, 1945 as the reckoning point of the requisite
possession and occupation was the sole prerogative of Congress, the determination of
which should best be left to the wisdom of the lawmakers. Except that said date qualified
the period of possession and occupation, no other legislative intent appears to be
associated with the fixing of the date of June 12, 1945. Accordingly, the Court should
interpret only the plain and literal meaning of the law as written by the legislators.
Moreover, an examination of Section 48(b) of the Public Land Act indicates that
Congress prescribed no requirement that the land subject of the registration should have
been classified as agricultural since June 12, 1945, or earlier. As such, the applicants
imperfect or incomplete title is derived only from possession and occupation since June
12, 1945, or earlier. This means that the character of the property subject of the
application as alienable and disposable agricultural land of the public domain determines
its eligibility for land registration, not the ownership or title over it.
Alienable public land held by a possessor, either personally or through his predecessors-
in-interest, openly, continuously and exclusively during the prescribed statutory period is
converted to private property by the mere lapse or completion of the period.29 In fact, by
virtue of this doctrine, corporations may now acquire lands of the public domain for as
long as the lands were already converted to private ownership, by operation of law, as a
result of satisfying the requisite period of possession prescribed by the Public Land
Act.30 It is for this reason that the property subject of the application of Malabanan need
not be classified as alienable and disposable agricultural land of the public domain for
the entire duration of the requisite period of possession.
To be clear, then, the requirement that the land should have been classified as alienable
and disposable agricultural land at the time of the application for registration is necessary
only to dispute the presumption that the land is inalienable.
The declaration that land is alienable and disposable also serves to determine the point
at which prescription may run against the State. The imperfect or incomplete title being
confirmed under Section 48(b) of the Public Land Act is title that is acquired by reason of
the applicants possession and occupation of the alienable and disposable agricultural
land of the public domain. Where all the necessary requirements for a grant by the
Government are complied with through actual physical, open, continuous, exclusive and
public possession of an alienable and disposable land of the public domain, the
possessor is deemed to have acquired by operation of law not only a right to a grant, but
a grant by the Government, because it is not necessary that a certificate of title be issued
in order that such a grant be sanctioned by the courts.31
If one follows the dissent, the clear objective of the Public Land Act to adjudicate and
quiet titles to unregistered lands in favor of qualified Filipino citizens by reason of their
occupation and cultivation thereof for the number of years prescribed by law32 will be
defeated. Indeed, we should always bear in mind that such objective still prevails, as a
fairly recent legislative development bears out, when Congress enacted legislation
(Republic Act No. 10023)33in order to liberalize stringent requirements and procedures in
the adjudication of alienable public land to qualified applicants, particularly residential
lands, subject to area limitations.34
On the other hand, if a public land is classified as no longer intended for public use or for
the development of national wealth by declaration of Congress or the President, thereby
converting such land into patrimonial or private land of the State, the applicable provision
concerning disposition and registration is no longer Section 48(b) of the Public Land Act
but the Civil Code, in conjunction with Section 14(2) of the Property Registration
Decree.35 As such, prescription can now run against the State.
To sum up, we now observe the following rules relative to the disposition of public land or
lands of the public domain, namely:
(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the
public domain belong to the State and are inalienable. Lands that are not clearly
under private ownership are also presumed to belong to the State and, therefore,
may not be alienated or disposed;
(2) The following are excepted from the general rule, to wit:
(a) Agricultural lands of the public domain are rendered alienable and
disposable through any of the exclusive modes enumerated under
Section 11 of the Public Land Act. If the mode is judicial confirmation of
imperfect title under Section 48(b) of the Public Land Act, the agricultural
land subject of the application needs only to be classified as alienable
and disposable as of the time of the application, provided the applicants
possession and occupation of the land dated back to June 12, 1945, or
earlier. Thereby, a conclusive presumption that the applicant has
performed all the conditions essential to a government grant arises,36 and
the applicant becomes the owner of the land by virtue of an imperfect or
incomplete title. By legal fiction, the land has already ceased to be part of
the public domain and has become private property.37
(b) Lands of the public domain subsequently classified or declared as no
longer intended for public use or for the development of national wealth
are removed from the sphere of public dominion and are considered
converted into patrimonial lands or lands of private ownership that may
be alienated or disposed through any of the modes of acquiring
ownership under the Civil Code. If the mode of acquisition is prescription,
whether ordinary or extraordinary, proof that the land has been already
converted to private ownership prior to the requisite acquisitive
prescriptive period is a condition sine qua non in observance of the law
(Article 1113, Civil Code) that property of the State not patrimonial in
character shall not be the object of prescription.
To reiterate, then, the petitioners failed to present sufficient evidence to establish that
they and their predecessors-in-interest had been in possession of the land since June
12, 1945. Without satisfying the requisite character and period of possession -
possession and occupation that is open, continuous, exclusive, and notorious since June
12, 1945, or earlier - the land cannot be considered ipso jure converted to private
property even upon the subsequent declaration of it as alienable and disposable.
Prescription never began to run against the State, such that the land has remained
ineligible for registration under Section 14(1) of the Property Registration Decree.
Likewise, the land continues to be ineligible for land registration under Section 14(2) of
the Property Registration Decree unless Congress enacts a law or the President issues a
proclamation declaring the land as no longer intended for public service or for the
development of the national wealth.
1w phi 1
WHEREFORE, the Court DENIES the petitioners' Motion for Reconsideration and the
respondent's Partial Motion for Reconsideration for their lack of merit.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17635 March 30, 1963
EDUARDO SANCHEZ, GREGORIO NUEZ, SULPICIO BANAAG, LINO BASA and
RODOLPO FERNANDEZ,petitioners-appellants,
vs.
MUNICIPALITY OF ASINGAN, Province of Pangasinan, respondent-appellee.
Castillo, Diaz, Tayabas and Torres for petitioners-appellants.
Guillermo, Navarro, Rame and Venture for respondent-appellee.
MAKALINTAL, J.:
This case is before us on appeal by the plaintiffs from the decision of the Court of First
Instance of Pangasinan.
The facts as found by the trial court are as follows: The defendant municipality, appellee
herein, is the owner of a triangular strip of land situated between the site of the municipal
school building and the provincial road, measuring 42 x 26-1/2 x 46 meters. On that land
appellants, with the knowledge and implied consent of the municipality, constructed
temporary stores and buildings of light materials shortly after the end of the last war.
Between 1952 and 1959 they paid rents to appellee. When a new local administration
took over after the elections of November 1959 the municipal council passed a resolution
notifying the occupants of the land that the same was needed for certain public
purposes, such as parking space, expansion of school grounds, widening of the road and
waiting area for pedestrians. Appellants were therefore advised to vacate on or before
May 15, 1960, some five (5) months after the date of notice. Instead of moving, however,
appellants filed a petition for prohibition with the court a quo on May 10, 1960 to prevent
the municipality from ejecting them from the land, with the alternative prayer that should
they be ejected, appellee be ordered to reimburse to them the rents which they had paid,
in the total sum of P1,178.20. There was also a demand for damages and attorney's
fees. After trial, the court dismissed the petition and ordered appellants to vacate the
land, with costs.
Appellants' first contention here is that the land in question belongs to the Province of
Pangasinan and therefore appellee has no right to order their ejectment. The premise of
the contention is incorrect, for the clear and specific finding of the court a quo is that the
said land is owned by the Municipality of Asingan. This is a factual conclusion that is no
longer open to review in the present appeal. The additional statement by the court "that it
is part of the broad shoulder of the provincial road" does not make the land provincial
property, such statement being merely descriptive of its location and not indicative of its
ownership..
