"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
G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the defendant machinery company,
and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong
materials in which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this
instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage
instrument, and was bought in by the machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the
property to the machinery company in satisfaction of the mortgage was annotated in the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a deed of sale of the land upon
which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered. This
deed makes no reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects
which might be found to exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company
went into possession of the building at or about the time when this sale took place, that is to say, the month of December, 1913, and it has
continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compaia Agricola
Filipina" executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to secure payment of
the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the
amount of the indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the building,
bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the land
registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with the sheriff
a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff,
the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at
public auction to the plaintiff, who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the ground that
the company had its title to the building registered prior to the date of registry of the plaintiff's certificate.
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
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.
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 xxx xxx xxx
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 (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried
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 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.)
the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed separately against. (Valdes vs. Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and
Central Altagracia [192], 225 U.S., 58.) 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
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. 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."
Villa-Real, Imperial, Butte, and Goddard, JJ., concur. 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
G.R. No. L-17870 September 29, 1962 incorporation therewith was not permanent in character because, as essential and principle elements of a sugar central, without them the
MINDANAO BUS COMPANY, petitioner, sugar central would be unable to function or carry on the industrial purpose for which it was established . Inasmuch as the central is permanent
vs. in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City,respondents. necessarily be permanent. (Emphasis ours.)
Binamira, Barria and Irabagon for petitioner. So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or
Vicente E. Sabellina for respondents. 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
LABRADOR, J.:
considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline
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
companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable
Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to.
nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the
immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and
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
are found within their industrial compounds are merely incidental and retain their movable nature.
sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment.
Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used
Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:
only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the
petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or
Island of Mindanao, collecting rates approved by the Public Service Commission;
service shop if its rolling equipment is repaired or serviced in another shop belonging to another.
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;
The law that governs the determination of the question at issue is as follows:
Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;
Art. 415. The following are immovable property:
3. That the machineries sought to be assessed by the respondent as real properties are the following:
xxx xxx xxx
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
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.)
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";
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
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
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
(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and
conducted in the land or building.
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".
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
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this
building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.
agreed stipulation of facts;
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioner's transportation
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
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
carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a
real estate within the meaning of Article 415 (c) of the Civil Code.
condition to be serviceable in the TPU land transportation business it operates;
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to
6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair
assessment as real estate for the purposes of the real estate tax. Without costs.
machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has
So ordered.
never engaged in, to date.1awphl.nt
SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent .
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for reconsideration, petitioner
DECISION
brought the case to this Court assigning the following errors:
PANGANIBAN, J .:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned assessments are valid; and that said
After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped from
tools, equipments or machineries are immovable taxable real properties.
subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting party.
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
The Case
equipments are taxable realties, by reason of their being intended or destined for use in an industry.
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision [1] of the Court of Appeals (CA)[2] in CA-GR SP No. 47332
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
and its February 26, 1999 Resolution[3] denying reconsideration. The decretal portion of the CA Decision reads as follows:
taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and
WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated March 31, 1998 in Civil Case No. Q-
4. The Tax Court erred in denying petitioner's motion for reconsideration.
98-33500 are hereby AFFIRMED.The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED.[4]
Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the
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
New Civil Code which provides:
Resolution[8] denied petitioners Motion for Special Protective Order, praying that the deputy sheriff be enjoined from seizing immobilized or
Art. 415. The following are immovable properties:
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.[15] Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of
replevin describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his
custody.
On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried
on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own
land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable
or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the
industry.[16] In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of
the Civil Code.[17]
Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered as personal.[18] After agreeing to such
stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily
precluded from denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the parties to treat a house as a personal property because it had been
made the subject of a chattel mortgage. The Court ruled:
x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat
the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills [20] also held that the machinery used in a factory
and essential to the industry, as in the present case, was a proper subject of a writ of replevin because it was treated as personal property in a
contract. Pertinent portions of the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes
of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby,
there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may
not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal
property. Specifically, Section 12.1 of the Agreement reads as follows:[21]
12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may
now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building
thereon, or attached in any manner to what is permanent.
Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the
circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to the Lease Agreement is
good only insofar as the contracting parties are concerned. [22] Hence, while the parties are bound by the Agreement, third persons acting in
good faith are not affected by its stipulation characterizing the subject machinery as personal. [23] In any event, there is no showing that any
specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a lease. [24] Submitting documents supposedly showing that
they own the subject machines, petitioners also argue in their Petition that the Agreement suffers from intrinsic ambiguity which places in
serious doubt the intention of the parties and the validity of the lease agreement itself. [25] In their Reply to respondents Comment, they further
allege that the Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil action pending before the RTC. A
resolution of these questions, therefore, is effectively a resolution of the merits of the case. Hence, they should be threshed out in the trial, not
in the proceedings involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy under Rule 60 was that questions involving title to the subject
property questions which petitioners are now raising -- should be determined in the trial. In that case, the Court noted that the remedy of
defendants under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiffs bond. They were not allowed,
however, to invoke the title to the subject property. The Court ruled:
In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure (or delivery) on ground of
insufficiency of the complaint or of the grounds relied upon therefor, as in proceedings on preliminary attachment or injunction, and thereby put
at issue the matter of the title or right of possession over the specific chattel being replevied, the policy apparently being that said matter
should be ventilated and determined only at the trial on the merits.[28]
Besides, these questions require a determination of facts and a presentation of evidence, both of which have no place in a petition for
certiorari in the CA under Rule 65 or in a petition for review in this Court under Rule 45. [29]
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on record shows that it has been nullified or
annulled. In fact, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by respondent. Accordingly, it
must be presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation[30] is also instructive on this point. In that case, the Deed of Chattel Mortgage, which characterized the WHEREFORE, from the evidence adduced by the parties, the Board overrules the claim of the [City Assessor of Lucena] and sustain the claim
subject machinery as personal property, was also assailed because respondent had allegedly been required to sign a printed form of chattel of [MERALCO].
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 Further, the Appellant (Meralco) is hereby ordered to render an accounting to the City Treasurer of Lucena and to pay the City Government of
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 Lucena the amount corresponding to the Five (5%) per centum of the gross earnings in compliance with paragraph 13 both Resolutions 108
record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x and 2679, respectively, retroactive from November 9, 1957 to date, if said tax has not yet been paid. 17chanrobleslaw
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. 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,
[31]
They also allege that the seizure would nullify all efforts to rehabilitate the corporation. 1991, the CBAA affirmed the assailed LBAA judgment. Apparently, the City Assessor of Lucena no longer appealed said CBAA Decision and it
Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and jurisprudence support its propriety. Verily, became final and executory.
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: Six years later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997 from the City Treasurer of Lucena, which stated
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 that the company was being assessed real property tax delinquency on its machineries beginning 1990, in the total amount of P17,925,117.34,
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 computed as follows:chanRoblesvirtualLawlibrary
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 TAX ASSESSED COVERED TAX DUE PENALTY TOTAL
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 DEC. # VALUE PERIOD
such sum to him as may be recovered against the adverse party, and by serving a copy bond on the applicant. 019-6500 P65,448,800.00 1990-94 P3,272,440.00 P2,356,156.80 P5,628,596.80
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioners. 019-7394 78,538,560.00 1995 785,385.60 534,062.21 1,319,447.81
SO ORDERED. 1996 785,385.60 345,569.66 1,130,955.26
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur. lst-3rd/1997 589,039.20 117,807.84 706,847.04
FIRST DIVISION 4th 1997 196,346.40 (19,634.64) 176,711.76
G.R. No. 166102, August 05, 2015 BASIC---- P8,962,558.67
MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY, Respondents. SEF---- 8,962,558.67
DECISION TOTAL TAX DELINQUENCY---- P17,925,117.34
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 Decision 1 dated May 13, 2004 and Resolution2 dated November 18, 2004 of the Court of Appeals in CA-G.R. SP The City Treasurer of Lucena requested that MERALCO settle the payable amount soon to avoid accumulation of penalties. Attached to the
No. 67027. The appellate court affirmed the Decision 3 dated May 3, 2001 of the Central Board of Assessment Appeals (CBAA) in CBAA Case letter were the following documents: (a) Notice of Assessment20 dated October 20, 1997 issued by the City Assessor of Lucena, pertaining to
No. L-20-98, which, in turn, affirmed with modification the Decision 4dated June 17, 19985 of the Local Board of Assessment Appeals (LBAA) of Tax Declaration No. 019-7394, which increased the market value and assessed value of the machinery; (b) Property Record Form; 21 and (c)
Lucena City, Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-7394, ruling that MERALCO is liable for real property tax Tax Declaration No. 019-6500.22
on its transformers, electric posts (or poles), transmission lines, insulators, and electric meters, beginning 1992.
MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 before the LBAA of Lucena City on December 23, 1997 and posted a
MERALCO is a private corporation organized and existing under Philippine laws to operate as a public utility engaged in electric distribution. surety bond23 dated December 10, 1997 to guarantee payment of its real property tax delinquency. MERALCO asked the LBAA to cancel and
MERALCO has been successively granted franchises to operate in Lucena City beginning 1922 until present time, particularly, by: (1) nullify the Notice of Assessment dated October 20, 1997 and declare the properties covered by Tax Declaration Nos. 019-6500 and 019-7394
Resolution No. 366 dated May 15, 1922 of the Municipal Council of Lucena; (2) Resolution No. 108 7 dated July 1, 1957 of the Municipal exempt from real property tax.
Council of Lucena; (3) Resolution No. 2679 8 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. 9209 11 approved on June 9, 2003 by Congress.12 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. 551 24 pertaining to the
On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No. 019-6500 13 covering the following exemption of MERALCO from payment of real property tax on its poles, wires, insulators, transformers, and meters. The LBAA refused to
electric facilities, classified as capital investment, of the company: (a) transformer and electric post; (b) transmission line; (c) insulator; and (d) 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,
electric meter, located in Quezon Ave. Ext., Brgy. Gulang-Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric facilities 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-
had a market value of P81,811,000.00 and an assessed value of P65,448,800.00, and were subjected to real property tax as of 1985. 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:cralawlawlibrary
MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of Lucena City, which was docketed as LBAA-89-2. MERALCO claimed WHEREFORE, in view of the foregoing, it is hereby ordered that:chanRoblesvirtualLawlibrary
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
MERALCO was exempted from payment of real property tax on said substation facilities. 1) MERALCO's appeal be dismissed for lack of merit;ChanRoblesVirtualawlibrary

The LBAA rendered a Decision14 in LBAA-89-2 on July 5, 1989, finding that under its franchise, MERALCO was required to pay the City
Government of Lucena a tax equal to 5% of its gross earnings, and "[s]aid 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 x x x, on its poles, wires, insulators, transformers and
structures, installations, conductors, and accessories, x x x, from which taxes the grantee (MERALCO) is hereby expressly exempted." 15 As
regards the issue 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 Electric Company 16 (1964 MERALCO case) in which the Court held that: (1) the
steel towers fell within the term "poles" expressly exempted from taxes under the franchise of MERALCO; and (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 would remain and the poles, wires, insulators, transformers, and electric meters of MERALCO would be
continuously assessed, but the City Assessor would stamp on the said Tax Declaration the word "exempt." The LBAA decreed in the
end:cralawlawlibrary
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.25chanrobleslaw
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:cralawlawlibrary
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:chanRoblesvirtualLawlibrary 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
x x x x accordance with the provisions of the cited Section 222 of the Local Government Code. 28chanrobleslaw

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 The CBAA denied the Motion for Reconsideration of MERALCO in a Resolution 29 dated August 16, 2001.
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 Disgruntled, MERALCO sought recourse from the Court of Appeals by filing a Petition for Review under Rule 43 of the Rules of Court, which
machineries in the sense that they are instruments, mechanical contrivances or apparatus though not attached permanently to the real was docketed as CA-G.R. SP No. 67027.
properties of [MERALCO] are actually, directly and exclusively used to meet their business of distributing electricity.
The Court of Appeals rendered a Decision on May 13, 2004 rejecting all arguments proffered by MERALCO. The appellate court found no
x x x x deficiency in the Notice of Assessment issued by the City Assessor of Lucena:cralawlawlibrary
It was not disputed that [MERALCO] failed to provide the [City Assessor and City Treasurer of Lucena] with a sworn statement declaring the
Clearly, [Section 234 of the Local Government Code] lists down the instances of exemption in real property taxation and very apparent is the true value of each of the subject transformer and electric post, transmission line, insulator and electric meter which should have been made
fact that the enumeration is exclusive in character in view of the wordings in the last paragraph. Applying the maxim "Expressio Unius est the basis of the fair and current market value of the aforesaid property and which would enable the assessor to identify the same for
Exclusio Alterius", we can say that "Where the statute enumerates those who can avail of the exemption, it is construed as excluding all others assessment purposes. [MERALCO] merely claims that the assessment made by the [City Assessor and City Treasurer of Lucena] was
not mentioned therein". Therefore, the above-named company [had] lost its previous exemptions under its franchise because of non-inclusion incorrect but did not even mention in their pleading the true and correct assessment of the said properties. Absent any sworn statement given
in the enumeration in Section 234. Furthermore, all tax exemptions being enjoyed by all persons, whether natural or juridical, including all by [MERALCO], [the City Assessor and City Treasurer of Lucena] were constrained to make an assessment based on the materials within
government-owned or controlled corporations are expressly withdrawn, upon effectivity of R.A. 7160. [their reach].30chanrobleslaw