The next issue raised by appellants is with reference to the sum of P1,178.20 paid by
them as rents from 1952 to 1959. They claim the right to be reimbursed in case they
should be ejected, and cite the case of Rojas v. Municipality of Cavite, 30 Phil. 607,
where this Court, after declaring null and void the lease of a public plaza belonging to the
said municipality and ordering the lessee to vacate the same, ordered the municipality to
reimburse the rentals collected. It should be noted that while the property involved in that
case was clearly devoted to public use, and therefore outside the commerce of man, and
could not under any circumstance have been the object of a valid contract of lease,
appellee's position herein is that the land in question is patrimonial character, not being
included in any of the categories of municipal properties for public use enumerated in
Article 424 of the Civil Code, namely: "municipal streets, squares, fountains, public
waters, promenades and public works for public service in said municipality." There is
indeed nothing in the decision appealed from or in the briefs of the parties to show that
the land was devoted to any of those purposes when appellants began their occupancy.
Consequently, the implied agreement of lease with them was not null and void, although
terminable upon the notice as appellee herein elected to terminate it. That being so,
there is no ground on which reimbursement of the rents may be ordered.
In any event, even granting that the land in question is for public use and therefore the
municipality of Asingan could not legally lease it to private parties, we see no justification
for the stand maintained by appellants that after having occupied said land and derived
benefits therefrom they should still be entitled to recover what they have paid as a
condition for their ejectment. That would be to enrich them unduly to the prejudice of
appellee. Besides, it may be said that when they built their temporary structures on the
land with the latter's knowledge and implied consent they both treated it as municipal
patrimonial property. Insofar as the rents already paid by them are concerned appellants
are estopped from claiming otherwise in order to obtain a recovery.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1w ph1.t
The judgment appealed from is affirmed, with cost against appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera,
Paredes, Dizon and Regala, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9069 March 31, 1915
THE MUNICIPALITY OF CAVITE, plaintiff-appellant,
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-appellees.
Attorney-General Villamor for appellant.
J. Y. Pinzon for appellees.
TORRES, J.:
Appeal filed through bill of exceptions by the Attorney-General, representing the plaintiff
municipality of Cavite, from the judgment of March 27, 1913, whereby the Honorable
Herbert D. Gale, judge, dismissed the complaint with costs against the plaintiff party,
declaring that the said municipality had no right to require that the defendants vacate the
land in question.
By an instrument dated December 5, 1911, afterwards amended on March 14, 1912, the
provincial fiscal of Cavite, representing the municipality of that name, filed a complaint in
the Court of First Instance of said province alleging that the plaintiff municipal
corporation, duly organized and constituted in accordance with Act No. 82, and as the
successor to the rights s aid entity had under the late Spanish government, and by virtue
of Act No. 1039, had exclusive right, control and administration over the streets, lanes,
plazas, and public places of the municipality of Cavite; that the defendants, by virtue of a
lease secured from the plaintiff municipality, occupy a parcel of land 93 square meters in
area that forms part o the public plaza known under the name of Soledad, belonging to
the municipality of Cavite, the defendants having constructed thereon a house, through
payment to the plaintiff for occupation thereof of a rental of P5,58 a quarter in advance,
said defendants being furthermore obligated to vacate the leased land within sixty days
subsequent to plaintiff's demand to that effect; that the defendants have been required by
the municipality to vacate and deliver possession of the said land, but more than the sixty
days within which they having done so to date; that the lease secured from the
municipality of Cavite, by virtue whereof the defendants occupy the land that is the
subject matter of the complaint, is ultra vires and therefore ipso facto null and void and of
no force or effect, for the said land is an integral portion of a public plaza of public
domain and use, and the municipal council of Cavite has never at any time had any
power or authority to withdraw it from public use, and to lease it to a private party for his
own use, and so the defendants have never had any right or occupy or to retain the said
land under leasehold, or in any other way, their occupation of the parcel being
furthermore illegal; and therefore prayed that judgment be rendered declaring that
possession of the sad land lies with the plaintiff and ordering the defendants to vacate
the land and deliver possession thereof to said plaintiff, with the costs against the
defendants.
The demurrer filed to the foregoing complaint having been overruled, with exception on
the part of the defendants, in their answer of April 10, 1912, they admitted some of the
allegations contained in the complaint but denied that the parcel of land which they
occupy and to which the complaint refers forms and integral part of Plaza Soledad, or
that the lease secured by them from the municipality of Cavite was null and void
and ultra vires, stating if they refused to vacate said land it was because they had
acquired the right of possession thereof. As a special defense they alleged that,
according to the lease, they could only be ordered to vacate the land leased when the
plaintiff municipality might need it for decoration or other public use, which does not
apply in the present case; and in a cross-complaint they alleged that on the land which is
the subject matter of the complaint the defendants have erected a house of strong
materials, assessed at P3,000, which was constructed under a license secured from the
plaintiff municipality; that if they should be ordered to vacate the said land they would
suffer damages to the extent of P3,000, wherefore they prayed that they be absolved
from the complaint, or in the contrary case that the plaintiff be sentenced to indemnify
them in the sum of P3,000 as damages, and to pay the costs.
After hearing of the case, wherein both parties submitted parol and documentary
evidence, the court rendered the judgment that he been mentioned, whereto counsel for
the municipality excepted and in writing asked for a reopening of the case and the
holding of a new trial. This motion was denied, with exception on the part of the
appellant, and the forwarded to the clerk of this court.
It is duly proven in the record that, upon presentation of an application by Hilaria Rojas,
he municipal council of Cavite by resolution No. 10, dated July 3, 107, Exhibit C, leased
to the said Rojas some 70 or 80 square meters of Plaza Soledad, on condition that she
pay rent quarterly in advance according to the schedule fixed in Ordinance No. 43, land
within sixty days subsequent to notification to that effect. The record shows (receipts,
Exhibit 1) that she has paid the land tax on the house erected on the lot.
The boundary line between the properties of the municipality of Cavite and the naval
reservation, as fixed in Act No. 1039 of the Philippine Commission, appears in the plan
prepared by a naval engineer and submitted as evidence by the plaintiff, Exhibit C of civil
case No. 274 of the Cavite court and registered in this court as No. 9071. According to
said plan, defendant's house is erected on a plat of ground that forms part of the
promenade called Plaza Soledad, and this was also so proven by the testimony of the
plaintiff's witnesses.
By section 3 of the said Act No. 1039, passed January 12, 1904, the Philippine
Commission granted to the municipality of Cavite all the land included in the tract called
Plaza Soledad. In the case of Nicolas vs. Jose (6 Phil. Rep., 589), wherein the
municipality of Cavite, represented by its president Catalino Nicolas, sought inscription in
its name of the land comprised in the said Palza Soledad, with objection on the part of
Maria Jose et al. who is sought that inscription be decreed in their name of the parcels of
land in this plaza occupied by them, this court decided that neither the municipality nor
the objectors were entitled to inscription, for with respect to the objectors said plaza
belonged to the municipality of Cavite and with respect to the latter the said Plaza
Soledad was not transferable property of that municipality to be inscribed in its name,
because he intention of Act No. 1039 was that the said plaza and other places therein
enumerated should be kept open for public transit; herefore there can be no doubt that
the defendant has no right to continue to occupy the land of the municipality leased by
her, for it is an integral portion of Plaza Soledad, which if for public use and is reserved
for the common benefit.
According to article 344 of the Civil Code: "Property for public use in provinces and in
towns comprises the provincial and town roads, the squares, streets, fountains, and
public waters, the promenades, and public works of general service supported by said
towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of
Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to
lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said
plaza or public place to the defendant for private use the plaintiff municipality exceeded
its authority in the exercise of its powers by executing a contract over a thing of which it
could not dispose, nor is it empowered so to do.
The Civil Code, articles 1271, prescribes that everything which is not outside he
commerce of man may be the object of a contract, and plazas and streets are outside of
this commerce, as was decided by the supreme court of Spain in its decision of February
12, 195, which says: "Communal things that cannot be soud because they are by their
very nature outside of commerce are those for public use, such as the plazas, streets,
common lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby he municipality of
Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and of no
force or effect, because it is contrary to the law and the thing leased cannot be the object
of a contract. On the hyphotesis that the said lease is null and void in accordance with
the provisions of article 1303 of the Civil Code, the defendant must restore and deliver
possession of the land described in the complaint to the municipality of Cavite, which in
its turn must restore to the said defendant all the sums it may have received from her in
the nature of rentals just as soon as she restores the land improperly leased. For the
same reasons as have been set forth, and as said contract is null and void in its origin, it
can produce no effect and consequently the defendant is not entitled to claim that the
plaintiff municipality indemnity her for the damages she may suffer by the removal of her
house from the said land.
For all the foregoing reasons we must reverse the judgment appealed from and declare,
as we do declare, that the land occupied by Hilaria Rojas forms part of the public plaza
called Soledad, and as the lease of said parcel of land is null and void, we order the
defendant to vacate it and release the land in question within thirty days, leaving it
cleared as it was before hr occupation. There is no ground for the indemnity sought in
the nature of damages, but the municipality must in its turn to the defendant the rentals
collected; without finding as to the costs. So ordered.
Arellano, C.J., Johnson and Araullo, JJ., concur.
Moreland, J., concurs in the result.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26337 December 17, 1926
CELSO LEDESMA, plaintiff-appellant,
vs.
THE MUNICIPALITY OF ILOILO, CONCEPCION LOPEZ, MAXIMO M. KALAW, and
wife, and JULIO LEDESMA,defendants-appellees.
Juan Ledesma for appellant.
Provincial Fiscal Borromeo Veloso for the appellee municipality.
Santos and Benitez for the other appellees.
JOHNSON, J.:
This action was commenced in the Court of First Instance of the Province of Iloilo. Its
purpose was to recover of the defendant the municipality of Iloilo the sum of P15,780 as
the value of the two lots Nos. 537 and 703 which, the plaintiff claimed, the defendant
municipality had illegally appropriated, together with the sum of P5,000 as damages and
costs. The recovery of said sums was opposed by the defendants upon the ground that
the plaintiff and appellant was not and never had been the owner of said lots Nos. 537
and 703. The municipality of Iloilo contended that it had purchased said lots from
Concepcion Lopez on the 9th day of March, 1925, for the purpose of widening the
adjoining streets and had paid therefore the sum of P25,000. The other defendants
answered the petition and supported the contention of the municipality. After hearing the
evidence upon the issue presented, the Honorable Leopoldo Rovira reached the
conclusion that a preponderance of the evidence supported the contention of the
defendants, and rendered a judgment absolving them from all liability under the
complaint, without any finding as to costs. From that judgment the plaintiff appealed.
In order that the facts in the present cause may be more clearly understood, reference to
the following map may be made:
It appears from the documentary evidence found in the record that prior to the 9th day of
March, 1915, Concepcion Lopez was the owner of lots 228-A, 228-B, 537 and 703 as
seen in said map, and that on the 9th day of March, 1915, all of said lots constituted lot
No. 228. On the 9th day of March, 1915, Concepcion Lopez sold to the City of Iloilo a
part of said lot, now numbered 537 and 703 for the sum of P25,000. The City of Iloilo
promised to pay to Concepcion Lopez the said sum of P25,000 within a period of ten
years (Exhibit 1). On the 10th day of November, 1915, after the presentation of a petition
for registration of lot 228, a certificate of title (No. 464) was issued in favor of Concepcion
for said lot 228, including lots 537 and 703. The inclusion of said lots (537 and 703) in
said certificate of title was evidently an error on the part of someone connected with the
office of the registrar of titles under the Torrens system.
Later and on the 27th day of April, 1918, Concepcion Lopez sold to Maximo M. Kalaw
and wife said lot 228, including lots 537 and 703 evidently by mistake (see transfer
certificate No. 617 and Exhibit B and 6). It is said that the inclusion of said lots 537 and
703 was a mistake because Concepcion Lopez as well as Maximo M. Kalaw and wife
were ignorant of the fact that said lots were included in that transfer of certificate of title.
Later and on the 11th day of August, 1919, Concepcion Lopez, representing Maximo M.
Kalaw, sold said lots (228, 537 and 703) to Julio Ledesma, which sale was ratified by
Maximo M. Kalaw and his wife on the 15th day of August, 1919 (see Exhibit D.) Later a
transfer certificate of title No. 908 was issued in favor of Julio Ledesma (Exhibit H).
According to the admissions of Julio Ledesma lots 537 and 703 were included by
mistake.
On the 15th day of September, 1919, Julio Ledesma sold a portion of lot No. 228 was
made into two lots 228-A and 228-B. Lot 228-A remained the property of Julio Ledesma
(see transfer certificate of title No. 1131, Exhibit I). Said lots 537 and 703, according to
said transfer certificate, remained the property of Julio Ledesma. 1aw phil.net
On the 2nd day of August, 1922, Julio Ledesma sold to the appellant herein lots Nos.
228-A, 537, and 703 (see transfer certificate 1989 in favor of Celso Ledesma, Exhibit J).
Again, according to Julio Ledesma, lots 537 and 703 were included in the transfer of lot
No. 228-A to Celso Ledesma by mistake.
The theory of the appellant is that, by reason of the fact that said lots 537 and 703 had
been included in the registered title (title No. 464) of Concepcion Lopez in November,
1915, and Concepcion included in each succeeding transfer of title to him said lots, that
he was the indisputable owner thereof, and because the City of Iloilo had appropriated
said lots, that he was entitled to recover the value of said lots together with damages.
With reference to the theory of the appellant, an examination of the records shows that
as early as April, 1915, said lots had been turned over by Concepcion Lopez to the City
of Iloilo under a contract of sale for street purposes. That fact was well known. The said
lots had been included as a part of the streets in the City of Iloilo. They had been
segregated from the lot formerly owned by Concepcion Lopez. Said lots 537 and 703
had become a part of a public highway established by law. The same were therefore
illegally included, in accordance with the provisions of section 39 of Act No. 496, in the
certificate of title issued to Concepcion Lopez on the 10th day of November, 1915. That
fact was recognized by Concepcion Lopez as well as by each of the subsequent
purchasers of said lots. The simple possession of a certificate of title, under the Torrens
system, does not necessarily make the possessor a true owner of all the property
described therein. If a person obtains a title, under the Torrens system, which include by
mistake or oversight land which cannot be registered under the Torrens system, he does
not, by virtue of said certificate alone, becomes the owner of the lands illegally included.
(Legarda and Prieto vs. Saleeby, 31 Phil., 590.)
The inclusion of public highways in a certificate of title does not thereby necessarily give
to the holder of such certificate said public highways. The appellant, therefore, even
though a part of said streets (lots 537 and 703) had been included in the original
certificate of title and in the subsequent transfer of title, did not become the owner of said
lots and is not therefore entitled to recover their value from the City of Iloilo nor the
damages prayed for.
For all of the foregoing reasons, the judgment of the lower court is hereby affirmed, with
costs. So ordered.
Avancea, C. J., Street, Villamor, Johns, Romualdez and Villa-Real, JJ., concur.