In the given facts, it has been manifested that the Municipal Board of Lucena passed Resolution No. 108 on July 1, 1957 extending the The Court of Appeals further ruled that there was no more basis for the real property tax exemption of MERALCO under the Local Government
franchise of MERALCO to operate in Lucena city an electric light system for thirty-five years, which should have expired on November 9, 1992 Code and that the withdrawal of said exemption did not violate the non-impairment clause of the Constitution, thus:cralawlawlibrary
and under Resolution No. 2679 passed on June 13, 1972 by the City Council of Lucena City awarding [MERALCO] a franchise to operate for Although it could not be denied that [MERALCO] was previously granted a Certificate of Franchise by the National Electrification Commission
twenty years an electric light, heat and power system in Lucena City, also to expire in the year 1992. Under those franchises, they were only 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
bound to pay franchise taxes and nothing more. 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.
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 At the outset, the Supreme Court has held that "Section 193 of the LGC prescribes the general rule, viz., tax exemptions or incentives granted
issued on October 28, 1993, such conferment does not automatically include and/or award exemption from taxes, nor does it impliedly give the to or presently enjoyed by natural or juridical persons are withdrawn upon the effectivity of the LGC except with respect to those entities
franchisee the right to continue the privileges like exemption granted under its previous franchise. It is just a plain and simple franchise. In expressly enumerated. In the same vein, We must hold that the express withdrawal upon effectivity of the LGC of all exemptions except only
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 as provided therein, can no longer be invoked by MERALCO to disclaim liability for the local tax." (City Government of San Pablo, Laguna vs.
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 yield Reyes, 305 SCRA 353, 362-363)
to the sublime yet inherent powers of the state, one of these is the power of taxation.
In fine, [MERALCO's] invocation of the non-impairment clause of the Constitution is accordingly unavailing. The LGC was enacted in
Looking into the law creating the National Electrification Administration (Commission), P.D. 269 as amended by P.D. 1645, nowhere in those pursuance of the constitutional policy to ensure autonomy to local governments and to enable them to attain fullest development as self-reliant
laws can we find such authority to bestow upon the grantee any tax exemption of whatever nature except those of cooperatives. This we communities. The power to tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised by local legislative bodies, no
believe is basically in consonance with the provisions of the Local Government Code more particularly Section 234. 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
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 in favor of the municipal corporations. (Ibid. pp. 363-365) 31chanrobleslaw
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 MERALCO similarly failed to persuade the Court of Appeals that the transformers, transmission lines, insulators, and electric meters mounted
to its contradictory and irreconcilable provisions with R.A. 7160. 26 on the electric posts of MERALCO were not real properties. The appellate court invoked the definition of "machinery" under Section 199(o) of
chanrobleslaw the Local Government Code and then wrote that:cralawlawlibrary
We firmly believe and so hold that the wires, insulators, transformers and electric meters mounted on the poles of [MERALCO] may
Yet, the CBAA modified the ruling of the LBAA by excluding from the real property tax deficiency assessment the years 1990 to 1991, nevertheless be considered as improvements on the land, enhancing its utility and rendering it useful in distributing electricity. The said
considering that:cralawlawlibrary properties are actually, directly and exclusively used to meet the needs of [MERALCO] in the distribution of electricity.
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) In addition, "improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty. It is a
classifying its poles, wires, insulators, transformers and electric meters as personal property was still controlling as the law of the case. So, familiar personalty phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered
from 1990 to 1991, it would be inappropriate and illegal to make the necessary assessment on those properties, much more to impose any personal property." (Caltex (Phil) Inc. vs. Central Board of Assessment Appeals, 114 SCRA 296, 301-302) 32chanrobleslaw
penalty for nonpayment of such.
Lastly, the Court of Appeals agreed with the CBAA that the new assessment of the transformers, electric posts, transmission lines, insulators,
But, assessments made beginning 1992 until 1997 by the City Government of Lucena is legal, both procedurally and substantially. When R.A. and electric meters of MERALCO shall retroact to 1992.
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 Hence, the Court of Appeals adjudged:cralawlawlibrary
[MERALCO] was automatically withdrawn pursuant to the letter and spirit of the law. x x x.27chanrobleslaw 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
Resultantly, the decretal portion of said CBAA Decision reads:cralawlawlibrary chanrobleslaw
 compliance with Section 222 of the Local Government Code, and since MERALCO has yet to pay the real property taxes due on said
In a Resolution dated November 18, 2004, the Court of Appeals denied the Motion for Reconsideration of MERALCO. 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
MERALCO is presently before the Court via the instant Petition for Review on Certiorari grounded on the following lone assignment of property taxes due.
error:cralawlawlibrary
THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN AFFIRMING IN TOTO THE DECISION OF THE CENTRAL The Petition is partly meritorious.
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 The Court finds that the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are no longer exempted
FROM 1992 UNTIL 1997, WITH PENALTIES; THE SAME BEING UNJUST, WHIMSICAL AND NOT IN ACCORD WITH THE LOCAL from real property tax and may qualify as "machinery" subject to real property tax under the Local Government Code. Nevertheless, the Court
GOVERNMENT CODE.34chanrobleslaw 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.
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 By posting a surety bond before
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 filing its appeal of the assessment with
be construed to harmonize with other laws on the same subject matter as to form a complete, coherent, and intelligible system; (2) the the LBAA, MERALCO substantially complied
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, with the requirement of payment under
ruling that the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are movable or personal protest in Section 252 of the Local
properties, is conclusive and binding; and (3) the electric poles are not exclusively used to meet the needs of MERALCO alone since these are Government Code.
also being utilized by other entities such as cable and telephone companies.
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
MERALCO further asserts that even if it is assumed for the sake of argument that the transformers, electric posts, transmission lines, 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
insulators, and electric meters are real properties, the assessment of said properties by the City Assessor in 1997 is a patent nullity. The 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
collection letter dated October 16, 1997 of the City Treasurer of Lucena, Notice of Assessment dated October 20, 1997 of the City Assessor of taxes on the property involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending upon the
Lucena, the Property Record Form dated October 20, 1997, and Tax Declaration No. 019-6500 simply state a lump sum market value for all final outcome of the appeal." Clearly, under the Local Government Code, even when the assessment of the real property is appealed, the real
the transformers, electric posts, transmission lines, insulators, and electric meters covered and did not provide an inventory/list showing the property tax due on the basis thereof should be paid to and/or collected by the local government unit concerned.
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 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
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 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-
the requisite information regarding the date of operation of MERALCO and the original cost, depreciation, and market value for each property 6500 and 019-7394 issued by the City Assessor of Lucena. MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 with the LBAA,
covered. For the foregoing reasons, the assessment of the properties of MERALCO in 1997 was arbitrary, whimsical, and without factual basis 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.
- 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 By posting the surety bond, MERALCO may be considered to have substantially complied with Section 252 of the Local Government Code for
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 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
10, 1991 of the CBAA in CBAA Case No. 248. 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
Granting that the assessment of its transformers, electric posts, transmission lines, insulators, and electric meters by the City Assessor of Development Corporation v. Central Board of Assessment Appeals 39 the Court affirmed the ruling of the CBAA and the Court of Tax Appeals en
Lucena in 1997 is valid, MERALCO alternatively contends that: (1) under Sections 221 35 and 22236 of the Local Government Code, the bane applying the "payment under protest" requirement in Section 252 of the Local Government Code and remanding the case to the LBAA for
assessment should take effect only on January 1, 1998 and not retroact to 1992; (2) MERALCO should not be held liable for penalties and "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."
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. 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.
At the end of its Petition, MERALCO prays:cralawlawlibrary
WHEREFORE, it is respectfully prayed of this Honorable Court that the appealed Decision dated May 13, 2004 of the Court of Appeals, Beginning January 1, 1992,
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 MERALCO can no longer claim
the Notice of Assessment, dated October 20, 1997, issued by respondent City Assessor, and the collection letter dated October 16, 1997 of exemption from real property tax of
respondent City Treasurer. its transformers, electric posts,
transmission lines, insulators, and
Petitioner also prays for such other relief as may be deemed just and equitable in the premises. 37 electric meters based on its
chanrobleslaw franchise.

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
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 Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property
granted under Ordinance No. 44 dated March 24, 1903 of the Municipal Board of Manila, which it acquired from the original grantee, Charles tax:chanRoblesvirtualLawlibrary
M. Swift. Under its franchise, MERALCO was expressly granted the following tax exemption privilege:cralawlawlibrary
Par 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles, wires, transformers, and (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been
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 granted, for consideration or otherwise, to a taxable person;ChanRoblesVirtualawlibrary
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 (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands,
insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted, x x x.41chanrobleslaw buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational
purposes;ChanRoblesVirtualawlibrary
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 (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled
exempted from real property tax. The Court ruled in the affirmative, ratiocinating that:cralawlawlibrary corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;ChanRoblesVirtualawlibrary
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 (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
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 (e) Machinery and equipment used for pollution control and environmental protection.
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 Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons,
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 whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this
voltage transmission wires (See Annex A) and their sole function is to support or carry such wires. Code.chanrobleslaw

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 Local Government Code, in addition, contains a general repealing clause under Section 534(f) which states that "[a]ll general and special
the United States have called these steel supports "steel towers", and they have denominated these supports or towers, as electric poles. In laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are
their decisions the words "towers" and "poles" were used interchangeably, and it is well understood in that jurisdiction that a transmission inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly."
tower or pole means the same thing.
Taking into account the above-mentioned provisions, the evident intent of the Local Government Code is to withdraw/repeal all exemptions
x x x x 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
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 Code to grant genuine and meaningful autonomy to enable local government units to attain their fullest development as self-reliant
restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as contemplated thereon, communities and make them effective partners in the attainment of national goals. The obvious intention of the law is to broaden the tax base
should be understood and taken as a part of the electric power system of the respondent Meralco, for the conveyance of electric current from of local government units to assure them of substantial sources of revenue. 43
the source thereof to its consumers, x x x.42chanrobleslaw
Section 234 of the Local Government Code particularly identifies the exemptions from payment of real property tax, based on the ownership,
Similarly, it was clear that under the 20-year franchise granted to MERALCO by the Municipal Board of Lucena City through Resolution No. character, and use of the property, viz.:cralawlawlibrary
2679 dated June 13, 1972, the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO were exempt from (a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties owned by: (i) the Republic, (ii) a
real property tax. Paragraph 13 of Resolution No. 2679 is quoted in full below:cralawlawlibrary province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered cooperatives.
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 (b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable institutions, (ii) houses and
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 temples of prayer like churches, parsonages or convents appurtenant thereto, mosques, and (iii) nonprofit or religious cemeteries.
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, (c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to which they are devoted are:
provincial, or national, now or in the future, on its poles, wires, insulators, switches, transformers and structures, installations, (i) all lands, buildings and improvements which are actually directly and exclusively used for religious, charitable or educational purposes; (ii)
conductors, and accessories, placed in and over and under all the private and/or public property, including public streets and highways, all machineries and equipment actually, directly and exclusively used by local water districts or by government-owned or controlled
provincial roads, bridges, and public squares, and on its franchise rights, privileges, receipts, revenues and profits, from which taxes the corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; and (iii) all machinery and
grantee is hereby expressly exempted. (Emphases supplied.)chanrobleslaw equipment used for pollution control and environmental protection.

In CBAA Case No. 248 (and LBAA-89-2), the City Assessor assessed the transformers, electric posts, transmission lines, insulators, and To help provide a healthy environment in the midst of the modernization of the country, all machinery and equipment for pollution control and
electric meters of MERALCO located in Lucena City beginning 1985 under Tax Declaration No. 019-6500. The CBAA in its Decision dated April environmental protection may not be taxed by local governments.
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. 2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical persons including government-owned or
controlled corporations are withdrawn upon the effectivity of the Code.44chanrobleslaw
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:cralawlawlibrary The last paragraph of Section 234 had unequivocally withdrawn, upon the effectivity of the Local Government Code, exemptions from payment
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the
presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water same section.
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. 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 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 real estate but are actually, directly and essentially
excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius.45 Not being among the recognized exemptions used to meet the needs of the particular industry,
from real property tax in Section 234 of the Local Government Code, then the exemption of the transformers, electric posts, transmission lines, business, or works, which by their very nature and
insulators, and electric meters of MERALCO from real property tax granted under its franchise was among the exemptions withdrawn upon the purpose are designed for, or essential to
effectivity of the Local Government Code on January 1, 1998. manufacturing, commercial, mining, industrial or
agricultural purposes.
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 Local Section 232. Power to Levy Real Property Tax. A Section 199. Definitions. - When used in this Title:
silent on the matter of exemption from real property tax of MERALCO or any of its properties. Government province or city or a municipality within the Metropolitan x x x x
Code Manila Area may levy an annual ad valorem tax on real
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 property such as land, building, machinery, and other (o) "Machinery" embraces machines, equipment,
conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved Effectivity: improvement not hereinafter specifically exempted. mechanical contrivances, instruments, appliances or
against the taxpayer.46 MERALCO has failed to present herein any express grant of exemption from real property tax of its transformers, January 1, 1992 apparatuswhich may or may not be attached,
electric posts, transmission lines, insulators, and electric meters that is valid and binding even under the Local Government Code. permanently or temporarily, to the real property . It
includes the physical facilities for production, the
The transformers, electric posts, installations and appurtenant service facilities, those
transmission lines, insulators, and electric which are mobile, self-powered or self- propelled,
meters of MERALCO may qualify as and those not permanently attached to the real
"machinery" under the Local Government property which are actually, directly, and exclusively
Code subject to real property tax. used to meet the needs of the particular industry,
business or activity and which by their very nature and
Through the years, the relevant laws have consistently considered "machinery" as real property subject to real property tax. It is the definition purpose are designed for, or necessary to its
of "machinery" that has been changing and expanding, as the following table will show:chanRoblesvirtualLawlibrary manufacturing, mining, logging, commercial, industrial
or agricultural purposes[.]
Real Property
Incidence of Real Property Tax Definition of Machinery 47
Tax Law
The Assessment Law Section 2. Incidence of real property tax. - Except in Section 3. Property exempt from tax. - The exemptions MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts, transmission lines, insulators, and electric
(Commonwealth Act No. chartered cities, there shall be levied, assessed, and shall be as follows: meters constitute the physical facilities through which MERALCO delivers electricity to its consumers. Each may be considered as one or more
470) collected, an annual ad valorem tax on real property, x x x x of the following: a "machine,"48 "equipment,"49 "contrivance,"50 "instrument,"51 "appliance,"52"apparatus,"53 or "installation."54
including land, buildings, machinery, and other (f) Machinery, which term shall embrace machines,
Effectivity: January 1, improvements not hereinafter specifically exempted. mechanical contrivances, instruments, appliances, and The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be deemed real property subject to real property
1940 apparatus attached to the real estate, used for 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 property,"
industrial agricultural or manufacturing purposes, and in fact, such machinery may even be "mobile." 55 The same provision though requires that to be machinery subject to real property tax, the
during the first five years of the operation of the physical facilities for production, installations, and appurtenant service facilities, those which are mobile, self-powered or self-propelled, or not
machinery. permanently attached to the real property (a) must be actually, directly, and exclusively used to meet the needs of the particular industry,
Real Property Section 38. Incidence of Real Property Tax. - There Section 3. Definition of Terms. - business, or activity; and (2) by their very nature and purpose, are designed for, or necessary for manufacturing, mining, logging, commercial,
Tax Code shall be levied, assessed and collected in all provinces, When used in this Code - industrial, or agricultural purposes. Thus, Article 290(o) of the Rules and Regulations Implementing the Local Government Code of 1991
cities and municipalities an annual ad valorem tax on recognizes the following exemption:cralawlawlibrary
Effectivity: June 1, 1974 real property, such as land, buildings, machinery and x x x x Machinery which are of general purpose use including but not limited to office equipment, typewriters, telephone equipment, breakable or
other improvements affixed or attached to real property easily damaged containers (glass or cartons), microcomputers, facsimile machines, telex machines, cash dispensers, furnitures and fixtures,
not hereinafter specifically exempted. (m) Machinery - shall embrace machines, mechanical freezers, refrigerators, display cases or racks, fruit juice or beverage automatic dispensing machines which are not directly and exclusively
contrivances, instruments, appliances and apparatus used to meet the needs of a particular industry, business or activity shall not be considered within the definition of machinery under this Rule.
attached to the real estate. It includes the physical (Emphasis supplied.)chanrobleslaw
facilities available for production, as well as the
installations and appurtenant service facilities, together 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
with all other equipment designed for or essential to its machinery be attached to the real property. Moreover, as the Court pointed out earlier, the ruling in the 1964 MERALCO case - that the electric
manufacturing, industrial or agricultural purposes. 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
Real Property Section 38. Incidence of Real Property Tax. - There Section 3. Definition of Terms. argument:cralawlawlibrary
Tax Code, as amended by shall be levied, assessed and collected in all provinces, When used in this Code - Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the
Presidential cities and municipalities an annual ad valorem tax on x x x x logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law
Decree No. 1383 real property, such as land, buildings, machinery and does not provide for a definition of real property; but Article 415 of the Civil Code does, by stating the following are immovable
other improvements affixed or attached to real property (m) Machinery - shall embrace machines, equipment, property:cralawlawlibrary
Effectivity: May 25, 1978 not hereinafter specifically exempted. mechanical contrivances, instruments, appliances and (1) Land, buildings, roads, and constructions of all kinds adhered to the soil;ChanRoblesVirtualawlibrary
apparatus attached to the real estate. It shall include
the physical facilities available for production, as well x x x x
as the installations and appurtenant service facilities,
together with all those not permanently attached to the (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;ChanRoblesVirtualawlibrary 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.)chanrobleslaw
x x x x
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation61 that:cralawlawlibrary
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried in 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
a building or on a piece of land, and which tends directly to meet the needs of the said industry or works;ChanRoblesVirtualawlibrary 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
xxxx 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
The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or 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.
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 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
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 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
manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. (Citations omitted.)chanrobleslaw
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 Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, 62 the Court acknowledged that "[i]t is a familiar phenomenon
not machineries or receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land. to see things classed as real property for purposes of taxation which on general principle might be considered personal property[.]"
Petitioner is not engaged in an industry or works on the land in which the steel supports or towers are constructed. 56 (Emphases
supplied.)chanrobleslaw Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under the Local
Government Code are controlling.
The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore under the Local Government Code.
MERALCO maintains that its electric posts are not machinery subject to real property tax because said posts are not being exclusively used by
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, MERALCO; these are also being utilized by cable and telephone companies. This, however, is a factual issue which the Court cannot take
respectively, gives an extensive definition of what constitutes "machinery" and unequivocally subjects such machinery to real property tax. The 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
Court reiterates that the machinery subject to real property tax under the Local Government Code "may or may not be attached, permanently companies or industries is best left to the determination of the City Assessor or his deputy, who has been granted the authority to take
or temporarily to the real property;" and the physical facilities for production, installations, and appurtenant service facilities, those which are evidence under Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991.
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, Nevertheless, the appraisal and
mining, logging, commercial, industrial, or agricultural purposes. assessment of the transformers, electric
posts, transmission lines, insulators, and
Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and, buildings, roads and constructions of all kinds electric meters of MERALCO as machinery
adhered to the soil." The land, buildings, and roads are immovables by nature "which cannot be moved from place to place," whereas the under Tax Declaration Nos. 019-6500 and
constructions adhered to the soil are immovables by incorporation "which are essentially movables, but are attached to an immovable in such 019-7394 were not in accordance with the
manner as to be an integral part thereof." 57 Article 415, paragraph (3) of the Civil Code, referring to "[ejverything attached to an immovable in a Local Government Code and in violation of
fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object," are likewise the right to due process of MERALCO and,
immovables by incorporation. In contrast, the Local Government Code considers as real property machinery which "may or may not be therefore, null and void.
attached, permanently or temporarily to the real property," and even those which are "mobile."
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
Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[machinery, receptacles, instruments or implements purpose." "Assessment" is "the act or process of determining the value of a property, or proportion thereof subject to tax, including the
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 discovery, listing, classification, and appraisal of the properties[.]" 63 When it comes to machinery, its appraisal and assessment are particularly
directly to meet the needs of the said industry or works." The Civil Code, however, does not define "machinery." governed by Sections 224 and 225 of the Local Government Code, which read:cralawlawlibrary
Section 224. Appraisal and Assessment of Machinery. - (a) The fair market value of a brand-new machinery shall be the acquisition cost. In all
The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are essentially movables, but other cases, the fair market value shall be determined by dividing the remaining economic life of the machinery by its estimated economic life
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 and multiplied by the replacement or reproduction cost.
therefrom."58These 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 (b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other charges, brokerage, arrastre and handling,
needs of said industry or works. 59 The first two requisites are not found anywhere in the Local Government Code. 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.
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 Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a depreciation allowance shall be made for machinery at a
purposes not provided for, or even in direct conflict with, the provisions of the Local Government Code. 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
As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a special law granting original, replacement, or reproduction cost for so long as the machinery is useful and in operation.chanrobleslaw
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:cralawlawlibrary It is apparent from these two provisions that every machinery must be individually appraised and assessed depending on its acquisition cost,
It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one. Lex specialis derogant remaining economic life, estimated economic life, replacement or reproduction cost, and depreciation.
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 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:cralawlawlibrary
Article 304. Authority of Local Assessors to Take Evidence. - For the purpose of obtaining information on which to base the market value of transmission lines, insulators, and electric meters of MERALCO.
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, The Court of Appeals laid the blame on MERALCO for the lack of information regarding its transformers, electric posts, transmission lines,
nature, and value. insulators, and electric meters for appraisal and assessment purposes because MERALCO failed to file a sworn declaration of said properties
chanrobleslaw 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 further mandates that the taxpayer be given a notice of the assessment of real property in the following the Local Government Code exactly covers such a situation, thus:cralawlawlibrary
manner:cralawlawlibrary Section 204. Declaration of Real Property by the Assessor. - When any person, natural or juridical, by whom real property is required to be
Section 223. Notification of New or Revised Assessment. - When real property is assessed for the first time or when an existing assessment is declared under Section 202 hereof, refuses or fails for any reason to make such declaration within the time prescribed, the provincial, city or
increased or decreased, the provincial, city or municipal assessor shall within thirty (30) days give written notice of such new or revised municipal assessor shall himself declare the property in the name of the defaulting owner, if known, or against an unknown owner, as the case
assessment to the person in whose name the property is declared. The notice may be delivered personally or by registered mail or through the 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
assistance of the punong barangay to the last known address of the person to served.chanrobleslaw made by the provincial, city or municipal assessor.chanrobleslaw

A notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability, should be Note that the only difference between the declarations of property made by the taxpayer, on one hand, and the provincial/city/municipal
sufficiently informative to apprise the taxpayer the legal basis of the tax. 64 In Manila Electric Company v. Barlis, 65 the Court described the 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
contents of a valid notice of assessment of real property and differentiated the same from a notice of collection:cralawlawlibrary provincial/city/municipal assessor is still required to assess the property for taxation in accordance with the provisions of the Local Government
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, Code.
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 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
property or proportion thereof which is being taxed, nor does it state the discovery, listing, classification and appraisal of the property subject to otherwise.66 In this case, MERALCO was able to overcome the presumption because it has clearly shown that the assessment of its properties
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 by the City Assessor was baselessly and arbitrarily done, without regard for the requirements of the Local Government Code.
the taxes shall authorize the government to auction off the properties subject to taxes x x x.chanrobleslaw
The exercise of the power of taxation constitutes a deprivation of property under the due process clause, and the taxpayer's right to due
Although the ruling quoted above was rendered under the Real Property Tax Code, the requirement of a notice of assessment has not process is violated when arbitrary or oppressive methods are used in assessing and collecting taxes. 67 The Court applies by analogy its
changed under the Local Government Code. 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
A perusal of the documents received by MERALCO on October 29, 1997 reveals that none of them constitutes a valid notice of assessment of On the strength of the foregoing observations, we ought to reiterate our earlier teachings that "in balancing the scales between the power of
the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO. 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
The letter dated October 16, 1997 of the City Treasurer of Lucena (which interestingly precedes the purported Notice of Assessment dated 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
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 spite of all its plenitude. Even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that
soon in order to avoid accumulation of penalties. It only presented in table form the tax declarations covering the machinery, assessed values it be exercised reasonably and in accordance with the prescribed procedure. (Citations omitted.)chanrobleslaw
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 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
The Notice of Assessment dated October 20, 1997 issued by the City Assessor gave a summary of the new/revised assessment of the without due process of law and, therefore, null and void.
"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. WHEREFORE, premises considered, the Court PARTLY GRANTS the instant Petition and AFFIRMS with MODIFICATION the Decision
Without specific description or identification of the machinery covered by said tax declaration, said Notice of Assessment and Property Record 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
Form give the false impression that there is only one piece of machinery covered. 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,
In Tax Declaration No. 019-6500, the City Assessor reported its findings under "Building and Improvements" and not "Machinery." Said tax the Court also DECLARES the appraisal and assessment of the said properties under Tax Declaration Nos. 019-6500 and 019-7394
declaration covered "capital investment-commercial," specifically: (a) Transformer and Electric Post; (b) Transmission Line, (c) Insulator, and as NULLand VOID for not complying with the requirements of the Local Government Code and violating the right to due process of Manila
(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. Electric Company, and ORDERS the CANCELLATION of the collection letter dated October 16, 1997 of the City Treasurer of Lucena and
Conspicuously, the table for "Machinery" - requiring the description, date of operation, replacement cost, depreciation, and market value of the the Notice of Assessment dated October 20, 1997 of the City Assessor of Lucena, but WITHOUT PREJUDICE to the conduct of a new
machinery - is totally blank. 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.
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 SO ORDERED.chanroblesvirtuallawlibrary
PI6,632,200.00, compared to that in Tax Declaration No. 019-6500. G.R. No. 183416, October 05, 2016
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR, Petitioner, v. FILIPINAS PALM OIL PLANTATION, INC., Respondent.
The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack of a valid appraisal and assessment DECISION
conducted by the City Assessor of Lucena in the first place. It appears that the City Assessor of Lucena simply lumped together all the LEONEN, J. :
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City under Tax Declaration The exemption from real property taxes given to cooperatives applies regardless of whether or not the land owned is leased. This exemption
Nos. 019-6500 and 019-7394, contrary to the specificity demanded under Sections 224 and 225 of the Local Government Code for appraisal benefits the cooperative's lessee. The characterization of machinery as real property is governed by the Local Government Code and not the
and assessment of machinery. The City Assessor and the City Treasurer of Lucena did not even provide the most basic information such as Civil Code.
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, This Petition1 for review assails the Decision 2 dated September 26, 2007 and the Resolution 3 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 which reads:
Palm Oil Plantation Inc. from payment of real property taxes. 4chanrobleslaw
chanRoblesvirtualLawlibrary
Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil plantation 5with a total land area of more than 7,000 WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision rendered by the Local Board of Assessment
hectares of National Development Company (NDC) lands in Agusan del Sur.6 Harvested fruits from oil palm trees are converted into oil through 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
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 Provincial Assessors Office of Agusan del Sur, Respondent" and hereby orders as follows:
residential homes constructed by Filipinas for its employees. 8chanrobleslaw
chanRoblesvirtualLawlibraryA. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100 PESOS (57.55), effective January
After the Comprehensive Agrarian Reform Law 9 was passed, NDC lands were transferred to Comprehensive Agrarian Reform Law 1, 1991. The assessment for each municipality shall be based on the corresponding number of trees as listed in Petitioner-Appellee's
beneficiaries who formed themselves as the merged NDC-Guthrie Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-NGEI) "Hectarage Statement" discussed hereinabove;
Cooperatives.10 Filipinas entered into a lease contract agreement with NGPI-NGEI. 11chanrobleslaw
B. Petitioner-Appellee should not be made to pay for the real property taxes due on the roads starting from January 1, 1991;
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 C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands owned by the Multi-purpose Cooperative;
Assessment Appeals (LBAA) on the following grounds:
D. The housing units with a market value of PI75,000.00 or less each shall be subjected to 0% assessment level, starting 1994;
chanRoblesvirtualLawlibrary
(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 E. Road Equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is not liable for real property tax thereon;
P207.00 when it should only be P42.00 pesos per tree;
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
(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 rightfully due from Petitioner-Appellee.
should be only 92 trees;
SO ORDERED.27 (Emphasis supplied)
(3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation roads are:ChanRoblesVirtualawlibrary
A.) P270,000.00 per kilometer for primary roads The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor. 28 The Provincial Assessor filed a Petition for Review before
B.) P135,000.00 for secondary roads the Court of Appeals, which, in turn, sustained the CBAA's Decision. 29chanrobleslaw
C.) P67,567.00 for tertiary roads constructed by the company.
It should only be:ChanRoblesVirtualawlibrary 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
A.) P105,000.00 for primary roads these are owned by cooperatives that are tax-exempt. 30 Section 133(n) of the Local Government Code provides:
B.) P52,300.00 for secondary roads
C.) P26,250.00 for tertiary roads chanRoblesvirtualLawlibrary
Likewise, bridges, culverts, canals and pipes should not be assessed separately from plantation roads, the same being components of the SECTION 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of
roads thereof; the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
....
(4.) The [petitioner] ERRED in imposing real property taxes against the petitioner for roads, bridges, culverts, pipes and canals as these (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and
belonged to the cooperatives; Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines."
(Emphasis supplied)
([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; Section 234(d) of the Local Government Code exempts duly registered cooperatives, like NGPI-NGEI, from payment of real property taxes:

([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.18chanrobleslaw
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.23chanrobleslaw
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
chanRoblesvirtualLawlibrary
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.33chanrobleslaw
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:35chanrobleslaw
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 (b) Real property shall be classified for assessment purposes on the basis of its actual use[.]
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 SECTION 199. Definition of Terms. When used in this Title, the term:
the meaning of section 2 of Commonwealth Act No. 470.36 (Citations omitted) . . . .
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof [.]
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 SECTION 205. Listing of Real Property in the Assessment Rolls.
under the right of accession:38chanrobleslaw . . . .
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or (d) Real property owned by the Republic of the Philippines, its instrumentalities and political subdivisions, the beneficial use of which has been
attached thereto, either naturally or artificially. 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.
. . . .
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. 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)
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: 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,
chanRoblesvirtualLawlibrary which defines real property, should not be made to control the Local Government Code, 49 a subsequent legislation that specifically defines
SECTION 199. Definition of Terms. When used in this Title, the term: "machinery" for taxation purposes.50chanrobleslaw
....
In the Resolution51 dated October 13, 2008, this Court denied the Petition for Review due to procedural missteps, which included the failure to
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attach legible duplicate original or certified true copies of the assailed decision and failure to pay proper fees. On November 25, 2008,
attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant petitioner moved for reconsideration,52 praying for the reversal of the Petition's denial due to mere technicalities.
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 On January 26, 2009, this Court granted Petitioner's Motion for Reconsideration. 53 It directed the reinstatement of the Petition and required
purpose are designed for, or necessary to its manufacturing, mining. respondent to comment.54chanrobleslaw

The Court of Appeals held that Section 19^(o) of the Local Government Code should be construed to include machineries covered by the On November 20, 2009, respondent filed its Comment. 55chanrobleslaw
meaning of real properties provided for under Article 415(5) of the Civil Code: 40chanrobleslaw
Article 415. The following are immovable property: 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
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried taxes.57It 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
on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works[.] 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.59chanrobleslaw
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 On the road equipment and mini haulers being subjected to real property taxation, respondent maintains that it should be spared from real
unless this person acts as an agent of the owner.42 Thus, the mini haulers and other road equipment retain their nature as property tax since the equipment and mini haulers are movables. 60chanrobleslaw
movables.43chanrobleslaw
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
The Provincial Assessor filed before this Court a Petition for Review raising the following issues: haulers.

chanRoblesvirtualLawlibraryFirst, whether the exemption privilege of NGPI-NGEI from payment of real property tax extends to respondent 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
Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by cooperatives; and cralawlawlibrary 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:
Second, whether respondent's road equipment and mini haulers are movable properties and have not been immobilized by destination for real
property taxation. chanRoblesvirtualLawlibrary
SECTION 234. Exemptions from Real Property Tax . The following are exempted from payment of the real property tax:
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 (d) All real property owned by duly registered cooperatives as provided for under [Republic Act] No. 6938[.] (Emphasis supplied)
actually, directly, and exclusively uses and possesses the properties. 47 Sections 198, 199, 205, and 217 of the Local Government Code
provide: 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
chanRoblesvirtualLawlibrary 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
SECTION 198. Fundamental Principles. The appraisal, assessment, levy and collection of real property tax shall be guided by the following corporation is not a ground for withdrawal of tax exemption. 62chanrobleslaw
fundamental principles:
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 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
the effectivity of the Local Government Code. However, Mactan does not refer to the tax exemption extended to cooperatives. The portion that 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
petitioner cited specifically mentions that the exemption granted to cooperatives has not been withdrawn by the effectivity of the Local the meaning of section 2 of Commonwealth Act No. 470.71
Government Code:
This was reiterated in Board of Assessment Appeals ofZamboanga del Sur v. Samar Mining Company, Inc. 72 Samar Mining Company, Inc.
chanRoblesvirtualLawlibrary (Samar Mining) was a domestic corporation engaged in the mining industry.73 Since Samar Mining's mining site and mill were in an inland
[S]ection 232 must be deemed to qualify Section 133. 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
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 Bureau of Lands and the Bureau of Forestry where the proposed road would pass through. 75 Samar Mining was given a "temporary permit to
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 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
National Government, its agencies and instrumentalities, and local government units"; however, pursuant to Section 232, provinces, cities, and assessed by the Provincial Assessor of Zamboanga del Sur with real property taxes on the road, which prompted it to appeal before the Board
municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of of Assessment Appeals.77Invoking Bislig Bay, Samar Mining claimed that it should not be assessed with real property tax since the road was
the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a constructed on public land. This Court ruled for Samar Mining, thus:
taxable person," as provided in item (a) of the first paragraph of Section 234.
chanRoblesvirtualLawlibrary
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned and controlled There is no question that the road constructed by respondent Saimar on the public lands leased to it by the government is an improvement.
corporations, Section 193 of the L[ocal] G[overnment] C[ode] prescribes the general rule, viz., they are withdrawn upon the effectivity of the But as to whether the same is taxable under the aforequoted provision of the Assessment Law, this question has already been answered in 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 negaitive by this Court. In the case of Bislig Bay Lumber Co., Inc. vs. Provincial Government of Surigao, where a similar issue was raised. . ..
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 . . . 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
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 which it is constructed and the improvement is the property of the government by right of accession. Under Section 3(a) of the Assessment
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 Law, all properties owned by the government, without any distinction, are exempt from taxation.79 (Emphasis supplied, citations omitted)
exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise.
The roads that respondent constructed became permanent improvements on the land owned by the NGPI-NGEI by right of accession under
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the L[ocal] G[overnment] C[ode], exemptions from the Civil Code, thus:
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 chanRoblesvirtualLawlibrary
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 Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or
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 attached thereto, either naturally or artificially.
above, the said section is qualified by Sections 232 and 234. . . . .
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
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 the land[.]
to the levy of:
Despite the land being leased by respondent when the roads were constructed, the ownership of the improvement still belongs to NGPI-NGEI.
chanRoblesvirtualLawlibrary 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,
(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government units. whatever is incorporated in the land, either naturally or artificially, belongs to the NGPI-NGEI as the landowner.

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 Although the roads were primarily built for respondent's benefit, the roads were also being used by the members of NGPI and the
ownership, character, or use of the property.63 (Emphasis supplied) 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:
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 chanRoblesvirtualLawlibrary
Surigao.64 To aid in developing its concession, Bislig Bay built a road at its expense from a barrio leading towards its area. 65 The Provincial On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie Plantations, Inc., as Lessee, entered into a "Lease
Assessor of Surigao assessed Bislig Bay with real property tax on the constructed road, which was paid by the company under protest. 66 It Agreement" . . . covering the agricultural lands transferred by NDC to the DAR, which lands the DAR ultimately distributed undivided to
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 qualified workers-beneficiaries. . . .
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: 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."
chanRoblesvirtualLawlibrary
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 Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent improvements, such as roads and palm trees
appellee belongs to the government by right accession not only because it is inherently incorporated or attached to the timber land leased to introduced on the Leased Property, shall automatically accrue to the LESSOR upon termination of this Lease Agreement without need of
appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government. ... In the second reimbursement."
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 All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative and NDC-Guthrie Plantations, Inc. were
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 reconfirmed and reaffirmed in the Addendum to Lease Agreement entered into by and between NGPI Multi-Purpose Cooperative and Filipinas
concession for the personal use of individuals residing in or within the vicinity of the land. ... In other words, the government has practically 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.
On the other hand, respondent claims that the road equipment and mini haulers are movables by nature. It asserts that although there may be
There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative which leased the same to Petitioner-Appellee. a difference between the meaning of "machinery" under the Local Government Code arid that of immovable property under Article 415(5) of
These roads belong to the Multi-Purpose Cooperative, not only by right of accession but also by express provisions of the Contract 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
Lease[.]81 Code."88chanrobleslaw

Respondent claims that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental, which includes the payment of taxes. 82 If In Manila Electric Company v. City Assessor,89 a similar issue of which definition of "machinery" prevails to warrant the assessment of real
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: property tax on it was raised.

chanRoblesvirtualLawlibrary Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code and the Local Government Code and asserted
"2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual rentals:ChanRoblesVirtualawlibrary that "machinery" contemplated under Section 199(o) of the Local Government must still be within the contemplation of immovable property
"1) An annual fixed rental, in the following amount "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE PER ANNUM which under Article 415 of the Civil Code.90 However, this Court ruled that harmonizing such laws "would necessarily mean imposing additional
would cover the following: 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:
chanRoblesvirtualLawlibrary"(1) All Taxes on the Land
"(2) Administration Charges chanRoblesvirtualLawlibrary
"(3) Amortization charges 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
"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 Court reiterates that the machinery subject to real property tax under the Local Government Code "may or may not be attached, permanently
land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten percent (10%) of the immediately preceding tax or temporarily to the real property"; and the physical facilities for production, installations, and appurtenant service facilities, those which are
imposed on the land; provided further, that any increase beyond these percentage shall be borne equally by the LESSOR and LESSEE. 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,
"The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased Property Primarily and mining, logging, commercial, industrial, or agricultural purposes.
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 Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[m]achinery, receptacles, instruments or implements
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 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
supplied) directly to meet the needs of the said industry or works." The Civil Code, however, does not define "machinery."