Malcolm and Ostrand, JJ., concur in the result.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-34672 March 30,1988
UNITED CHURCH BOARD FOR WORLD MINISTRIES, as owner of BROKENSHIRE
MEMORIAL HOSPITAL, petitioner,
vs.
HON. JUDGE ALEJANDRO E. SEBASTIAN, as Presiding Judge of the CFI of Davao
del Norte, and MELENCIO B. DELENA and MAURO GEMENTIZA as Co-Executors
of the Testate Estate of DAVID, Jacobson, respondents.
CRUZ, J.:
This case is unusual because it arose not out of greed but of generosity. The only
question to be resolved is the Identity and eligibility of the beneficiary in the light of the
pertinent constitutional provisions and the evidence of record.
David Jacobson was an American citizen who had been a resident of the Philippines for
more than thirty years and up to the time of his death in 1970. 1 He left a will in which he
"devised and bequeathed" to the Brokenshire Memorial Hospital 60% of his shares of stocks
in the Tagdangua Plantation Co., inc. which was incorporated under Philippine law in
1948. 2 This corporation was the registered owner of a tract of land in Pantuhan Davao del
Norte, with a total area of about 445 hectares acquired by virtue of a sales patent issued to it
in 11953 . 3
In Special Proceeding No. 1695 of the Court of First Instance of Davao del Norte, Judge
Alejandro E. Sebastian disallowed the above-described legacy on the ground that it was
in effect an alienation of private agricultural land in favor of a transferee which was not
qualified under the Constitution of 1935. 4 The finding was that the Brokenshire Memorial
Hospital was owned by the United Church Board for World Ministries (UCBWM) ,the herein
petitioner, which was a non-stock corporation organized in the United States by virtue of a
charter granted by the state legislature of Massachussets . 5
The basis of this ruling was Article XII, Sections I and 5 of the 1935 Constitution, which
barred foreigners, including Americans, from acquiring agricultural lands in this country
except only by hereditary succession. The court directed that a copy of its order be sent
to the Solicitor General so he could take the proper action, in view of the invalidity of the
transfer, for the escheat of the subject property to the State. 6
Its motion for reconsideration having been denied, the petitioner came to this Court,
contending that the above-cited constitutional provisions were not applicable because
the object of the legacy was not land but shares of stocks. Moreover, even assuming that
what was really involved was a transfer of land, the petitioner was nonetheless qualified
to acquire it under the provisions of the Parity Amendment and the Laurel-Langley
Agreement.
The Solicitor General disagreed at first, insisting that the legacy was prohibited by the
1935 Constitution and did not come under any of the allowed exceptions. During the
protracted exchange of pleadings among the parties, however, certain events transpired
to considerably change the original situation and, consequently, also the position of
government.
It now appears from the voluminous documents submitted in this case that at the time
the will was executed in 1966, the land on which the Brokenshire Memorial Hospital was
situated was already registered in the name of the Mindanao District Conference, an
affiliate of the United Church of Christ in the Philippines (PUCC). 7 It was this non-stock
corporation, organized in 1949 under Philippine law with a 100% Filipino membership, that
owned and was operating the Hospital at the time of Jacobson's death. 8 Later, the
Brokenshire Memorial Hospital was itself incorporated as a charitable institution, with Filipinos
constituting the majority of its membership, 9 and on December 16,1970, became the
successor-in-interest of the UCCP to the devised parcel of land. 10
In proof of these circumstances, the new counsel for Brokenshire presented, among
many other documents, the articles of incorporation of the UCCP and the Hospital and
their corresponding certificates of registration issued by the Securities and Exchange
Commission, the licenses issued by the Board of Medical Sciences for the operation of
the Hospital to the UCCP from 1968 to 1972 and to the Brokenshire Memorial Hospital,
Inc. from 1973 to 1974, and the certificate of title over the subject land in the name of the
"Mindanao District Conference, commonly known as the Brokenshire Memorial
Hospital." 11
These facts were not brought earlier to the attention of the probate court by the former
counsel of the Hospital, Atty. Juan V. Faune for reasons that do not appear in the record.
It was for such omission (the new counsel would call it "misrepresentation") that Atty.
Faune was replaced by Atty. Rodolfo D. de la Cruz, who disavowed his predecessor's
representations. At any rate, the above-stated documents have now made it clear that
the United Church for Christ in the Philippines and not the United Church Board for
World Ministries was the owner of the Hospital at the time of the execution of the win in
1966 and of the testator's death in 1970. It is also not disputed that such ownership
passed to the Brokenshire Memorial Hospital itself upon its incorporation in 1970 when it
thus became the proper party-in-interest to claim the property directly devised by
Jacobson to it.
That the United Church Board for World Ministries no longer claims the subject property
(if indeed it really did claim it before), is manifest in its sur rejoinder to the rejoinder of the
movant Brokenshire Memorial Hospital, Inc., which had asked to be substituted for the
former as petitioner in this case. The body of this pleading is reproduced in full as
follows:
PETITIONER, by the Undersigned Counsel, to this Honorable Court most
respectfully states:
l. That upon its organization in 1948 the United Church of Christ in the
Philippines succeeded to the religious work, service and mission of the
United Church Board for World Ministries and other religion boards in the
United States of America;
2. It was the intention, following the independence of the Philippines from
the U.S.A. the constitution of an independent and autonomous United
Church of Christ in the Philippines, to eventually transfer all properties,
schools, and hospitals established by said mission boards, to the United
Church of Christ in the Philippines;
3. That the United Church Board for World Ministries had, in fact,
transferred the ownership of most of its properties in the Philippines to
the United Church of Christ in the Philippines, its religious organizations
and/or instrumentalities;
4. That when the Brokenshire Memorial Hospital was destroyed by fire in
1964, reconstruction efforts and responsibilities was assumed by the
United Church of Christ in the Philippines, it was the intention of the
United Church Board for World Ministries to relinquish the rights, interests
and ownership to the Brokenshire Memorial Hospital, now Brokenshire
Memorial Hospital, Inc. and considered it so relinquished, with continuing
funding assistance from the United Church Board for World Ministries
and other mission boards overseas;
5. The United Church Board for World Ministries continues to this date,
with its fraternal and cooperative relationship with the United Church of
Christ in the Philippines;
6. That as has already been stated, the United Church Board for World
Ministries does not intend to take, possess, or enjoy the legacy of David
Jacobson and has manifested and mandated that all properties that may
be derived therefrom shall be used entirely and exclusively for the work of
the Brokenshire Memorial Hospital and its School of Nursing in
accordance with the wishes of David Jacobson;
7. Considering the clear intention of David Jacobson to support the life
and work of Brokenshire Memorial Hospital and its School of Nursing,
and further considering that what was bequeathed are shares of stocks in
a corporation,, there exists no legal and moral impediment for the legacy
to be delivered to the Brokenshire Memorial Hospital, Inc., an
instrumentality of the United Church of Christ in the Philippines, that has
succeeded to the ownership of and the humanitarian, and charitable
service of said Hospital.
Respectfully submitted.
September 3, 1983, Davao City, Philippines.
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WITH OUR CONCURRENCE: Ave.,
Davao City
UNITED CHURCH BOARD FOR
(Sgd.) DEAN CLAIR (Sgd.) ROSALINO D. ISIDRO
WORLD MINISTRIES
Executor Counsel for the Estate
by:
and
(Sgd.) BYRON W. CLARK Executor
Dean Clair
Treasurer
205
NO OBJECTION TO THE DELIVERY Aldavinco
Bldg.,
OF THE LEGACY TO BROKENSHIRE
C.M. Recto
MEMORIAL HOSPITAL, INC. Ave.,
Davao
City 12
(Sgd.) MELENCIO B. DELENA (Sgd.) DARIO C. RAMA
Parenthetically, it should be observed, in fairness to Judge Sebastian, that he was
Executor-Respondent Counsel for the Estate
unaware of these circumstances when he declared the legacy invalid to enforce the
nationalistic provisions of Article XIII of the 1935 Constitution. For his vigilance in the
and protection of the national patrimony, he should be, as he is hereby, commenced.
Responden
ts
Even on the assumption that the UCBWN was really the owner of the Hospital at the time
of the effectivity of the will and that the devise was for that reason unenforceable, the
Melencio defect in the will should be deemed rectified by the subsequent transfer of the property to
Delena and the Brokenshire Memorial Hospital, Inc. Our consistent ruling on this matter is that if land
is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a
the late ctitizen, the flaw in the original transaction is considered cured and the title of the
Mauro transferee is rendered valid.

Gementiza Thus, in Sarsosa vda. de Barsobia v. Cuenco, 13 where a Filipino citizen sold her land to an
alien who later sold it to a Filipino, we held that the invalidity of the initial transfer to the alien
was corrected by the subsequent transfer of the property to a citizen. A similar ruling was
made in Godinez v. Fong Pak Luen, 14 involving a similar set of facts, where we also cited
Vasquez v. Li Seng Giap, 15 and Herrera v. Luy King Guan. 16 In Yap v. Maravillas, 17we
validated the sale of agricultural land to an alien who, after the purchase, was naturalized as
a Filipino and so became qualified to acquire it. The facts were slightly different in De Castro
v. Teng, 18 where, upon the death of an alien who had purchased a residential lot, his heirs
entered into an extrajudicial partition of his estate and transferred the land to one of his sons
who was a naturalized Filipino. We also sustained the sale.
This action has been pending for quite some time now because of the confusion
regarding the status of the Brokenshire Memorial Hospital as the ultimate beneficiary of
the challenged legacy. The curious thing is that this case was mired in factual and legal
complications caused by needless misunderstanding among the parties which, it now
appears, were never in any substantial disagreement over the ownership of the Hospital.
Their common concern for its welfare, in line with the charitable spirit and purposes of
the testator, should have avoided all this tedious and acrimonious dispute.
WHEREFORE, the Brokenshire Memorial Hospital, Inc. is hereby substituted for the
United Church Board for World Ministries as petitioner in this case and DECLARED to be
qualified to accept the legacy of the late David Jacobson. The petition as thus modified is
GRANTED. The order of the respondent judge dated December 9, 1971, and his
Resolution dated December 9, 1971, are SET ASIDE. This decision is immediately
executory. No costs.
SO ORDERED.
Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 124293 January 31, 2005
J.G. SUMMIT HOLDINGS, INC., petitioner,
vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and
Members; ASSET PRIVATIZATION TRUST; and PHILYARDS HOLDINGS,
INC., respondents.
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the petitioner, J.G. Summit
Holdings, Inc. for reconsideration of our Resolution dated September 24, 2003 and to
elevate this case to the Court En Banc. The petitioner questions the Resolution which
reversed our Decision of November 20, 2000, which in turn reversed and set aside a
Decision of the Court of Appeals promulgated on July 18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of September 24, 2003,
are as follows:
On January 27, 1997, the National Investment and Development Corporation (NIDC), a
government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki
Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which subsequently became the
Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, the NIDC
and KAWASAKI will contribute P330 million for the capitalization of PHILSECO in the
proportion of 60%-40% respectively. One of its salient features is the grant to the parties
of the right of first refusal should either of them decide to sell, assign or transfer its
interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS
[PHILSECO] to any third party without giving the other under the same terms the right of
first refusal. This provision shall not apply if the transferee is a corporation owned or
controlled by the GOVERNMENT or by a KAWASAKI affiliate.
On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to
the Philippine National Bank (PNB). Such interests were subsequently transferred to the
National Government pursuant to Administrative Order No. 14. On December 8, 1986,
President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on
Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and
possession of, conserve, manage and dispose of non-performing assets of the National
Government. Thereafter, on February 27, 1987, a trust agreement was entered into
between the National Government and the APT wherein the latter was named the trustee
of the National Government's share in PHILSECO. In 1989, as a result of a quasi-
reorganization of PHILSECO to settle its huge obligations to PNB, the National
Government's shareholdings in PHILSECO increased to 97.41% thereby reducing
KAWASAKI's shareholdings to 2.59%.
In the interest of the national economy and the government, the COP and the APT
deemed it best to sell the National Government's share in PHILSECO to private entities.
After a series of negotiations between the APT and KAWASAKI, they agreed that the
latter's right of first refusal under the JVA be "exchanged" for the right to top by five
percent (5%) the highest bid for the said shares. They further agreed that KAWASAKI
would be entitled to name a company in which it was a stockholder, which could exercise
the right to top. On September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI)1 would exercise its right to top.
At the pre-bidding conference held on September 18, 1993, interested bidders were
given copies of the JVA between NIDC and KAWASAKI, and of the Asset Specific
Bidding Rules (ASBR) drafted for the National Government's 87.6% equity share in
PHILSECO. The provisions of the ASBR were explained to the interested bidders who
were notified that the bidding would be held on December 2, 1993. A portion of the
ASBR reads:
1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the
National Government's equity in PHILSECO consisting of 896,869,942 shares of stock
(representing 87.67% of PHILSECO's outstanding capital stock), which will be sold as a
whole block in accordance with the rules herein enumerated.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the
APT Board of Trustees and the Committee on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price
set for the National Government's 87.67% equity in PHILSECO is PESOS: ONE BILLION
THREE HUNDRED MILLION (P1,300,000,000.00).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular
meeting following the bidding, for the purpose of determining whether or not it should be
endorsed by the APT Board of Trustees to the COP, and the latter approves the same.
The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS]
Holdings, Inc., that the highest bid is acceptable to the National Government. Kawasaki
Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period of
thirty (30) calendar days from the date of receipt of such advice from APT within which to
exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest
bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise
their "Option to Top the Highest Bid," they shall so notify the APT about such exercise of
their option and deposit with APT the amount equivalent to ten percent (10%) of the
highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in
paragraph 6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc.
and/or [PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they shall
have a period of ninety (90) days from the receipt of the APT's notice within which to pay
the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to
exercise their "Option to Top the Highest Bid" within the thirty (30)-day period, APT will
declare the highest bidder as the winning bidder.
xxx xxx xxx
12.0 The bidder shall be solely responsible for examining with appropriate care these
rules, the official bid forms, including any addenda or amendments thereto issued during
the bidding period. The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares which may, in any
manner, affect the bidder's proposal. Failure on the part of the bidder to so examine and
inform itself shall be its sole risk and no relief for error or omission will be given by APT
or COP. . . .