Therefore, NGPI-NGEI, as owner of the roads that permanently became part of the land being leased by respondent, shall be liable for real The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are essentially movables, but
property taxes, if any. However, by express provision of the Local Government Code, NGPI-NGEI is exempted from payment of real property 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
tax.84chanrobleslaw therefrom." These properties, including machinery, become immobilized if the following requisites concur: (a) they are placed in the tenement
II 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
The road equipment and mini haulers shall be considered as real property, subject to real property tax. omitted)
85
Section 199(o) of the Local Government Code defines "machinery" as real property subject to real property tax, thus: Section 199(o) of the Local Government prevails over Article 415(5) of the Civil Code. In Manila Electric Company:

chanRoblesvirtualLawlibrary chanRoblesvirtualLawlibrary
SECTION 199. Definition of Terms. When used in this Title, the term: 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
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be Secretary of the Department of Public Works and Highways Simeon A. Datumanong:ChanRoblesVirtualawlibrary
attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one. Lex specialis derogant
service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are generali. As this Court expressed in the case of Leveriza v. Intermediate Appellate Court, "another basic principle of statutory construction
actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and mandates that general legislation must give way to special legislation on the same subject, and generally be so interpreted as to embrace only
purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes[.] 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 ."
Article 415(5) of the New Civil Code defines "machinery" as that which constitutes an immovable property:
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation that:
chanRoblesvirtualLawlibrary
Article 415. The following are immovable property: chanRoblesvirtualLawlibrary
. . . . A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and harmonized, if
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried 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
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) 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
Petitioner contends that the second sentence of Section 199(o) includes the road equipment and mini haulers since these are directly 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.
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. 87chanrobleslaw 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 review on certiorari, challenges the February 9, 2005 Decision 3 and November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both
construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. petitions were dismissed on the ground of prescription.
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court acknowledged that "[i]t is a familiar phenomenon The pertinent facts are as follows:
to see things classed as real property for purposes of taxation which on general principle might be considered personal property[.]" 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 Agreement 5 (Agreement), was for a period of five years. Article
Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under the Local 10 reads:
Government Code are controlling.93 (Emphasis supplied, citations omitted) 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
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 become subject to or in relation to the performance of their obligations under this agreement (other than (i) taxes imposed or calculated on the
nature of respondent's business, transportation is indispensable for its operations. 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
Under the definition provided in Section 199(o) of the Local Government Code, the road equipment and the mini haulers are classified as Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially opposed the assignment of rights, citing
machinery, thus: 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
chanRoblesvirtualLawlibrary Batangas City. The assessed tax, which likewise covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the
SECTION 199. Definition of Terms. When used in this Title, the terra: 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.
(o) "Machinery" . . . includes the physical facilities for production , the installations and appurtenant service facilities, those which are In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors decision to assess real property taxes on the
mobile , self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and power barges. However, the motion was denied on September 22, 1995, and the Provincial Assessor advised NPC to pay the
exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are assessment.8 This prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment
designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes [.] ( Emphasis supplied) 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
Petitioner is correct in claiming that the phrase pertaining to physical facilities for production is comprehensive enough to include the road In its Answer to the petition, the Provincial Assessor averred that the barges were real property for purposes of taxation under Section 199(c)
equipment and mini haulers as actually, directly, and exclusively used by respondent to meet the needs of its operations in palm oil of Republic Act (R.A.) No. 7160.
production.96Moreover, "mini-haulers are farm tractors pulling attached trailers used in the hauling of seedlings during planting season and in Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of Finance (DOF) had rendered
transferring fresh palm fruits from the farm [or] field to the processing plant within the plantation area." 97 The indispensability of the road an opinion10 dated May 20, 1996, where it is clearly stated that power barges are not real property subject to real property assessment.
equipment and mini haulers in transportation makes it actually, directly, and exclusively used in the operation of respondent's business. 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.
In its Comment, respondent claims that the equipment is no longer vital to its operation because it is currently employing equipment outside SO ORDERED.12
the company to do the task.98 However, respondent never raised this contention before the lower courts. Hence, this is a factual issue of which The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real
this Court cannot take cognizance. This Court is not a trier of facts. 99 Only questions of law are entertained in a petition for review assailing a property for taxation purposes because they are installed at a specific location with a character of permanency. The LBAA also pointed out that
Court of Appeals decision.100chanrobleslaw the owner of the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for the
payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and
WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 26, 2007 and the Resolution cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.
dated May 26, 2008 in CA-G.R. SP No. 74060 are AFFIRMED with MODIFICATION, in that the road equipment and the mini haulers Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA).
should be assessed with real property taxes. On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant by Distraint 13over the power barges,
seeking to collect real property taxes amounting to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially served to FELS
SO ORDERED. on November 8, 1996. It then filed a Motion to Lift Levy dated November 14, 1996, praying that the Provincial Assessor be further restrained
by the CBAA from enforcing the disputed assessment during the pendency of the appeal.
Carpio, (Chairperson), Del Castillo, , and Mendoza, JJ., concur. On November 15, 1996, the CBAA issued an Order 14 lifting the levy and distraint on the properties of FELS in order not to preempt and render
Brion, J., on leave. ineffectual, nugatory and illusory any resolution or judgment which the Board would issue.
Endnotes : Meantime, the NPC filed a Motion for Intervention 15 dated August 7, 1998 in the proceedings before the CBAA. This was approved by the
G.R. No. 168557 February 16, 2007 CBAA in an Order16 dated September 22, 1998.
FELS ENERGY, INC., Petitioner, During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee the payment of real property taxes
vs. assessed by the Provincial Assessor (in the event that the judgment be unfavorable to them). The bonds were duly approved by the CBAA.
THE PROVINCE OF BATANGAS and On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real property tax. The dispositive portion reads:
THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents. WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of Batangas is hereby reversed. Respondent-
x----------------------------------------------------x appellee Provincial Assessor of the Province of Batangas is hereby ordered to drop subject property under ARP/Tax Declaration No. 018-
G.R. No. 170628 February 16, 2007 00958 from the List of Taxable Properties in the Assessment Roll. The Provincial Treasurer of Batangas is hereby directed to act accordingly.
NATIONAL POWER CORPORATION, Petitioner, SO ORDERED.18
vs. Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since they are actually, directly and exclusively
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160. 19 As to the other jurisdictional issue, the
Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial Assessor, Respondents. CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No.
DECISION 7160. The Provincial Assessor filed a motion for reconsideration, which was opposed by FELS and NPC.
CALLEJO, SR., J.: In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier decision. The fallo of the resolution reads:
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. WHEREFORE, premises considered, it is the resolution of this Board that:
(FELS) and National Power Corporation (NPC), respectively. The first is a petition for review on certiorari assailing the August 25, 2004 (a) The decision of the Board dated 6 April 2000 is hereby reversed.
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its Resolution 2 dated June 20, 2005; the second, also a petition for (b) The petition of FELS, as well as the intervention of NPC, is dismissed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is likewise hereby affirmed.
SO ORDERED.21
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 October 19, 2001.
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 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 motion for consolidation
with CA-G.R. SP No. 67491, since it is the ponente of the latter petition who should resolve the request for reconsideration.
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:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions dated July 31, 2001 and October 19, 2001 of
the Central Board of Assessment Appeals are AFFIRMED.
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 Resolution 25 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 Resolution 28 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 that the filing of the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum shopping.
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 Resolution 31 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
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 OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site
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 used in connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the
same or any other judicial tribunal of concurrent jurisdiction, touching on the points or matters in issue in the first suit. Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.52
xxx 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,
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 which reads:
it has been considered and decided with finality. Litigations must end and terminate sometime and somewhere. The effective and efficient SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
administration of justice requires that once a judgment has become final, the prevailing party should not be deprived of the fruits of the verdict xxx
by subsequent suits on the same issues filed by the same parties. (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled
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 corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; x x x
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 Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation;
between the first and the second actions, identity of parties, subject matter and causes of action. The application of the doctrine of res judicata nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides:
does not require absolute identity of parties but merely substantial identity of parties. There is substantial identity of parties when there is OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel pursuant to Article 6 and
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 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
latter.43 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
To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding real property assessment. Therefore, when customs, public order or public policy, the parties to the contract are bound by its terms and conditions.54
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, 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
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 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
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 misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved 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 favor of provincial corporations, we hold that FELS is considered a taxable entity.
the erroneous petition filed by NPC is thus unavailing. 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
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 taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is
forum, a party seeks another and possibly favorable judgment in another forum other than by appeal or special civil action or certiorari. There between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas.
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 It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments deprivation of revenues. The
other court would make a favorable disposition.44 power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security
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 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
already discussed, res judicata may be properly applied herein. Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and 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
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 with the State policy to guarantee the autonomy of local governments 58 and the objective of the Local Government Code that they enjoy
from one of the tribunals which allowed them to pursue their cases. genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them
It must be stressed that an important factor in determining the existence of forum shopping is the vexation caused to the courts and the effective partners in the attainment of national goals.59
parties-litigants by the filing of similar cases to claim substantially the same reliefs. 45 The rationale against forum shopping is that a party In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance and support myriad
should not be allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or complaints constitutes abuse of court activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement
processes, which tends to degrade the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of of peace, progress, and prosperity of the people.60
the heavily burdened dockets of the courts.46 WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED.
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, SO ORDERED.
(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 ROMEO J. CALLEJO, SR.
particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in Associate Justice
the other.47 WE CONCUR:
Having found that the elements of res judicata and forum shopping are present in the consolidated cases, a discussion of the other issues is CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
no longer necessary. Nevertheless, for the peace and contentment of petitioners, we shall shed light on the merits of the case. Associate Justice Asscociate Justice
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 MINITA V. CHICO-NAZARIO
inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by Associate Justice
tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. 48 Besides, factual ATT E S TATI O N
findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left of the Courts Division.
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. CONSUELO YNARES-SANTIAGO
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 Associate Justice
property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas Chairperson
turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the A.M. No. 486-MJ September 13, 1977
accessory equipment mounted on the barges were subject to real property taxation. JOSE MARIA ANTONIO FERNANDEZ, complainant,
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though floating, are intended by their nature and vs.
object to remain at a fixed place on a river, lake, or coast" are considered immovable property. Thus, power barges are categorized as JUDGE JULIO PRESBITERO, Municipal Judge of Pulupandan, Negros Occidental, respondent.
immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work Noe C. Baja for the complainant.
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 Juan M. Hagad for the respondent.
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, CONCEPCION JR., J.:
generation, and transmission of electric power. Administrative case against a municipal judge for grave misconduct, partiality, and oppression, for having conducted the preliminary
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 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,
by the local government. As stipulated under Section 2.11, Article 2 of the Agreement: 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 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
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 technical conception. It is a state of mind' and, consequently, the `appearance of impartiality is an essential manifestation of its reality.' It must
reexamine the witnesses. be obvious, therefore, that while judges should possess proficiency in law in order that they can competently construe and enforce the law, it is
The case was referred to the Executive Judge of the Court of First Instance of the province, for investigation, report and more important that they should act and behave in such a manner that the parties before them should have confidence in their impartially." 9
recommendation, 1 who, after a proper hearing, found the respondent judge guilty of partiality and recommended the suspension of the Here, the actuations of the respondent judge, in holding the preliminary examination of the criminal case in the residence of a relative of a
respondent judge from office for a period of two (2) months, without pay. 2 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
The Judicial Consultant, however, recommends the imposition of a lesser penalty of reprimand, for the reason that respondent judge acted in suspicion of partiality. The respondent judge should have exercised due prudence in the discharge of his officials duties.
good faith. 3 WHEREFORE, judgment is hereby rendered ordering the respondent, Judge Julio V. Presbitero of the Municipal Court of Pulupandan Negros
The facts of the case are not disputed. It appears that a stabbing incident, involving herein complainant, Jose Maria Antonio Fernandez, son of Occidental, to pay a fine equivalent to his salary for two (2) months.
the incumbent Municipal Mayor Joaquin O. Fernandez, and one Francisco Bescaser, took place at Veraguth St., Pulupandan, Negros SO ORDERED.
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 Barredo (Actg. Chairman), Antonio, Aquino and Santos, JJ., concur.
(CIS) investigated herein complainant Fernandez, after which complainant was sent home. Complainant, however, was directed not to leave
his house. LUIS MARCOS P. LAUREL, G.R. No. 155076
On the following day, April 18, 1973, Holy Wednesday, the CIS agents, together with Francisco Bescaser and the latter's witnesses, went to Petitioner,
the Municipal Court of Pulupandan to file a complaint for attempted murder against the herein complainant Fernandez. The respondent, Judge Present:
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 Puno, C.J.,
Municipal Court, the respondent judge was then hearing a case in the Municipal Court of Murcia, Negros Occidental. At the suggestion of one Quisumbing,
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, Ynares-Santiago,
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 Carpio,
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 - versus - Austria-Martinez,
Barrio Ubay because they were riling a case with the Municipal Court of Pulupandan. Corona,
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, Carpio Morales,
bringing with him the Criminal Docket and Seal of the Municipal Court of Pulupandan. 4Upon arrival, the respondent judge was presented with Azcuna,
a copy of the criminal complaint and the affidavits of witnesses. Despite the fact that these affidavits 5 have been previously subscribed and Tinga,
sworn to before Asst. Provincial Fiscal Othello Amunategui, the respondent judge, with the help of his clerk, personally took anew the sworn Chico-Nazario,
statements of Francisco Bescaser and his witnesses. 6 The complaint was thereafter entered in the Docket as Crim. Case No. 1046, following Velasco, Jr.,
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. Nachura,
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 Leonardo-De Castro, and
the PC Stockade at Bacolod City. Brion, JJ.
After the preliminary investigation of the case, a motion to dismiss the case was filed, which motion was duly opposed by the prosecution. In HON. ZEUS C. ABROGAR,
his Order, dated July 9, 1973,7 denying the said motion to dismiss the case, the respondent judge, relying upon the testimony of Francisco Presiding Judge of the Regional
Bescaser implicating Mayor Joaquin Fernandez in the killing of one Yanson, strongly recommended the investigation of said killing by Trial Court, Makati City, Branch 150,
investigative agencies of the government, finishing the Chief Justice, the Secretary of National Defense, the Secretary of Justice, and the PEOPLE OF THE PHILIPPINES Promulgated:
Executive Secretary with a copy of said order. & PHILIPPINE LONG DISTANCE
The respondent judge testifies his actions, saying that he wanted to conduct the preliminary examination of the criminal case against TELEPHONE COMPANY,
Fernandez in the courtroom during regular office hours and had told the CIS agents of his desire, but relented when he recalled that there Respondents. January 13, 2009
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. x ---------------------------------------------------------------------------------------- x
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 RESOLUTION
witnesses.
The respondent's act of vehemently recommending the investigation of the circumstances surrounding the death of one Yanson, contained in YNARES-SANTIAGO, J .:
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 On February 27, 2006, this Courts First Division rendered judgment in this case as follows:
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? IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the Regional Trial Court and the Decision of the
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 Court of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the
Honor, in the motion filed by Atty. Benito. petitioner to quash the Amended Information.
Q. Why did you include, that?
A. But, Your Honor, I have to. SO ORDERED.[1]
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. By way of brief background, petitioner is one of the accused in Criminal Case No. 99-2425, filed with the Regional Trial Court of Makati City,
Q. But not in the kind of complaint? Branch 150.The Amended Information charged the accused with theft under Article 308 of the Revised Penal Code, committed as follows:
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? On or about September 10-19, 1999, or prior thereto in Makati City, and within the jurisdiction of this Honorable Court, the accused, conspiring
A. Because these points were raised. 8 and confederating together and all of them mutually helping and aiding one another, with intent to gain and without the knowledge and consent
of the Philippine Long Distance Telephone (PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the international
long distance calls belonging to PLDT by conducting International Simple Resale (ISR), which is a method of routing and completing
international long distance calls using lines, cables, 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 this business from PLDT while using its facilities in the
estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.
CONTRARY TO LAW.[2]
Petitioner filed a Motion to Quash (with Motion to Defer Arraignment), on the ground that the factual allegations in the Amended Information do
not constitute the felony of theft. The trial court denied the Motion to Quash the Amended Information, as well petitioners subsequent Motion
for Reconsideration.
Petitioners special civil action for certiorari was dismissed by the Court of Appeals. Thus, petitioner filed the instant petition for review with this
Court.
In the above-quoted Decision, this Court held that the Amended Information does not contain material allegations charging petitioner with theft
of personal property since international long distance calls and the business of providing telecommunication or telephone services are not
personal properties under Article 308 of the Revised Penal Code.
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 maintains that the Amended Information charging petitioner with theft is valid and sufficient; that it states the
names of all the accused who were specifically charged with the crime of theft of PLDTs international calls and business of providing
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 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 test of sufficiency as it enabled a person of common
understanding to know the charge against him and the court to render judgment properly.
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. Carlos[4] 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 1998 and 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 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 (a) P6,757.40, the value of the sugar cane;
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 (b) 1,435.68, the value of the sugar-cane shoots;
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 (c) 646.00, the value of palay harvested by plaintiff;
sufficiently apprised of the nature and cause of the charge against him, and thus guaranteed of his rights under the Constitution. (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
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision dated February 27, 2006 is RECONSIDERED and question was personal property and, therefore, not subject to redemption;
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 (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
Regional Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion to Defer Arraignment) in Criminal Case No. Valdez;
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 (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-
amend the Amended Information to show that the property subject of the theft were services and business of the private offended party. 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
SO ORDERED. 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:
G.R. No. L-26278 August 4, 1927 (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
LEON SIBAL , plaintiff-appellant, Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal),levied an attachment on eight parcels of land belonging to said Leon Sibal, situated
vs. 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).
EMILIANO J. VALDEZ ET AL., defendants. (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,
EMILIANO J. VALDEZ, appellee. for the sum to P4,273.93, having paid for the said parcels separately as follows (Exhibit C, and 2-A):
J. E. Blanco for appellant.
Felix B. Bautista and Santos and Benitez for appellee. Parcel
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 1 ..................................................................... P1.00
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 2 ..................................................................... 2,000.00
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 3 ..................................................................... 120.93
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 4 ..................................................................... 1,000.00
the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.
5 ..................................................................... 1.00
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 6 ..................................................................... 1.00
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 7 with the house thereon .......................... 150.00
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 8 ..................................................................... 1,000.00
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 4,273.93
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 (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
step up the following defenses: P2,000 to Macondray & Co., Inc., for the account of the redemption price of said parcels of land, without specifying the particular parcels to
(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption; which said amount was to applied. The redemption price said eight parcels was reduced, by virtue of said transaction, to P2,579.97 including
(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint; interest (Exhibit C and 2).
(c) That he was the owner of the palay in parcels 1, 2 and 7; and The record further shows:
(d) That he never attempted to harvest the palay in parcels 4 and 5. (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
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary injunction he was unable to gather the case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1. the same parties in the present case), attached 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 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
addition thereto, he suffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving him from all liability under the described in the complaint (Exhibit A).
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 (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
plaintiff to pay to him the sum of P11,833.76, representing the value of the sugar cane and palay in question, including damages. question to Emilio J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).
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 (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,
Honorable Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of the defendants including all of his rights, interest and participation therein, which real property consisted of eleven parcels of land and a house and camarin
(1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption; situated in one of said parcels (Exhibit A).
(2) Absolving the defendants from all liability under the complaint; and (4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin, were bought by Emilio J. Valdez at the auction
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and severally pay to the defendant held by the sheriff for 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.
Emiliano J. Valdez the sum of P9,439.08 as follows: The house and camarin were situated on parcel 7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12, and 13, were released from the attachment by
virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).
(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 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 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
evidence then presented for the defense. the litigation. He expected to have raised about 600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The
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 lower court has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would have netted him P600.
show that said two parcels belonged to Agustin Cuyugan and were the identical parcel 2 which was excluded from the attachment and sale of In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and
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 Marcos Sibal are hereby ordered to pay to the defendant jointly and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower
sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show that they are not the same. court, as follows:
The description of the parcels in the complaint is as follows: P6,757.40 for the sugar cane;
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. 1,220.40 for the sugar cane shoots;
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 323.00 for the palay harvested by plaintiff in parcels 1 and 2;
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 600.00 for the palay which defendant could have raised.
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 8,900.80
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 all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.
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:
Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.
Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados de superficie,
G.R. No. 18520 September 26, 1922
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
INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee,
al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de P2,990. Tax No. 2856.
vs.
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).
ILDEFONSO RAMIREZ, creditor and appellant.
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
WILLIAM EDMONDS, assignee.
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.
Lim & Lim for appellant.
We, therefore, conclude that parcels 1 and 2 of the complaint belong to the defendant, having acquired the same from Macondray & Co. on
Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co.
June 25, 1924, and from the plaintiff Leon Sibal on the same date.
ROMUALDEZ, J.:
It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans. There being no evidence of bad
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
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
Fidelity & Surety Co., or that in favor of Ildefonso Ramirez. The first was declared by the trial court to be entitled to preference.
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.
In the lower court there were three mortgagees each of whom claimed preference. They were the two above mentioned and Concepcion
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
Ayala. The latter's claim was rejected by the trial court, and from that ruling she did not appeal.
& 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
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
as above stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal in
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
said parcel.
registry.
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
The appellant claims preference on these grounds: ( a) That the first mortgage above-mentioned is not valid because the property which is the
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
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
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
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
the interest of both Macondray and Sibal therein.
given by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the Fidelity & Surety Co.
In this connection the following facts are worthy of mention:
As to the first ground, the thing that was mortgaged to this corporation is described in the document as follows:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said execution. Said parcels of land were
. . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta. Dolores del Rosario and the mortgagor herein
sold to Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co.
referred to as the partnership), located at Calle Real Nos. 123 and 125, District of Intramuros, Manila, Philippine Islands.
P2,000 on the redemption of said parcels of land. (See Exhibits B and C ).
With regard to the nature of the property thus mortgaged, which is one-half interest in the business above described, such interest is a
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar cane in question. (Exhibit A) The
personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code, and may be
said personal property so attached, sold at public auction May 9 and 10, 1924. April 29, 1924, the real property was attached under the
the subject of mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.)
execution in favor of Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A).
The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only a description of the following nature:
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.
The description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry
As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar cane in question covered an area
and investigation, to identify the same.
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-
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
half of the quantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; that during the season the sugar was
he, as debtor, nor the debtor himself, is in possession of the property mortgaged, which is, and since the registration of the mortgage has
selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have netted P 6,757.40 from the sugar cane in question.
been, legally in possession of the Fidelity & Surety Co. (Sec. 4, Act No. 1508; Meyers vs. Thein, 15 Phil., 303.)
The evidence also shows that the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de cana) and not
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
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
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
therefore would have netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower court.
upon any property, and much less upon the property in question.
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
Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the Fidelity & Surety Co. because in the very
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
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 &
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.
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.
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 Decision 3 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 Injunction 5 against
Rogelio C. Bias (Bias) in his capacity as Commanding Officer of the Philippine Naval Command in Port San Vicente, Sta. Ana,
Cagayan.1wphi1 According to him, some members of the Philippine Navy, upon 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 injunction6 and 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. Cortez] has not perfected his right over the 50 hectares of
land nor acquired any vested 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 Appeal 14 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.31Otherwise 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 owner 36 is one of the two concepts of possession provided under Article 525 37 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 Barely a month after, or on October 25, 1965, Pres. Macapagal issued Proclamation No. 478 11"reserving for the veterans rehabilitation,
technicality which may, in the exercise of [its] discretion, be set aside in view of the importance of the issue raised."49 medicare and training center site purposes" an area of 537,520 square meters of the land previously declared as AFP Officers' Village under
We note that Rev. Cortez alleged that he sought the injunction so that he could continue his humanitarian works. However, considering that Proclamation No. 461, and placed the reserved area under the administration of the Veterans Federation of the Philippines ( VFP).
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 The property is within the 537,520 square-meter parcel of land reserved in VFP's favor.
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 On November 15, 1991, the property was the subject of a Deed of Sale 12between the Republic of the Philippines, through former
in Spl. Civil Action Case No. II-2403, DISMISSED. Land Management Bureau (LMB) Director Abelardo G. Palad, Jr., (Dir. Palad) and petitioner NOVAI. The deed of sale was subsequently
SO ORDERED. registered and from which TCT No. T-15387 was issued in NOVAI's name.
MARIANO C. DEL CASTILLO
Associate Justice The Republic's Complaint for Cancellation of Title
WE CONCUR:
13
ANTONIO T. CARPIO In its complaint filed with the RTC on December 23, 1993, the Republic sought to cancel NOVAFs title based on the following grounds: (a)
Associate Justice 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
Chairperson 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
ARTURO D. BRION JOSE CATRAL MENDOZA property, and of the NOVAFs alleged payment of P14,250,270.00 for the property; and (d) the presidential proclamation, i.e., Proclamation No.
Associate Justice Associate Justice 2487, claimed to have been issued by then President Corazon C. Aquino in 1991 that authorized the transfer and titling of the property to
MARIVIC M.V.F. LEONEN NOVAI, is fictitious.
Associate Justice
ATT E S TATI O N NOVAI's Answer to the Complaint
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division. 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
ANTONIO T. CARPIO dominion, as the land had long been segregated from the military reservation pursuant to Proclamation No. 461.
Associate Justice
Chairperson 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
C E R TI F I C ATI O N sales patent over the property with the LMB which prepared, verified and approved the property's plan and technical description; and that the
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above 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
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. price, corresponding taxes, and other charges, with the balance to be paid in installments.
MARIA LOURDES P.A. SERENO
Chief Justice Also, NOVAI contended that, since any alleged irregularities that may have attended the sale pertained only to formalities, the proper remedy
SECOND DIVISION 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
G.R. No. 177168, August 03, 2015 of action had prescribed because its title to the property had already become indefeasible.
NAVY OFFICERS' VILLAGE ASSOCIATION, INC. (NOVAI), Petitioner, v. REPUBLIC OF THE PHILIPPINES, Respondent. The RTC's decision
DECISION
BRION, J. : 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
We resolve the present petition for review on certiorari1 assailing the December 28, 2006 decision2and March 28, 2007 resolution3 of the Court 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
of Appeals (CA) in CA-G.R. CV No. 85179. was acquired by NOVAI through fraud. The RTC resolved both issues in NOVAI's favor.

The CA reversed and set aside the August 20, 2004 decision 4 of the Regional Trial Court (RTC) Branch 67, Pasig City, that dismissed the 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
complaint filed by the Republic of the Philippines ( respondent or the Republic) for the cancellation of Transfer Certificate of Title (TCT) No. T- 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
15387 issued in the name of Navy Officers' Village Association, Inc. or NOVAI (petitioner). formalities of a notarial certification; (c) notwithstanding the claims of forgery, the signature of Dir. Palad on the deed of sale appeared genuine
The Factual Antecedents 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.
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 The CA's decision
Andres Bonifacio Military Reservation (FBMR) in Taguig, Metro Manila.
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
The property previously formed part of a larger 15,812,684 square-meter parcel of land situated at the former Fort William McKinley, Rizal, 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
which was covered by TCT No. 61524 issued in the name of the Republic of the Philippines. 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.
On July 12, 1957, then President Carlos P. Garcia issued Proclamation No. 423 7 "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- Since the property is inalienable, the CA held that the incontestability and indefeasibility generally accorded to a Torrens title cannot apply
meter parcel of land covered by TCT No. 61524. 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
On September 29, 1965, then Pres. Diosdado Macapagal issued Proclamation No. 461 8 which excluded from Fort McKinley "a certain barred by prescription.
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 Also, the CA held that there can be no presumption of regularity in the execution of the subject deed of sale given the questionable
Nos. 2749 and 730.10cralawrednad 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 motion for leave to file comment-in-intervention and to admit the attached comment-in-intervention. 19cralawrednad
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 In a resolution dated February 18, 2008, 20 the Court allowed the BCDA's intervention.
payments on the property, among others.
As the Republic has done, the BCDA contends that NOVAI is disqualified from acquiring the property given the constitutional and statutory
Lastly, the CA held that the Court's observations and ruling in Republic of the Philippines v. Southside Homeowners Association, Inc 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
(Southside)15 is applicable to the present case. In Southside, the Republic similarly sought the cancellation of title - TCT No. 15084 - issued in 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
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. issued by mistake or error on the part of a public official can be cancelled at any time by the State.
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 The BCDA further contends that NOVAI miserably failed to comply with the legal requirements for the release of the property from the military
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. 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
NOVAI sought reconsideration of the CA's decision, which the CA denied in its March 28, 2007 resolution; 16 hence, this petition. 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
The Petition 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.
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, Also, the BCDA observed that NOVAI was incorporated only on December 11, 1991, while the deed of sale was purportedly executed on
and (d) the ruling in Southside was applicable to the present case. November 15, 1991, which shows that NOVAI did not yet legally exist at the time of the property's purported sale.
OUR RULING
In support of its petition, NOVAI raises the following arguments:ChanRoblesvirtualLawlibrary
(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 We resolve to DENY NOVAI's petition for review on certiorari as we find no reversible errorcommitted by the CA in issuing its December 28,
) 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 2006 decision and March 28, 2007 resolution.
Public Land Act; I. Procedural Objections
(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; A. In the filing of the present petition before this Court
(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; 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
(d The CA should not have considered as evidence the testimony of Senator Franklin Drilon on the nonexistence of Proclamation No. 2487 law which must be distinctly set forth.
) because such testimony was given by Senator Drilon in another case 17 and was not formally offered in evidence by the Republic during the
trial of the present case before the RTC; 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
(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
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
) close to two (2) years from the issuance of NOVAI's title on January 9, 1992; and
the calibration of the whole evidence considering mainly the credibility of the witnesses; the existence and relevancy of specific surrounding
(f) The case of Southside is not a cognate or companion case to the present case because the two cases involve completely dissimilar factual circumstances, as well as their relation to each other and to the whole; and the probability of the situation. 23cralawrednad
and doctrinal bases; thus, the Court's observations and ruling in Southside should not be applied to the present case.
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
The Republic's Comment to the Petition exceptions is when there is conflict between the factual findings of the RTC and that of the CA .
Procedurally, the Republic assails the propriety of the issues raised by NOVAI, such as "whether Proclamation No. 2487 and the signature of 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
LMB Director Palad on the assailed deed of sale are forged or fictitious," and "whether the Republic had presented adequate evidence to 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
establish the spuriousness of the subject proclamation," which are factual in nature and not allowed in a Rule 45 petition. parties' evidence in order to finally resolve the present controversy.
On the petition's substance, the Republic counters that:ChanRoblesvirtualLawlibrary B. On BCD A's Intervention
(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; In its reply25cralawred to the BCDA's comment-in-intervention, NOVAI primarily objects to the BCDA's intervention because it was made too
(b Proclamation No. 2487, which purportedly revoked Proclamation No. 478, does not legally exist and thus cannot be presumed valid and late.
) 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; 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
(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 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
sale, and a handwriting expert from the National Bureau of Investigation (NBI) confirmed that Dir. Palad's signature was indeed a forgery;18 or interest which may be affected by the proceeding, 27 such interest being actual, material, direct and immediate, not simply contingent and
(d NOVAI, a private corporation, is disqualified from purchasing the property because R.A. Nos. 274 and 730, and the Public Land Act only expectant.28cralawrednad
) 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 As a general rule, intervention cannot be made at the appeal stage. Section 2, Rule 19 of the Rules of Court, governing interventions, provides
) cases. 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
BCDA's Comment-in-Intervention 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
On December 28, 2007, and while the case was pending before this Court, the Bases Conversion Development Authority ( BCDA) filed a overriding technicalities on the timeliness of the filing thereof." 30cralawrednad
Thus, in exceptional cases, the Court may allow intervention although the trial court has already rendered judgment. In fact, the Court had As these provisions operate, the President may classify lands of the public domain as alienable and disposable, mineral or timber land, and
allowed intervention in one case even when the petition for review was already submitted for decision before it. 31cralawrednad transfer such lands from one class to another at any time.

In the present case, the BCDA is indisputably the agency specifically created under R.A. No. 7227 32to own, hold and/or administer military Within the class of alienable and disposable lands of the public domain, the President may further classify public domain lands, according to
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 the use or purpose to which they are destined, as agricultural: residential, commercial, industrial, etc.; educational, charitable, etc.; and
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 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.
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. 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
Indeed, the BCDA has such substantial and material interest both in the outcome of the case and in the disputed property that a final disposition of alienable and disposable public lands available under C.A. No. 141, as amended.
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. The modes of disposition of alienable and disposable lands available under C.A. No. 141 include: (1) by homestead settlement (Chapter IV),
II. Substantive Issues 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,
A. The property is non-disposable land of the public domain reserved for public or quasi-public use or purpose 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.
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. 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.
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 With particular regard, however, to parcels of land classified as reservations for public and quasi-public uses (under Section 9 [d]), when the
several presidential proclamations and statues issued subsequent to Proclamation No. 423, which either removed or reserved for specific President transfers them to the class of .alienable and disposable public domain lands destined for residential, commercial, industrial, or for
public or quasi-public use or purpose certain of its portions. 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
On the one hand, NOVAI argues that Proclamation No. 461 had already transferred the property from the State's "public domain" to its "private residential purposes from reservation for public and quasi-public uses) are actually acquired by private persons, they become private property.
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." 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 classification and disposition of lands of the public domain are governed by Commonwealth Act ( C.A.) No. 141 or the Public Land Act, the The President may also, under Section 8 of C.A. No. 141, suspend their concession or disposition.
country's primary law on the matter.
If these parcels of land are re-classified as reservations before they are actually acquired by private persons, or if the President suspends their
Under Section 6 of C.A. No. 141, the President of the Republic of the Philippines, upon the recommendation of the Secretary of Agriculture concession or disposition, they shall not be subject to occupation, entry, sale, lease, or other disposition until again declared open for
and Natural Resources, may, from time to time, classify lands of the public domain into alienable or disposable, timber and mineral lands, disposition by proclamation of the President pursuant to Section 88 in relation with Section 8 of C.A. No. 141.
and transfer these lands from one class to another for purposes of their administration and disposition.
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
Under Section 7 of C.A. No. 141, the President may, from time to time, upon recommendation of the Secretary of Agriculture and Natural non-alienable and non-disposable, even though they are, by the general classification under Section 6, alienable and disposable lands of the
Resources and for purposes of the administration and disposition of alienable and disposable public lands, declare what lands are open to public domain. By specific declaration under Section 88, in relation with Section 8, these lands classified as reservations are non-alienable and
disposition or concession under the Acts' provisions. 33cralawrednad non-disposable.