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc.2 submitted a
bid of Two Billion and Thirty Million Pesos (P2,030,000,000.00) with an acknowledgment
of KAWASAKI/[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days
to act on APT's recommendation based on the result of this bidding. Should the COP
approve the highest bid, APT shall advise Kawasaki Heavy Industries, Inc. and/or its
nominee, [PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National
Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall
then have a period of thirty (30) calendar days from the date of receipt of such advice
from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid
equivalent to the highest bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the sale on December
3, 1993 "subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings,
Inc. to top JGSMI's bid by 5% as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to
top its bid on the grounds that: (a) the KAWASAKI/PHI consortium composed of
KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life violated
the ASBR because the last four (4) companies were the losing bidders thereby
circumventing the law and prejudicing the weak winning bidder; (b) only KAWASAKI
could exercise the right to top; (c) giving the same option to top to PHI constituted
unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a
public bidding or auction sale; and (e) the JG Summit consortium was not estopped from
questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the
purchase price of the subject bidding. On February 7, 1994, the APT notified petitioner
that PHI had exercised its option to top the highest bid and that the COP had approved
the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock
Purchase Agreement. Consequently, petitioner filed with this Court a Petition for
Mandamus under G.R. No. 114057. On May 11, 1994, said petition was referred to the
Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of
merit. It ruled that the petition for mandamus was not the proper remedy to question the
constitutionality or legality of the right of first refusal and the right to top that was
exercised by KAWASAKI/PHI, and that the matter must be brought "by the proper party
in the proper forum at the proper time and threshed out in a full blown trial." The Court of
Appeals further ruled that the right of first refusal and the right to top are prima facie legal
and that the petitioner, "by participating in the public bidding, with full knowledge of the
right to top granted to KAWASAKI/[PHILYARDS] isestopped from questioning the
validity of the award given to [PHILYARDS] after the latter exercised the right to top and
had paid in full the purchase price of the subject shares, pursuant to the ASBR."
Petitioner filed a Motion for Reconsideration of said Decision which was denied on March
15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging grave abuse
of discretion on the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that
the Court of Appeals erred when it dismissed the petition on the sole ground of the
impropriety of the special civil action of mandamus because the petition was also one of
certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose
capitalization must be sixty percent (60%) Filipino-owned. Consequently, the right to top
granted to KAWASAKI under the Asset Specific Bidding Rules (ASBR) drafted for the
sale of the 87.67% equity of the National Government in PHILSECO is illegal not only
because it violates the rules on competitive bidding but more so, because it allows
foreign corporations to own more than 40% equity in the shipyard. It also held that
"although the petitioner had the opportunity to examine the ASBR before it participated in
the bidding, it cannot be estopped from questioning the unconstitutional, illegal and
inequitable provisions thereof." Thus, this Court voided the transfer of the national
government's 87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the
right of JG Summit, as the highest bidder, to take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed
Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE.
Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million Pesos
(P2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision.
In turn, APT is ordered to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests
from petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of stocks
representing 87.6% of PHILSECO's total capitalization;
(d) return to private respondent PHGI the amount of Two Billion One Hundred
Thirty-One Million Five Hundred Thousand Pesos (P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI.
SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted] three basic issues for
x x x resolution: (1) Whether PHILSECO is a public utility; (2) Whether under the 1977
JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total
capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI
violates the principles of competitive bidding.3 (citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents.
On the first issue, we held that Philippine Shipyard and Engineering Corporation
(PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility4 and that
no law declares a shipyard to be a public utility.5 On the second issue, we found nothing
in the 1977 Joint Venture Agreement (JVA) which prevents Kawasaki Heavy Industries,
Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECOs total
capitalization.6 On the final issue, we held that the right to top granted to KAWASAKI in
exchange for its right of first refusal did not violate the principles of competitive bidding.7
On October 20, 2003, the petitioner filed a Motion for Reconsideration8 and a Motion to
Elevate This Case to the Court En Banc.9 Public respondents Committee on Privatization
(COP) and Asset Privatization Trust (APT), and private respondent Philyards Holdings,
Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.s (JG Summits)
Motion for Reconsideration and Motion to Elevate This Case to the Court En Banc on
January 29, 2004 and February 3, 2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this litigation are the
following:
1. Whether there are sufficient bases to elevate the case at bar to the Court en
banc.
2. Whether the motion for reconsideration raises any new matter or cogent
reason to warrant a reconsideration of this Courts Resolution of September 24,
2003.
Motion to Elevate this Case to the
Court En Banc
The petitioner prays for the elevation of the case to the Court en banc on the following
grounds:
1. The main issue of the propriety of the bidding process involved in the present
case has been confused with the policy issue of the supposed fate of the
shipping industry which has never been an issue that is determinative of this
case.10
2. The present case may be considered under the Supreme Court Resolution
dated February 23, 1984 which included among en banc cases those involving a
novel question of law and those where a doctrine or principle laid down by the
Court en banc or in division may be modified or reversed.11
3. There was clear executive interference in the judicial functions of the Court
when the Honorable Jose Isidro Camacho, Secretary of Finance, forwarded to
Chief Justice Davide, a memorandum dated November 5, 2001, attaching a copy
of the Foreign Chambers Report dated October 17, 2001, which matter was
placed in the agenda of the Court and noted by it in a formal resolution dated
November 28, 2001.12
Opposing J.G. Summits motion to elevate the case en banc, PHILYARDS points out the
petitioners inconsistency in previously opposing PHILYARDS Motion to Refer the Case
to the Court En Banc. PHILYARDS contends that J.G. Summit should now be estopped
from asking that the case be referred to the Court en banc. PHILYARDS further contends
that the Supreme Court en banc is not an appellate court to which decisions or
resolutions of its divisions may be appealed citing Supreme Court Circular No. 2-89
dated February 7, 1989.13 PHILYARDS also alleges that there is no novel question of law
involved in the present case as the assailed Resolution was based on well-settled
jurisprudence. Likewise, PHILYARDS stresses that the Resolution was merely an
outcome of the motions for reconsideration filed by it and the COP and APT and is
"consistent with the inherent power of courts to amend and control its process and
orders so as to make them conformable to law and justice. (Rule 135, sec. 5)"14 Private
respondent belittles the petitioners allegations regarding the change in ponente and the
alleged executive interference as shown by former Secretary of Finance Jose Isidro
Camachos memorandum dated November 5, 2001 arguing that these do not justify a
referral of the present case to the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En Banc should be granted,
J.G. Summit further argued that: its Opposition to the Office of the Solicitor Generals
Motion to Refer is different from its own Motion to Elevate; different grounds are invoked
by the two motions; there was unwarranted "executive interference"; and the change
in ponente is merely noted in asserting that this case should be decided by the Court en
banc.15
We find no merit in petitioners contention that the propriety of the bidding process
involved in the present case has been confused with the policy issue of the fate of the
shipping industry which, petitioner maintains, has never been an issue that is
determinative of this case. The Courts Resolution of September 24, 2003 reveals a clear
and definitive ruling on the propriety of the bidding process. In discussing whether the
right to top granted to KAWASAKI in exchange for its right of first refusal violates the
principles of competitive bidding, we made an exhaustive discourse on the rules and
principles of public bidding and whether they were complied with in the case at bar.16This
Court categorically ruled on the petitioners argument that PHILSECO, as a shipyard, is a
public utility which should maintain a 60%-40% Filipino-foreign equity ratio, as it was a
pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding
industry which was beyond avoidance.17
We reject petitioners argument that the present case may be considered under the
Supreme Court Resolution dated February 23, 1984 which included among en
banc cases those involving a novel question of law and those where a doctrine or
principle laid down by the court en banc or in division may be modified or reversed. The
case was resolved based on basic principles of the right of first refusal in commercial law
and estoppel in civil law. Contractual obligations arising from rights of first refusal are not
new in this jurisdiction and have been recognized in numerous cases.18 Estoppel is too
known a civil law concept to require an elongated discussion. Fundamental principles on
public bidding were likewise used to resolve the issues raised by the petitioner. To be
sure, petitioner leans on the right to top in a public bidding in arguing that the case at bar
involves a novel issue. We are not swayed. The right to top was merely a condition or a
reservation made in the bidding rules which was fully disclosed to all bidding parties.