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 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
delimited and classified, and when practicable, surveyed. Section 8 excludes (by implication) from disposition or concession, public lands 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
which have been reserved for public or quasi-public uses; appropriated by the Government; or in any manner have become private property, public domain lands until they are actually disposed of in favor of private persons.
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 Complementing and reinforcing this interpretation - that lands designated as reservations for public and quasi-public uses are non-alienable
his proclamation or by act of Congress. 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
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 private lands.36cralawrednad
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 In this regard, Article 419 of the Civil Code classifies property as either of public dominion or of private ownership. Article 420 37 defines
classifications and, at any time, transfer lands from one class to another. 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
Section 83 of C.A. No. 141 defines public domain lands classified as reservations for public and quasi-public uses as "any tract or the character stated in Article 420. While Article 422 states that public dominion property which is no longer intended for public use or service
tracts of land of the public domain" which the President, by proclamation and upon recommendation of the Secretary of Agriculture and shall form part of the State's patrimonial property.
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 Thus, from the perspective of the general Civil Code provisions on Property, lands which are intended for public use or public service such as
or tracts of lands shall be non-alienable and shall not be subject to occupation, entry, sale, lease or other disposition until again reservations for public or quasi-public uses are property of the public dominion and remain to be so as long as they remain reserved.
declared alienable under the provisions of [CA No. 141] or by proclamation of the President." 35cralawrednad
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 x x x x. (Emphasis supplied)
subject to sale, disposition or encumbrance; any sale, disposition or encumbrance of such property of the public dominion is void for being Clearly, the legal basis of the property's sale could not have been Proclamation No. 461.
contrary to law and public policy.39cralawrednad
2. Proclamation No. 2487 which purportedly revoked Proclamation No. 478 does not legally exist; hence, it did not withdraw the property from
To be subject to sale, occupation or other disposition, lands of the public domain designated as reservations must first be withdrawn, by act of the reservation or from the public dominion
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 Neither can Proclamation No. 2487 serve as legal basis for the property's sale in NOVAI's favor. Proclamation No. 2487 purportedly revoked
Code.40 Without such express declaration or positive governmental act, the reserved public domain lands remain to be public dominion Proclamation No. 478 and declared the property open for disposition in favor of NOVAI.
property of the State.41cralawrednad
The Republic and the BCD A (now respondents) argue that Proclamation No. 2487 does not legally exist; it could not have served to release
To summarize our discussion:ChanRoblesvirtualLawlibrary the property from the mass of the non-alienable property of the State.

(1) Lands of the public domain classified as reservations for public or quasi-public uses are non-alienable and shall not be subject to 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
disposition, although they are, by the general classification under Section 6 of C.A. No. 141, alienable and disposable lands of the public are still void. NOVAI, on the other hand, claims in defense that Proclamation No. 2487 is presumed valid and constitutional, and the burden of
domain, until declared open for disposition by proclamation of the President; and proving otherwise rests on the respondents.

(2) Lands of the public domain classified as reservations are property of the public dominion; they remain to be property of the public dominion In insisting on the presumptive validity of law, NOVAI obviously failed to grasp and appreciate the thrust of the respondents' arguments,
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, including the impact of the evidence which they presented to support the question they raised regarding the authenticity of Proclamation No.
or otherwise positively declared to have been converted to patrimonial property. 2487.

Based on these principles, we now examine the various issuances affecting the property in order to determine the property's character and Rather than the validity or constitutionality of Proclamation No. 2487, what the respondents assailed was its legal existence, not whether it was
nature, i.e., whether the property remains public domain property of the State or has become its private property. 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.
For easier reference, we reiterate the various presidential proclamations and statutes affecting the property:cralawlawlibrary
(1 Proclamation No. 423, series of 1957 - established the FBMR, a military reservation; the property falls within the FBMR; 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.
(2 Proclamation No. 461, series of (September) 1965 - segregated, from the FBMR, a portion of Parcel 3, plan Psd-2031, which includes the These pieces of evidence include:ChanRoblesvirtualLawlibrary
) 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 First, the October 26, 1993 letter of the Solicitor General to the Office of the President inquiring about the existence of Proclamation No.
) (VRMTC); and 2487.42cralawrednad
(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. Second, the November 12, 1993 letter-reply of the Office of the President informing the Solicitor General that Proclamation No. 2487 "is not
1. Proclamation No. 461 was not the legal basis for the property's sale in favor of NOVAI among the alleged documents on file with [its] Office." 43cralawrednad

We agree with the respondents that while Proclamation No. 461, issued in September 1965, removed from the FBMR a certain parcel of land Third, the testimony of the Assistant Director of the Records Office in Malacaang confirming that indeed, after verifying their records or of the
that includes the property, Proclamation No. 478, issued in October 1965, in turn segregated the property from the area made available for different implementing agencies, "[t]here is no existing document(s) in [their] possession regarding that alleged Proclamation No. 2487;" 44 and
disposition under Proclamation No. 461, and reserved it for the use of the VRMTC.
Fourth and last, the October 11, 1993 Memorandum of then Department of Justice Secretary Frahklin M. Drilon ( DOJ Secretary Drilon) to the
We find it clear that Proclamation No. 478 was issued after, not before, Proclamation No. 461. Hence, while Proclamation No. 461 withdrew a NBI to investigate, among others, the circumstances surrounding the issuance of Proclamation No. 2487. 45 Notably, this October 11, 1993
certain area or parcel of land from the FBMR and made the covered area available for disposition in favor of the AFPOVAI, Proclamation No. 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
478 subsequently withdrew the property from the total disposable portion and reserved it for the use of the VRMTC. With the issuance of 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. 478, the property was transferred back to that class of public domain land reserved for public or quasi-public use or purpose proclamation No. 932 dated 19 June 1992." 46cralawrednad
which, consistent with Article 420 of the Civil Code, is property of the public dominion, not patrimonial property of the State.
In this regard, we quote with approval the CA's observations in its December 28, 2006 decision:cralawlawlibrary
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 Cast against this backdrop, it stands to reason enough that the defendant-appellee NOVAI was inevitably duty bound to prove and establish
the property to NOVAI. The subject deed of sale pertinently reads:cralawlawlibrary the very existence, as well as the genuineness or authenticity, of this Presidential Proclamation No. 2487. For certain inexplicable reasons,
"This DEED OF SALE, made and executed in Manila, Philippines, by the Director of Lands, Pursuant to Batas Pambansa Blg. 878 and in however, the defendant-appellee did not do so, but opted to build up and erect its case upon Presidential Proclamation No. 461.
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:ChanRoblesvirtualLawlibrary To be sure, the existence of Presidential Proclamation No. 2487 could be easily proved, and established, by its publication in the
xxxx 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
WHEREAS, pursuant to Presidential proclamation No. 478 as amended by proclamation No. 2487 in relation to the provision of Act unrelenting claim that it does not exist at all.47 (Emphasis supplied)
No. 3038 and similar Acts supplemented thereto, the Vendee applied for the purchase of a portion of the above-described Property which A final point, we did not fail to notice the all too obvious and significant difference between the proclamation number of Proclamation No. 2487
portion is identical to Lot 3, Swo-000183 and more particularly described on page two hereof; and the numbers of the proclamations actually issued by then President Corazon C. Aquino on or about that time.
xxxx
We take judicial notice that on September 25, 1991 - the very day when Proclamation No. 2487 was supposedly issued - former Pres. Aquino
WHEREAS, the Vendee has complied with all other conditions required by Act No. 3038 in relation to Commonwealth Act No. 141, as issued Proclamation No. 80048 and Proclamation No. 801.49Previously, on September 20, 1991, Pres. Aquino issued Proclamation No.
amended, and the rules and regulation promulgated thereunder. 799;50 and thereafter, on September 27, 1991, she issued Proclamation No. 802. 51cralawrednad
Other proclamations issued around or close to September 25, 1991, included the following:cralawlawlibrary Since the sale of the property, in this case, is void, the title issued to NOVAI is similarly void ab initio. It is a well-settled doctrine that
1. Proclamation No. 750 issued on July 1, 1991; 52cralawrednad registration under the Torrens System does not, by itself, vest title as it is not a mode of acquiring ownership; 71 that registration under the
Torrens System merely confirms the registrant's already existing title. 72cralawrednad
2. Proclamation No. 760 issued on July 18, 1991; 53cralawrednad
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
3. Proclamation No. 770 issued on August 12, 1991; 54cralawrednad 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.
4. Proclamation No. 780 issued on August 26, 1991; 55cralawrednad
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
5. Proclamation No. 790 issued on September 3, 1991; 56cralawrednad valid deed of sale and is duly notarized.

6. Proclamation No. 792 issued on September 5, 1991; 57cralawrednad 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
7. Proclamation No. 797 issued on September 11, 1991; 58cralawrednad and convincing evidence establishing the contrary.74cralawrednad

8. Proclamation No. 798 issued on September 12, 1991; 59cralawrednad 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
9. Proclamation No. 804 issued on September 30, 1991; 60cralawrednad 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.
10. Proclamation No. 805 issued on September 30, 1991; 61cralawrednad
C. Even assuming that Proclamation No. 2487 legally exists, the sale of the property to NOVAI is illegal.
11. Proclamation No. 806 issued on October 2, 1991; 62cralawrednad
1. Dir. Palad did not have the authority to sell and convey the property.
12. Proclamation No. 810 issued on October 7, 1991;63cralawrednad
The subject deed of sale points to Proclamation No. 2487, purportedly amending Proclamation No. 478, in relation with Act No. 3038,75 as
13. Proclamation No. 820 issued on October 25, 1991; 64cralawrednad legal basis for authorizing the sale.