In Bureau Veritas, represented by Theodor H. Hunermann v. Office of the
President, et al., 19 we dealt with this conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al.,
(L-18751, 28 April 1962, 4 SCRA 1245), that in an "invitation to bid, there is a condition
imposed upon the bidders to the effect that the bidding shall be subject to the
right of the government to reject any and all bids subject to its discretion. In the
case at bar, the government has made its choice and unless an unfairness or
injustice is shown, the losing bidders have no cause to complain nor right to
dispute that choice. This is a well-settled doctrine in this jurisdiction and
elsewhere."
The discretion to accept or reject a bid and award contracts is vested in the Government
agencies entrusted with that function. The discretion given to the authorities on this
matter is of such wide latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil.
486 [1960]). x x x The exercise of this discretion is a policy decision that necessitates
prior inquiry, investigation, comparison, evaluation, and deliberation. This task can best
be discharged by the Government agencies concerned, not by the Courts. The role of
the Courts is to ascertain whether a branch or instrumentality of the Government has
transgressed its constitutional boundaries. But the Courts will not interfere with executive
or legislative discretion exercised within those boundaries. Otherwise, it strays into the
realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the Courts will set aside
the award of a contract made by a government entity. Grave abuse of discretion implies
a capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v.
Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The
abuse of discretion must be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform a duty enjoined by law, as to act at all in
contemplation of law, where the power is exercised in an arbitrary and despotic manner
by reason of passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-
40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of discretion on the part of
public respondents when they awarded the CISS contract to Respondent SGS. In the
"Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee made an
express reservation of the right of the Government to "reject any or all bids or any
part thereof or waive any defects contained thereon and accept an offer most
advantageous to the Government." It is a well-settled rule that where such
reservation is made in an Invitation to Bid, the highest or lowest bidder, as the
case may be, is not entitled to an award as a matter of right (C & C Commercial
Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or any
Bid may be rejected or, in the exercise of sound discretion, the award may be made to
another than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am.
Jur., 788). (emphases supplied)
1awphi1.nt
Like the condition in the Bureau Veritas case, the right to top was a condition imposed
by the government in the bidding rules which was made known to all parties. It was a
condition imposed on all bidders equally, based on the APTs exercise of its
discretion in deciding on how best to privatize the governments shares in
PHILSECO. It was not a whimsical or arbitrary condition plucked from the ether and
inserted in the bidding rules but a condition which the APT approved as the best way the
government could comply with its contractual obligations to KAWASAKI under the JVA
and its mandate of getting the most advantageous deal for the government. The right to
top had its history in the mutual right of first refusal in the JVA and was reached by
agreement of the government and KAWASAKI.
Further, there is no "executive interference" in the functions of this Court by the mere
filing of a memorandum by Secretary of Finance Jose Isidro Camacho. The
memorandum was merely "noted" to acknowledge its filing. It had no further legal
significance. Notably too, the assailed Resolution dated September 24, 2003 was
decided unanimously by the Special First Division in favor of the respondents.
Again, we emphasize that a decision or resolution of a Division is that of the Supreme
Court20 and the Court en banc is not an appellate court to which decisions or resolutions
of a Division may be appealed.21
For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioners Motion for Reconsideration.
First, that a fair resolution of the case should be based on contract law, not on policy
considerations; the contracts do not authorize the right to top to be derived from the right
of first refusal.22 Second, that neither the right of first refusal nor the right to top can be
legally exercised by the consortium which is not the proper party granted such right
under either the JVA or the Asset Specific Bidding Rules (ASBR).23 Third, that the
maintenance of the 60%-40% relationship between the National Investment and
Development Corporation (NIDC) and KAWASAKI arises from contract and from the
Constitution because PHILSECO is a landholding corporation and need not be a public
utility to be bound by the 60%-40% constitutional limitation.24
On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not
been able to show compelling reasons to warrant a reconsideration of the Decision of the
Court.25 PHILYARDS denies that the Decision is based mainly on policy considerations
and points out that it is premised on principles governing obligations and contracts and
corporate law such as the rule requiring respect for contractual stipulations, upholding
rights of first refusal, and recognizing the assignable nature of contracts rights.26 Also, the
ruling that shipyards are not public utilities relies on established case law and
fundamental rules of statutory construction. PHILYARDS stresses that KAWASAKIs
right of first refusal or even the right to top is not limited to the 40% equity of the
latter.27 On the landholding issue raised by J.G. Summit, PHILYARDS emphasizes that
this is a non-issue and even involves a question of fact. Even assuming that this Court
can take cognizance of such question of fact even without the benefit of a trial,
PHILYARDS opines that landholding by PHILSECO at the time of the bidding is
irrelevant because what is essential is that ultimately a qualified entity would eventually
hold PHILSECOs real estate properties.28 Further, given the assignable nature of the
right of first refusal, any applicable nationality restrictions, including landholding
limitations, would not affect the right of first refusal itself, but only the manner of its
exercise.29 Also, PHILYARDS argues that if this Court takes cognizance of J.G. Summits
allegations of fact regarding PHILSECOs landholding, it must also recognize
PHILYARDS assertions that PHILSECOs landholdings were sold to another
corporation.30 As regards the right of first refusal, private respondent explains that
KAWASAKIs reduced shareholdings (from 40% to 2.59%) did not translate to a
deprivation or loss of its contractually granted right of first refusal.31 Also, the bidding was
valid because PHILYARDS exercised the right to top and it was of no moment that losing
bidders later joined PHILYARDS in raising the purchase price.32
In cadence with the private respondent PHILYARDS, public respondents COP and APT
contend:
1. The conversion of the right of first refusal into a right to top by 5% does not
violate any provision in the JVA between NIDC and KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed by the
constitutional restriction on foreign ownership.
3. The petitioner is legally estopped from assailing the validity of the proceedings
of the public bidding as it voluntarily submitted itself to the terms of the ASBR
which included the provision on the right to top.
4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI
and the fact that PHILYARDS formed a consortium to raise the required amount
to exercise the right to top the highest bid by 5% does not violate the JVA or the
ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of
lands does not apply to PHILSECO because as admitted by petitioner itself,
PHILSECO no longer owns real property.
6. Petitioners motion to elevate the case to the Court en banc is baseless and
would only delay the termination of this case.33
In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments
of the public and private respondents in this wise:
1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with
losing bidders through the exercise of a right to top, which is contrary to law and
the constitution is null and void for being violative of substantive due process and
the abuse of right provision in the Civil Code.
a. The bidders[] right to top was actually exercised by losing bidders.
b. The right to top or the right of first refusal cannot co-exist with a
genuine competitive bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start of this case
but is shamelessly ignored by the respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of fact.
c. That PHILSECO owned land at the time that the right of first refusal
was agreed upon and at the time of the bidding are most relevant.
d. Whether a shipyard is a public utility is not the core issue in this case.
3. Fraud and bad faith attend the alleged conversion of an inexistent right of first
refusal to the right to top.
a. The history behind the birth of the right to top shows fraud and bad
faith.
b. The right of first refusal was, indeed, "effectively useless."
4. Petitioner is not legally estopped to challenge the right to top in this case.
a. Estoppel is unavailing as it would stamp validity to an act that is
prohibited by law or against public policy.
b. Deception was patent; the right to top was an attractive nuisance.
 c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced from the right of first
refusal is not new and we have already ruled on the issue in our Resolution of
September 24, 2003. We upheld the mutual right of first refusal in the JVA.34 We also
ruled that nothing in the JVA prevents KAWASAKI from acquiring more than 40% of
PHILSECOs total capitalization.35 Likewise, nothing in the JVA or ASBR bars the
conversion of the right of first refusal to the right to top. In sum, nothing new and of
significance in the petitioners pleading warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right of first refusal nor
the right to top can legally be exercised by the consortium which is not the proper party
granted such right under either the JVA or the ASBR. Thus, we held:
The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group,
Insular Life Assurance, Mitsui and ICTSI), has joined PHILYARDS in the latter's effort to
raise P2.131 billion necessary in exercising the right to top is not contrary to law, public
policy or public morals. There is nothing in the ASBR that bars the losing bidders from
joining either the winning bidder (should the right to top is not exercised) or
KAWASAKI/PHI (should it exercise its right to top as it did), to raise the purchase price.
The petitioner did not allege, nor was it shown by competent evidence, that the
participation of the losing bidders in the public bidding was done with fraudulent intent.
Absent any proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in
a free enterprise system. The appellate court is thus correct in holding the petitioner
estopped from questioning the validity of the transfer of the National Government's
shares in PHILSECO to respondent.36
Further, we see no inherent illegality on PHILYARDS act in seeking funding from parties
who were losing bidders. This is a purely commercial decision over which the State
should not interfere absent any legal infirmity. It is emphasized that the case at bar
involves the disposition of shares in a corporation which the government sought to
privatize. As such, the persons with whom PHILYARDS desired to enter into business
with in order to raise funds to purchase the shares are basically its business. This is in
contrast to a case involving a contract for the operation of or construction of a
government infrastructure where the identity of the buyer/bidder or financier constitutes
an important consideration. In such cases, the government would have to take utmost
precaution to protect public interest by ensuring that the parties with which it is
contracting have the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding
company, KAWASAKI could exercise its right of first refusal only up to 40% of the shares
of PHILSECO due to the constitutional prohibition on landholding by corporations with
more than 40% foreign-owned equity. It further argues that since KAWASAKI already
held at least 40% equity in PHILSECO, the right of first refusal was inutile and as such,
could not subsequently be converted into the right to top. 37 Petitioner also asserts that,
at present, PHILSECO continues to violate the constitutional provision on landholdings
as its shares are more than 40% foreign-owned.38 PHILYARDS admits that it may have
previously held land but had already divested such landholdings.39 It contends, however,
that even if PHILSECO owned land, this would not affect the right of first refusal but only
the exercise thereof. If the land is retained, the right of first refusal, being a property right,
could be assigned to a qualified party. In the alternative, the land could be divested
before the exercise of the right of first refusal. In the case at bar, respondents assert that
since the right of first refusal was validly converted into a right to top, which was
exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation (i.e.,
60% of its shares are owned by Filipinos), then there is no violation of the
Constitution.40 At first, it would seem that questions of fact beyond cognizance by this
Court were involved in the issue. However, the records show that PHILYARDS admits it
had owned land up until the time of the bidding.41 Hence, the only issue is whether
KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA
considering that PHILSECO owned land until the time of the bidding and
KAWASAKI already held 40% of PHILSECOs equity.
We uphold the validity of the mutual rights of first refusal under the JVA between
KAWASAKI and NIDC. First of all, the right of first refusal is a property right of
PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right
allows them to purchase the shares of their co-shareholder before they are offered to a
third party. The agreement of co-shareholders to mutually grant this right to each
other, by itself, does not constitute a violation of the provisions of the Constitution
limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS
correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly
assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This
transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof
of any fraudulent intent. The transfer could be made either to a nominee or such other
party which the holder of the right of first refusal feels it can comfortably do business
with. Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI,
in exercising its right of first refusal, can exceed 40% of PHILSECOs equity. In fact, it
can even be said that if the foreign shareholdings of a landholding corporation
exceeds 40%, it is not the foreign stockholders ownership of the shares which is
adversely affected but the capacity of the corporation to own land that is, the
corporation becomes disqualified to own land. This finds support under the basic
corporate law principle that the corporation and its stockholders are separate juridical
entities. In this vein, the right of first refusal over shares pertains to the shareholders
whereas the capacity to own land pertains to the corporation. Hence, the fact that
PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law
disqualifies a person from purchasing shares in a landholding corporation even if
the latter will exceed the allowed foreign equity, what the law disqualifies is the
corporation from owning land. This is the clear import of the following provisions in the
Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose capital
is owned by such citizens. Such agreements may be for a period not exceeding
twenty-five years, renewable for not more than twenty-five years, and under such terms
and conditions as may be provided by law. In cases of water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power, beneficial
use may be the measure and limit of the grant.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.42(emphases supplied)
The petitioner further argues that "an option to buy land is void in itself (Philippine
Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to
KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced
from the right of first refusal, is also void."43 Contrary to the contention of petitioner, the
case of Lui She did not that say "an option to buy land is void in itself," for we ruled as
follows:
x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option
giving an alien the right to buy real property on condition that he is granted
Philippine citizenship. As this Court said in Krivenko vs. Register of Deeds:
[A]liens are not completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is temporary, they may be
granted temporary rights such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of
land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his
property, this to last for 50 years, then it becomes clear that the arrangement is a
virtual transfer of ownership whereby the owner divests himself in stages not only
of the right to enjoy the land (jus possidendi, jus utendi, jus fruendi and jus
abutendi) but also of the right to dispose of it (jus disponendi) rights the sum
total of which make up ownership. It is just as if today the possession is
transferred, tomorrow, the use, the next day, the disposition, and so on, until
ultimately all the rights of which ownership is made up are consolidated in an alien.
And yet this is just exactly what the parties in this case did within this pace of one year,
with the result that Justina Santos'[s] ownership of her property was reduced to a hollow
concept. If this can be done, then the Constitutional ban against alien landholding in the
Philippines, as announced in Krivenko vs. Register of Deeds, is indeed in grave
peril.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of
ownership as the owner could not sell or dispose of his properties. The contract in Lui
She prohibited the owner of the land from selling, donating, mortgaging, or encumbering
the property during the 50-year period of the option to buy. This is not so in the case at
bar where the mutual right of first refusal in favor of NIDC and KAWASAKI does not
amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar involves
a right of first refusal over shares of stock while the Lui She case involves an option
to buy the land itself. As discussed earlier, there is a distinction between the
shareholders ownership of shares and the corporations ownership of land arising from
the separate juridical personalities of the corporation and its shareholders.
We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO
continues to violate the Constitution as its foreign equity is above 40% and yet owns
long-term leasehold rights which are real rights.45It cites Article 415 of the Civil Code
which includes in the definition of immovable property, "contracts for public works, and
servitudes and other real rights over immovable property."46 Any existing landholding,
however, is denied by PHILYARDS citing its recent financial statements.47 First, these
are questions of fact, the veracity of which would require introduction of evidence. The
Court needs to validate these factual allegations based on competent and reliable
evidence. As such, the Court cannot resolve the questions they pose. Second, J.G.
Summit misreads the provisions of the Constitution cited in its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private respondent is not a
60%-40% corporation, and this violates the Constitution x x x The violation continues to
this day because under the law, it continues to own real property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973
Constitution (the JVA was signed in 1977), provided:
"Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain."

32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.

32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the
public domain are corporations at least 60% of which is owned by Filipino citizens (Sec.
22, Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution

applies only to ownership of land.48 It does not extend to immovable or real property
as defined under Article 415 of the Civil Code.Otherwise, we would have a strange
situation where the ownership of immovable property such as trees, plants and growing
fruit attached to the land49 would be limited to Filipinos and Filipino corporations only.

III.

WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is

DENIED WITH FINALITY and the decision appealed from is AFFIRMED. The Motion to
Elevate This Case to the Court En Banc is likewise DENIED for lack of merit.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga, JJ., concur.