14. Proclamation No. 834 issued on November 13, 1991;65 and Section 176 of Act No. 3038 authorizes the sale or lease only: (i) of land of the private domain, not land of the public domain; and (ii) by the
Secretary of Agriculture and Natural Resources, not by the LMB Director. Section 2 77 of the said Act, in fact, specifically exempts from its
15. Proclamation No. 840 issued on November 26, 1991.66 coverage "land necessary for the public service." As the sale was executed by the LMB Director covering the property that was reserved for
This list shows that the proclamations issued by former Pres. Aquino followed a series or sequential pattern with each succeeding issuance the use of the VRMTC, it, therefore, clearly violated the provisions of Act No. 3038.
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 2. The area subject of the sale far exceeded the area that the Director of Lands is authorized to convey.
Aquino did not go beyond the hundreds series.
Batas Pambansa (B.P.) Blg. 87878 which, per the Deed of Sale, purportedly authorized the Director of Lands, representing the Republic, to sell
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 the property in favor of NOVAI, limits the authority of the Director of Lands to sign patents or certificates covering lands to ten (10) hectares.
proclamations issued for the same period were sequentially numbered and bore three-digit proclamation numbers.
In this case, the subject deed of sale covers a total area of 475,009 square meters or 47.5009 hectares. Obviously, the area covered by the
As Proclamation No. 2487 does not legally exist and therefore could not have validly revoked Proclamation No. 478, we find, as the CA also deed of sale and which NOVAI purportedly purchased, far exceeds the area that the Director of Lands is authorized to convey under B.P. Blg.
correctly did, that Proclamation No. 478 stands as the most recent manifestation of the State's intention to reserve the property anew for some 878.
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 3. The evidence on record and the highly suspect circumstances surrounding the sale fully supports the conclusion that the property's sale to
and not subject to disposition; it also remains property of the public dominion; hence, non-alienable and non-disposable land of the public NOVAI is fictitious, thus, void.
domain.
We note the following irregularities that attended the sale of the property to NOVAI:
As a consequence, when R.A. No. 7227 took effect in 1992, the property subject of this case, which does not fall among the areas specifically The absence, on file with the LMB, of any request for approval of any survey plan or of an approved survey plan in NOVAI's name covering the
designated as exempt from the law's operation 67 was, by legal fiat, transferred to the BCDA's authority. property.79 The approved survey plan relating to Lot 3, SWO-13-000183 subject of NOVAI's TCT No. 15387 pertains to the AFPOVAI under
Proclamation No. 461;80cralawrednad
B. As the property remains a reserved public domain land, its sale and the title issued pursuant to the sale are void The technical description, which the DENR prepared for the property as covered by TCT 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; 81cralawrednad
As the property remains a reserved public domain land, it is outside the commerce of man. Property which are intended for public or quasi- 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
public use or for some public purpose are public dominion property of the State 68 and are outside the commerce of man. NOVAI, therefore, any parcel of land in Metro Manila;82cralawrednad
could not have validly purchased the property in 1991. LMB Dir. Palad categorically denied signing and executing the deed of sale;83cralawrednad
The findings of the NBI handwriting; expert, detailed in the Questioned Documents Report No. 815-1093 dated October 29, 1993, 84 revealed
We reiterate and emphasize that property which has been reserved for public or quasi-public use or purpose are non-alienable and shall not that the, signature of LMB Director Palad as it appeared on the Deed of Sale and his standard/sample signature as they appeared on the
be subject to sale or other disposition until again declared alienable by law or by proclamation of the President. 69 Any sale or disposition of submitted comparison documents "were not written by one and the same person," 85 and concluded that "[t]he questioned signature of
property of the public dominion is void for being contrary to law and public policy.70cralawrednad 'ABELARDG G. PALAD, JR.' xxx is a TRACED FORGERY by carbon process;" 86 and
Lastly, the LMB Cashier's Office did not receive the amount of P14,250,270.00 allegedly paid by NOVAI as consideration for the property. The
receipts87 - O.R. No. 8282851 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 bore official receipt numbers which were not among the series of official receipts
issued by the National Printing Office to the LMB, and in fact, were not among the series used by the LMB on the pertinent dates. 88
In sum, we find - based on the facts, the law, and jurisprudence - that the property, at the time of the sale, was a reserved public domain land.
Its sale, therefore, and the corresponding title issued in favor of petitioner NOVAI, is void.
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, 2007, of the Court of Appeals in CA-G.R. CV No. 85179.
SO ORDERED.chanrobles virtuallawlibrary
Carpio, (Chairperson), Del Castillo, Mendoza, and Leonen,
G.R. No. 192896 July 24, 2013
DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC., represented by its Incumbent President, GREG SERIEGO, Petitioner,
vs.
BASES DEVELOPMENT AUTHORITY, Respondent.
DECISION
REYES, J.:
Before us on Petition for Review1 under Rule 45 of the Rules of Court is the 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 the Resolution 4 dated April
28, 2004 of the Commission on the Settlement of Land Problems (COSLAP) in COS LAP Case No. 99-500. The fallo of the assailed COS LAP
Resolution reads, as follows:
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 8 20 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 Petition 26 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 Answer 28 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 Proclamation Nos. 2476 and 172 as
settlers, landowners and cultural minorities. Besides, the COSLAP merely took over from the abolished PACLAP whose functions, including its alienable and disposable.
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 Pursuant to Proclamation No. 2476, the following surveys were conducted by the Bureau of Lands to delimit the boundaries of the areas
Order No. 561 containing said provision, being enacted only on September 21, 1979, cannot affect the exercise of jurisdiction of the PACLAP excluded from the coverage of Proclamation No. 423:
Provincial Committee of Koronadal on September 20, 1978. Neither can it affect the decision of the COSLAP which merely affirmed said Barangay Survey Plan Date Approved
exercise of jurisdiction.34 1. Lower Bicutan SWO-13-000253 October 21, 1986
In its Motion for Reconsideration35 filed on May 20, 2004, the BCDA questioned the validity of the survey results since it was conducted without 2. Signal Village SWO-13-000258 May 13, 1986
its representatives present, at the same time denying that it received a notification of the DENR verification survey. 36 It maintained that there is 3. Upper Bicutan SWO-13-000258 May 13, 1986
no basis for the COSLAPs finding that the members of Dream Village were in open, continuous, and adverse possession in the concept of 4. Western Bicutan SWO-13-000298 January 15, 198753
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 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
In the Order38 dated June 17, 2004, the COSLAP denied BCDAs Motion for Reconsideration, insisting that it had due notice of the verification 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
survey, while also noting that although the BCDA wanted to postpone the verification survey due to its tight schedule, it actually stalled the 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
survey when it failed to suggest an alternative survey date to ensure its presence. declared alienable and disposable.54
CA Ruling 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
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 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-
private ownership and because it is registered under an indefeasible Torrens title 40; that Proclamation No. 172 covers only Lots 1 and 2 of 0001302 with an actual area of 78466 square meters. The area is actually is [sic] outside SWO-00-0001302 of BCDA." 55 Inexplicably and
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 gratuitously, the DENR also states that the area is outside of BCDA, completely oblivious that the BCDA holds title over the entire Fort
the BCDA 41; that the COSLAP resolution is based on an erroneous DENR report stating that Dream Village is outside of BCDA, because Lots 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
10, 11, and portion of Lot 13 of Swo-00-0001302 are within the DA 42; that the COSLAP was not justified in ignoring BCDAs request to 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
postpone the survey to the succeeding year because the presence of its representatives in such an important verification survey was 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
indispensable for the impartiality of the survey aimed at resolving a highly volatile situation 43; that the COSLAP is a mere coordinating when, as constructed, it was made to traverse northward into the Libingan ng mga Bayani. Dream Village has not disputed this assertion.
administrative agency with limited jurisdiction44; and, that the present case is not among those enumerated in Section 3 of E.O. No. 56145. 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
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 part of Libingan ng mga Bayani does not signify abandonment by the government of the bypassed lots, nor that these lots would then become
problems or disputes in "other similar land problems of grave urgency and magnitude,"46 and the present case is one such problem. 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
The CA in its Decision47 dated September 10, 2009 ruled that the COSLAP has no jurisdiction over the complaint because the question of 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
whether Dream Village is within the areas declared as available for disposition in Proclamation No. 172 is beyond its competence to 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
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, a farther argument against a claim that the government has abandoned them to Dream Village.
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 While property of the State or any
disputants were applicants for sales patent thereto. of its subdivisions patrimonial in
Dream Villages motion for reconsideration was denied in the appellate courts Order 48 of July 13, 2010. character may be the object of
Petition for Review in the Supreme Court prescription, those "intended for
On petition for review on certiorari to this Court, Dream Village interposes the following issues: some public service or for the
A development of the national
IN ANNULLING THE RESOLUTION OF COSLAP IN COSLAP CASE NO. 99-500, THE HONORABLE CA DECIDED THE CASE IN A wealth" are considered property of
MANNER NOT CONSISTENT WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT; public dominion and therefore not
B susceptible to acquisition by
THE HONORABLE CA ERRED IN RULING THAT COSLAP HAD NO JURISDICTION OVER THE CONTROVERSY BETWEEN THE prescription.
PARTIES HEREIN.49 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
The Courts Ruling of prescription." Articles 420 and 421 identify what is property of public dominion and what is patrimonial property:
We find no merit in the petition. Art. 420. The following things are property of public dominion:
The BCDA holds title to Fort Bonifacio. (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores,
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 roadsteads, and others of similar character;
categorically ruled as follows: (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
First, it is unequivocal that the Philippine Government, and now the BCDA, has title and ownership over Fort Bonifacio. The case of Acting national wealth.
Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati is final and conclusive on the ownership of the then Hacienda de Art. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.
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. One question laid before us is whether the area occupied by Dream Village is susceptible of acquisition by prescription. In Heirs of Mario
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 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
them.51 became alienable and disposable. However, it was also clarified that the said lands did not thereby become patrimonial, since the BCDA law
The facts in Samahan ng Masang Pilipino sa Makati are essentially not much different from the controversy below. There, 20,000 families were 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
long-time residents occupying 98 has. of Fort Bonifacio in Makati City, who vainly sought to avert their eviction and the demolition of their 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
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 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
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. 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
23888, 23887, 23886, 22460, 23889, 23890, and 23891, all in the name of the BCDA. The Court ruled that the BCDAs aforesaid titles over property and cease to be property of the public dominion:58
Fort Bonifacio are valid, indefeasible and beyond question, since TCT No. 61524 was cancelled in favor of BCDA pursuant to an explicit For as long as the property belongs to the State, although already classified as alienable or disposable, it remains property of the public
authority under R.A. No. 7227, the legal basis for BCDAs takeover and management of the subject lots. 52 dominion if when it is "intended for some public service or for the development of the national wealth."59
Dream Village sits on the Thus, under Article 422 of the Civil Code, public domain lands become patrimonial property only if there is a declaration that these are
abandoned C-5 Road, which lies alienable or disposable, together with an express government manifestation that the property is already patrimonial or no longer retained for
outside the area declared in 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 streamline administrative proceedings, and, in general, to adopt bold and decisive measures to solve problems involving public lands and
before acquisitive prescription can commence, the property sought to be registered must not only be classified as alienable and disposable, it lands of the public domain."69
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 On November 27, 1975, P.D. No. 832 reorganized the PACLAP and enlarged its functions and duties. Section 2 thereof even granted it quasi
the property has been converted into patrimonial. Absent such an express declaration by the State, the land remains to be property of public judicial functions, to wit:
dominion.60 Sec. 2. Functions and duties of the PACLAP. The PACLAP shall have the following functions and duties:
Since the issuance of Proclamation No. 423 in 1957, vast portions of the former Maricaban have been legally disposed to settlers, besides 1. Direct and coordinate the activities, particularly the investigation work, of the various government agencies and agencies involved in land
those segregated for public or government use. Proclamation No. 1217 (1973) established the Maharlika Village in Bicutan, Taguig to serve problems or disputes, and streamline administrative procedures to relieve small settlers and landholders and members of cultural minorities of
the needs of resident Muslims of Metro Manila; Proclamation No. 2476 (1986), as amended by Proclamation No. 172 (1987), declared more the expense and time-consuming delay attendant to the solution of such problems or disputes;
than 400 has. of Maricaban in Upper and Lower Bicutan, Signal Village, and Western Bicutan as alienable and disposable; Proclamation No. 2. Refer for immediate action any land problem or dispute brought to the attention of the PACLAP, to any member agency having jurisdiction
518 (1990) formally exempted from Proclamation No. 423 the Barangays of Cembo, South Cembo, West Rembo, East Rembo, Comembo, thereof: Provided, That when the Executive Committee decides to act on a case, its resolution, order or decision thereon shall have the force
Pembo and Pitogo, comprising 314 has., and declared them open for disposition. and effect of a regular administrative resolution, order or decision, and shall be binding upon the parties therein involved and upon the member
The above proclamations notwithstanding, Fort Bonifacio remains property of public dominion of the State, because although declared agency having jurisdiction thereof;
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 xxxx
military reservations in the country to productive civilian uses. 61 Needless to say, the acquisitive prescription asserted by Dream Village has not 4. Evolve and implement a system of procedure for the speedy investigation and resolution of land disputes or problems at provincial level, if
even begun to run. possible. (Underscoring supplied)
Ownership of a land registered On September 21, 1979, E.O. No. 561 abolished the PACLAP and created the COSLAP to be a more effective administrative body to provide
under a Torrens title cannot be lost a mechanism for the expeditious settlement of land problems among small settlers, landowners and members of the cultural minorities to
by prescription or adverse avoid social unrest.70 Paragraph 2, Section 3 of E.O No. 561 now specifically enumerates the instances when the COSLAP can exercise its
possession. adjudicatory functions:
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 Sec. 3. Powers and Functions. The Commission shall have the following powers and functions:
C-5 Road, which is within the vast titled territory of Fort Bonifacio. We have already established that these lots have not been declared 1. Coordinate the activities, particularly the investigation work, of the various government offices and agencies involved in the settlement of
alienable and disposable under Proclamation Nos. 2476 or 172. land problems or disputes, and streamline administrative procedures to relieve small settlers and landholders and members of cultural
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. minorities of the expense and time consuming delay attendant to the solution of such problems or disputes;
1529, the Property Registration Decree, expressly provides that no title to registered land in derogation of the title of the registered owner shall 2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any land problem or dispute referred to the
be acquired by prescription or adverse possession. And, although the registered landowner may still lose his right to recover the possession of Commission: Provided, That the Commission may, in the following cases, assume jurisdiction and resolve land problems or disputes which are
his registered property by reason of laches, 63 nowhere has Dream Village alleged or proved laches, which has been defined as such neglect or critical and explosive in nature considering, for instance, the large number of the parties involved, the presence or emergence of social tension
omission to assert a right, taken in conjunction with lapse of time and other circumstances causing prejudice to an adverse party, as will or unrest, or other similar critical situations requiring immediate action:
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 (a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires;
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, (b) Between occupants/squatters and government reservation grantees;
ordains that relief will be denied to a stale demand which otherwise could be a valid claim.64 (c) Between occupants/squatters and public land claimants or applicants;
The subject property having been (d) Petitions for classification, release and/or subdivision of lands of the public domain; and
expressly reserved for a specific (e) Other similar land problems of grave urgency and magnitude.
public purpose, the COSLAP xxxx
cannot exercise jurisdiction over the Citing the constant threat of summary eviction and demolition by the BCDA and the seriousness and urgency of the reliefs sought in its
complaint of the Dream Village Amended Petition, Dream Village insists that the COSLAP was justified in assuming jurisdiction of COSLAP Case No. 99-500. But in Longino
settlers. v. Atty. General,71 it was held that as an administrative agency, COSLAPs jurisdiction is limited to cases specifically mentioned in its enabling
BCDA has repeatedly asserted that the COSLAP has no jurisdiction to hear Dream Villages complaint. Concurring, the CA has ruled that statute, E.O. No. 561. The Supreme Court said:
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 Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction and, as such, could wield only such as are specifically granted to
No. 172 has released the disputed area for disposition are issues which are "manifestly beyond the scope of the COSLAPs jurisdiction vis-- them by the enabling statutes. x x x.
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 xxxx
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 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
serious ramifications of the disputed claims: to the agency having appropriate jurisdiction for settlement/resolution; or (b) assume jurisdiction if the matter is one of those enumerated in
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 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
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 presence or emergence of social tension or unrest, or other similar critical situations requiring immediate action. In resolving whether to
impugned Resolution is a patent nullity since the tribunal which rendered it lacks jurisdiction. Thus, the pronouncements contained therein are assume jurisdiction over a case or to refer the same to the particular agency concerned, the COSLAP has to consider the nature or
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 classification of the land involved, the parties to the case, the nature of the questions raised, and the need for immediate and urgent action
creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect." 66 (Citation omitted) thereon to prevent injuries to persons and damage or destruction to property. The law does not vest jurisdiction on the COSLAP over any land
We add that Fort Bonifacio has been reserved for a declared specific public purpose under R.A. No. 7227, which unfortunately for Dream dispute or problem.72(Citation omitted)
Village does not encompass the present demands of its members. Indeed, this purpose was the very reason why title to Fort Bonifacio has The Longino ruling has been consistently cited in subsequent COSLAP cases, among them Davao New Town Development Corp. v.
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 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
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 Herrera v. Bernardo.79
purpose. 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
On July 31, 1970, President Marcos issued E.O. No. 251 creating the Presidential Action Committee on Land Problems (PACLAP) to expedite problems of grave urgency," since the statutory construction principle of ejusdem generis prescribes that where general words follow an
and coordinate the investigation and resolution of all kinds of land disputes between settlers, streamline and shorten administrative enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest
procedures, adopt bold and decisive measures to solve land problems, or recommend other solutions. 67 E.O. No. 305, issued on March 19, 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,
1971, reconstituted the PACLAP and gave it exclusive jurisdiction over all cases involving public lands and other lands of the public COSLAPs jurisdiction is limited to disputes involving lands in which the government has a proprietary or regulatory interest, 81 or public lands
domain,68 as well as adjudicatory powers phrased in broad terms: "To investigate, coordinate, and resolve expeditiously land disputes, 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.1wphi1 The Supreme court ruled that COSLAP
may resolve only land disputes "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.
BIENVENIDO L. REYES
Associate Justice
WE CONCUR:
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 Communications 1 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. 2056 2 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,4the 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.1awphil.net Republic Act 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. itc-alf They are 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. itc-alf The
actions of the former are presumed to have the implied sanction of the 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, 1935.1awphil.net And, the 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. itc-
alf This puts Us into inquiry 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, 10wood 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. 1awphil.net Two hundred meters long, five 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;
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; The petition for the opening of Sapang Malauling Maragul, Quiorang Silab, Nigui, Pepangebunan, Nasi and Bulacus was dismissed by the
7. Waters found within the zone of operation of public works, even though constructed under contract; Secretary of Public Works and Communications and the case considered closed. The said administrative decision has not been questioned in
8. Waters which flow continuously or intermittently from lands belonging to private persons, to the State, to provinces, or to towns, from the this appeal by either party. Hence, they are deemed excluded herein.
moment they leave such lands; All the other streams, being artificial and devoted exclusively for the use of the hacienda owner and his personnel, are declared of private
9. The waste waters of fountains, sewers, and public institutions. ownership. Hence, the dams across them should not he ordered demolished as public nuisances.
Art. 408. The following are of private ownership: 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
1. Waters, either continuous or intermittent rising on private etates, while they run through them; alleged issuance of a administrative decisions ordering demolition of dikes involved in this case after the writ of injunction was granted and
2. Lakes and ponds and their beds when formed by nature on such estates; served, suffice it to state that the lower court made no finding of contempt of court. Necessarily, there is no conviction for contempt reviewable
3. Subterranean waters found therein; by this Court and any discussion on the matter would be academic.
4. Rain water falling thereon as long as their bounderies. WHEREFORE, the decision appealed from is affirmed, except as to Sapang Cansusu which is hereby declared public and as to which the
5. The channels of flowing streams, continuous or intermittent, formed by rain water, and those of brooks crossing estates which are not of judgment of the lower court is reversed. No costs. So ordered.
public ownership. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal. Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
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.
Footnotes
Articles 71 and 72 of the Spanish Law of Waters of August 3, 1866 state:
G.R. No. 163767 March 10, 2014
Art. 71. The water-beds of all creeks belong to the owners of the estates or lands over which they flow.
REPUBLIC OF THE PHILIPPINES, represented by THE DIRECTOR OF LANDS, Petitioner,
Art. 72. The water-beds on public land, of creeks through which spring waters run, are a part of the public domain.
vs.
The natural water-beds or channels of rivers are also part of the public domain.
ROSARIO DE GUZMAN VDA. DE JOSON, Respondent.
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
DECISION
brooks belong to the owners of estates over which they flow. The channels, therefore, of the streams in question which may be classified
BERSAMIN, J.:
creeks, belong to the owners of Hacienda San Esteban.
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
The said streams, considered as canals, of which they originally were, are of private ownership in contemplation of Article 339(l) of the
(2) of Presidential Decree No. 1529 (Property Registration Decree).
Spanish Civil Code. Under Article 339, canals constructed by the State and devoted to public use are of public ownership. Conversely, canals
The Republic appeals the adverse decision promulgated on January 30, 2004, 1 whereby the Court of Appeals (CA) affirmed the judgment
constructed by private persons within private lands and devoted exclusively for private use must be of private ownership.
rendered on August 10, 1981 by the erstwhile Court of First Instance (CFI) of Bulacan (now the Regional Trial Court) in Registration Case No.
Our attention has been called to the case of Mercado v. Municipal President of Macabebe, 59 Phil. 592. There the creek (Batasan-Limasan)
3446-M granting the application of the respondent for the registration of her title covering a parcel of land situated in San Isidro, Paombong,
involved was originally dug by the estate's owner who, subsequently allowed said creek to be used by the public for navigation and fishing
Bulacan.2
purposes for a period of 22 years. Said this Court through Mr. Justice Diaz:
The respondent filed her application for land registration in the CFI in Bulacan. 3 The jurisdictional requirements were met when the notice of
And even granting that the Batasan-Limasan creek acquired the proportions which it had, before it was closed, as a result of excavations
initial hearing was published in the Official Gazette for two successive weeks, 4 as evidenced by a certification of publication. 5 The notice of
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
initial hearing was also posted by the Provincial Sheriff of Bulacan in a conspicuous place in the municipal building of Paombong, Bulacan as
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
well as on the property itself.6On June 2, 1977, at the initial hearing of the application, Fiscal Liberato L. Reyes interposed an opposition in
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
behalf of the Director of Lands and the Bureau of Public Works. Upon motion by the respondent and without objection from Fiscal Reyes, the
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
CFI commissioned the Acting Deputy Clerk of Court to receive evidence in the presence of Fiscal Reyes.7
any right to the creek in question by virtue of excavations which they had made thereon, they had such right through prescription, inasmuch as
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,
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.
Paombong, Bulacan, and covered by plan Ap-03-001603; 8 that the riceland had been originally owned and possessed by one Mamerto
The use and enjoyment of a creek, as any other property simceptible of appropriation, may be acquired or lost through prescription, and the
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
appellant and her predecessors in interest certainly lost such right through the said cause, and they cannot now claim it exclusively for
Romualda Jacinto, her sister Maria Jacinto (mother of the respondent) had inherited the land; that upon the death of Maria Jacinto in 1963, the
themselves after the general public had been openly using the same from 1906 to 1928. . . .
respondent had herself inherited the land, owning and possessing it openly, publicly, uninterruptedly, adversely against the whole world, and in
In the cited case, the creek could have been of private ownership had not its builder lost it by prescription. Applying the principle therein
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
enunciated to the case at bar, the conclusion would be inevitably in favor of private ownership, considering that the owners of Hacienda San
paid, as shown in Official Receipt No. H-7100234.11
Esteban held them for their exclusive use and prohibited the public from using them.
In their opposition filed by Fiscal Reyes, 12 the Director of Lands and the Director of Forest Development averred that whatever legal and
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
possessory rights the respondent had acquired by reason of any Spanish government grants had been lost, abandoned or forfeited for failure
the Secretary of Public Works and Communications whether the latter can declare of private ownership those streams which "were dug up
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
artificially", because it was assumed that the streams were used "by the public as fishing ground and in transporting their commerce in bancas
actually a portion of the Labangan Channel operated by the Pampanga River Control System, could not be subject of appropriation or land
or in small crafts without the objection of the parties who dug" them. Precisely, Mercado v. Municipality of Macabebe was given application
registration.14
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
The Office of the Solicitor General (OSG) also filed in behalf of the Government an opposition to the application, 15insisting that the land was
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
within the unclassified region of Paombong, Bulacan, as indicated in BF Map LC No. 637 dated March 1, 1927; that areas within the
the factual premises and the legal conclusion contained in said opinion.
unclassified region were denominated as forest lands and thus fell under the exclusive jurisdiction, control and authority of the Bureau of
The case at bar should be differentiated from those cases where We held illegal the closing and/or appropriation of rivers or streams by
Forest Development (BFD);16 and that the CFI did not acquire jurisdiction over the application considering that: (1) the land was beyond the
owners of estates through which they flow for purposes of converting them into fishponds or other works. 23 In those cases, the watercourses
commerce of man; (2) the payment of taxes vested no title or ownership in the declarant or taxpayer.17
which were dammed were natural navigable streams and used habitually by the public for a long time as a means of navigation . Consequently,
Ruling ofthe CFI
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
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
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
sufficiently established her open, public, continuous, and adverse possession in the concept of an owner for more than 30 years, to wit:
the hacienda owner.
Since it has been established that the applicants and her predecessors-in-interest have been in the open, public, continuous, and adverse
Finally, Sapang Cansusu, being a natural stream and a continuation of the Cansusu River, admittedly a public stream, belongs to the public
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,
domain. Its closure therefore by the predecessors of Roman Santos was illegal.
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 ResourcesCommunity
Environment and Natural Resources Office (DENR-CENRO),36viz:
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". 1wphi1
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. 1wphi1 The duty of the Court is to apply the Constitution and the laws in accordance with
their language and intent. The remedy is to change the law, which is the province of the legislative branch. Congress can very well be
entreated to amend Section 14(2) of the Property Registration Decree and pertinent provisions of the Civil Code to liberalize the requirements
for judicial confirmation of imperfect or incomplete titles.46
The period of possession prior to the reclassification of the land as alienable and disposable land of the public domain is not considered in
reckoning the prescriptive period in favor of the possessor. As pointedly clarified also in Heirs of Mario Malabanan v. Republic: 47
Should public domain lands become patrimonial because they are declared as such in a duly enacted law or duly promulgated proclamation
that they are no longer intended for public service or for the development of the national wealth, would the period of possession prior to the
conversion of such public dominion into patrimonial be reckoned in counting the prescriptive period in favor of the possessors? We rule in the
negative.
The limitation imposed by Article 1113 dissuades us from ruling that the period of possession before the public domain land becomes
patrimonial may be counted for the purpose of completing the prescriptive period. Possession of public dominion property before it becomes
patrimonial cannot be the object of prescription according to the Civil Code. As the application for registration under Section 14(2) falls wholly
within the framework of prescription under the Civil Code, there is no way that possession during the time that the land was still classified as
public dominion property can be counted to meet the requisites of acquisitive prescription and justify registration. 48
In other words, the period of possession prior to the reclassification of the land, no matter how long, was irrelevant because prescription did
not operate against the State before then.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals promulgated on January 30, 2004; DISMISSES
the application for land registration of respondent Rosario de Guzman Vda. De Joson respecting Lot 2633, Cad-297 with a total area of 12,342
square meters, more or less, situated in San Isidro, Paombong, Bulacan; and DIRECTS the respondent to pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
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.
Acting on the petition, the Court required the respondents to comment thereon. However, before respondents could do so, petitioners
manifested that for lack of interest on the part of respondent Alfredo Maza, the awardee in the public bidding of the fishpond, the 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 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 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 in their favor as it is now clear that after the National Irrigation
Administration [NIA] had built the dike around the land, no water gets in or out of the land. 1
The stipulations contained in the Compromise Agreement partake of the nature of an 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 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 belonging to the public domain which is not susceptible to
private appropriation and acquisitive prescription, and as a public water, it cannot be registered under the Torrens 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
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 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 being contrary to law and public policy.
The finding that the subject body of water is a creek belonging to the public domain is a factual determination binding upon this Court. The
Municipality of Bugallon, acting thru its duly-constituted municipal council is clothed with authority to pass, as it did the two resolutions dealing
with its municipal waters, and it cannot be said that petitioners were 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.
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.
THIRD DIVISION
[G.R. No. 152115. January 26, 2005]
NIMFA USERO, petitioner , vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents .
[G.R. No. 155055. January 26, 2005]
LUTGARDA R. SAMELA, petitioner , vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents .
DECISION
CORONA, J .:
Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first petition, docketed as
G.R. No. 152115, filed by Nimfa Usero, assails the September 19, 2001 decision [1] of the Court of Appeals in CA-GR SP No. 64718. The
second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails the January 11, 2002 decision [2] of the Court of Appeals in
CA-GR SP NO. 64181.
The undisputed facts follow.
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]
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 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.
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 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
misapprehension of facts.[7] This is obviously not the case here. Decision[1] and June 8, 2007 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being contrary to law and
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 jurisprudence. The CA had reversed the Order [3] of the Regional Trial Court (RTC) of Paraaque City, Branch 196, issued on April 29, 2005 in
is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of land; (2) a certification from the Second Manila Civil Case No. 05-0155.
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 Below are the facts.
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 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
that water lilies thrive in that strip of land can only mean that there is a permanent stream of water or creek there. Compound in Barangay Vitalez, Paraaque City and covered by Tax Declaration Nos. 01027 and 01472 in the name of respondent Mario D.
In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of their respective lots to prove 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
that there is no creek between their properties and that of the Polinars. However, an examination of said TCTs reveals that the descriptions their great grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on, Pedro continuously and
thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no boundary description relative to the northwest portion of the exclusively occupied and possessed the said lot. In 1966, after executing an affidavit declaring possession and occupancy, [4] Pedro was able
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 to obtain a tax declaration over the said property in his name. [5] Since then, respondents have been religiously paying real property taxes for
site of the creek has no described boundary. Moreover the tax declaration presented by petitioner is devoid of any entry on the west boundary the said property.[6]
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 Meanwhile, in 1961, respondent Mario Ebio married Pedros daughter, Zenaida. Upon Pedros advice, the couple established their home on the
boundaries is in fact a creek and belongs to no one but the state. said lot. In April 1964 and in October 1971, Mario Ebio secured building permits from the Paraaque municipal office for the construction of their
Property is either of public dominion or of private ownership.[8] Concomitantly, Article 420 of the Civil Code provides: house within the said compound.[7] On April 21, 1987, Pedro executed a notarized Transfer of Rights [8] ceding his claim over the entire parcel
ART. 420. The following things are property of public dominion: of land in favor of Mario Ebio. Subsequently, the tax declarations under Pedros name were cancelled and new ones were issued in Mario
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, Ebios name.[9]
roadsteads, and others of similar character; On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No. 08, series of 1999 [10] seeking assistance from
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 the City Government of Paraaque for the construction of an access road along Cut-cut Creek located in the said barangay. The proposed road,
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 projected to be eight (8) meters wide and sixty (60) meters long, will run from Urma Drive to the main road of Vitalez Compound[11] traversing
individual[10]. the lot occupied by the respondents. When the city government advised all the affected residents to vacate the said area, respondents
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their property. immediately registered their opposition thereto. As a result, the road project was temporarily suspended.[12]
WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R. SP 64181 and CA- In January 2003, however, respondents were surprised when several officials from the barangay and the city planning office proceeded to cut
G.R. SP 64718 are affirmed in toto. eight (8) coconut trees planted on the said lot. Respondents filed letter-complaints before the Regional Director of the Bureau of Lands, the
SO ORDERED. Department of Interior and Local Government and the Office of the Vice Mayor.[13] On June 29, 2003, the Sangguniang Barangay of Vitalez
Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur. held a meeting to discuss the construction of the proposed road. In the said meeting, respondents asserted their opposition to the proposed
THIRD DIVISION 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]
OFFICE OF THE CITY MAYOR OF PARAAQUE CITY, G.R. No. 178411 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)
OFFICE OF THE CITY ADMINISTRATOR OF PARAAQUE 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
CITY, OFFICE OF THE CITY ENGINEER OF PARAAQUE claim over the subject property and expressing intent for a further dialogue.[17] The request remained unheeded.
CITY, OFFICE OF THE CITY PLANNING AND Present: Threatened of being evicted, respondents went to the RTC of Paraaque City on April 21, 2005 and applied for a writ of preliminary injunction
DEVELOPMENT COORDINATOR, OFFICE OF THE against petitioners.[18]In the course of the proceedings, respondents admitted before the trial court that they have a pending application for the
BARANGAY CAPTAIN AND SANGGUNIANG issuance of a sales patent before the Department of Environment and Natural Resources (DENR).[19]
PAMBARANGAY OF BARANGAY VITALEZ, PARAAQUE CARPIO MORALES, J., On April 29, 2005, the RTC issued an Order [20] denying the petition for lack of merit. The trial court reasoned that respondents were not able to
CITY, TERESITA A. GATCHALIAN, ENRICO R. ESGUERRA, Chairperson, prove successfully that they have an established right to the property since they have not instituted an action for confirmation of title and their
ERNESTO T. PRACALE, JR., MANUEL M. ARGOTE, BRION, application for sales patent has not yet been granted. Additionally, they failed to implead the Republic of the Philippines, which is an
CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN BERSAMIN, indispensable party.
L. GONZALES, ESTER C. ASEHAN, MANUEL A. FUENTES, ABAD,* and Respondents moved for reconsideration, but the same was denied.[21]
and MYRNA P. ROSALES, VILLARAMA, JR., JJ. Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the Court of Appeals issued its Decision in favor of
Petitioners, 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.
- versus - 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
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, Promulgated: RL 8 has been intended as a road lot.
ARTURO V. EBIO, EDUARDO V. EBIO, RENATO V. EBIO, On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed the accreted property since 1930 per his Affidavit dated 21
LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL V. June 23, 2010 March 1966 for the purpose of declaring the said property for taxation purposes. The property then became the subject of Tax Declaration No.
EBIO, 20134 beginning the year 1967 and the real property taxes therefor had been paid for the years 1966, 1967, 1968, 1969, 1970, 1972, 1973,
Respondents. 1974, 1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, and 2004. Sometime in 1964 and 1971, construction permits were
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x 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
DECISION
application of the provisions of the Civil Code on acquisitive prescription which is likewise applicable in the instant case.
xxxx
VILLARAMA, JR., J .:
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.
A right in esse means a clear and unmistakable right.[34] A party seeking to avail of an injunctive relief must prove that he or she possesses a
right in esse or one that is actual or existing.[35] It should not be contingent, abstract, or future rights, or one which may never arise.[36]
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, 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 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. 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 8 to the local government of Paraaque.
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, 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 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 the registration of title which the applicant already possessed over the land.
Registration was never intended as a means of acquiring ownership. [37] A decree of registration merely confirms, but does not confer,
ownership.[38]
Did the filing of a sales patent application by the respondents, which remains pending before the DENR, estop them from filing an injunction
suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through judicial proceedings or through administrative process. In
the instant case, respondents admitted that they opted to confirm their title over the property administratively by filing an application for sales
patent.
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 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]
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally applicable even against a sovereign entity
that is the State.
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 are hereby AFFIRMED.
With costs against petitioners.
SO ORDERED.
[G.R. No. 133250. July 9, 2002]
FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents .
DECISION
CARPIO, J .:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary restraining order. The petition seeks to
compel the Public Estates Authority (PEA for brevity) to disclose all facts on PEAs then on-going renegotiations with Amari Coastal Bay and
Development Corporation (AMARI for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new
agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways, signed a contract with the Construction and
Development Corporation of the Philippines (CDCP for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The contract
also included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in
consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked PEA to
reclaim land, including foreshore and submerged areas, and to develop, improve, acquire, x x x lease and sell any and all kinds of lands. [1] On
the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the lands reclaimed in the foreshore and
offshore of the Manila Bay[2] under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that [A]ll future
works in MCCRRP x x x shall be funded and owned by PEA. Accordingly, PEA and CDCP executed a Memorandum of Agreement dated
December 29, 1981, which stated:
(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be agreed upon by the parties, to be
paid according to progress of works on a unit price/lump sum basis for items of work to be agreed upon, subject to price escalation, retention
and other terms and conditions provided for in Presidential Decree No. 1594.All the financing required for such works shall be provided by
PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor of PEA, all of the rights, title, interest
and participation of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet
been sold, transferred or otherwise disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine Thousand Four
Hundred Seventy Three (99,473) square meters in the Financial Center Area covered by land pledge 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, PEA[15] and AMARI[16] 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 Courts 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 petitioners prayer for a public
disclosure of the renegotiations. Likewise, petitioners 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. Petitioners 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 titles [19] 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 latters
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 petitioners 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. Tuvera[23] 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 Code [24] and Section 1 of Commonwealth Act No. 638 [25] 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]2 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 taxpayers 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 taxpayers 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 peoples 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 peoples 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 peoples will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and
thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information
relating thereto can such bear fruit.
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 publics 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 AMARIs 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.
Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous to the government
or even illegal, becomes a fait accompli. This negates the State policy of full transparency on matters of public concern, a situation which the
framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from participating in the public discussion of
any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an emasculation of a
constitutional right, nor a retreat by the State of its avowed policy of full disclosure of all its transactions involving public interest.
The right covers three categories of information which are matters of public concern, namely: (1) official records; (2) documents and papers
pertaining to official acts, transactions and decisions; and (3) government research data used in formulating policies. The first category refers
to any document that is part of the public records in the custody of government agencies or officials. The second category refers to documents
and papers recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts, transactions or decisions of
government agencies or officials. The third category refers to research data, whether raw, collated or processed, owned by the government
and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes evaluation reports, recommendations, legal and expert
opinions, minutes of meetings, terms of reference and other documents attached to such reports or minutes, all relating to the JVA. However,
the right to information does not compel PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of the JVA. [34] The
right only affords access to records, documents and papers, which means the opportunity to inspect and copy them. One who exercises the
right must copy the records, documents and papers at his expense. The exercise of the right is also subject to reasonable regulations to
protect the integrity of the public records and to minimize disruption to government operations, like rules specifying when and how to conduct
the inspection and copying.[35]
The right to information, however, does not extend to matters recognized as privileged information under the separation of powers. [36] The right
does not also apply to information on military and diplomatic secrets, information affecting national security, and information on investigations
of crimes by law enforcement agencies before the prosecution of the accused, which courts have long recognized as confidential. [37] The right
may also be subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers. The
information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings which, like
internal deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house of Congress, [38] are recognized
as confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory ideas and
assessments, free from the glare of publicity and pressure by interested parties, is essential to protect the independence of decision-making of
those tasked to exercise Presidential, Legislative and Judicial power.[39] This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information on on-going negotiations before a final
contract. The information, however, must constitute definite propositions by the government and should not cover recognized exceptions like
privileged information, military and diplomatic secrets and similar matters affecting national security and public order. [40] Congress has also
prescribed other limitations on the right to information in several legislations. [41]
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to be reclaimed, violate
the Constitution.
The Regalian Doctrine
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 department pursuant to law, must declare the property no
longer needed for public use or territorial defense before the government could lease or alienate the property to private parties. [45]
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed and foreshore lands. The salient
provisions of this law were as follows:
Section 1. The control and disposition of the foreshore as defined in existing law, and the title to all Government or public lands
made or reclaimed by the Governmentby dredging or filling or otherwise throughout the Philippine Islands, shall be retained by the
Government without prejudice to vested rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or reclaimed by the Government by dredging or
filling or otherwise to be divided into lots or blocks, with the necessary streets and alleyways located thereon, and shall cause plats and plans
of such surveys to be prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall give notice to the public that such parts of the lands so
made or reclaimed as are not needed for public purposes will be leased for commercial and business purposes , x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and best bidder therefore, subject to such regulations and
safeguards as the Governor-General may by executive order prescribe. (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to all lands reclaimed by the government. The Act also vested in the
government control and disposition of foreshore lands. Private parties could lease lands reclaimed by the government only if these lands were
no longer needed for public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act No. 1654 made
government reclaimed lands sui generis in that unlike other public lands which the government could sell to private parties, these reclaimed
lands were available only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did not prohibit private parties from
reclaiming parts of the sea under Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties with government
permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act. [46] The salient provisions of Act No. 2874, on
reclaimed lands, were as follows:
Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time
to time classify the lands of the public domain into
(a) Alienable or disposable ,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or disposable public lands, the Governor-General , upon
recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are open to
disposition or concession under this Act .
Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited or classified x x
x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be classified as suitable for residential
purposes or for commercial, industrial, or other productive purposes other than agricultural purposes, and shall be open to
disposition or concession, shall be disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore ;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed of to private parties by lease only
and not otherwise , as soon as the Governor-General, upon recommendation by the Secretary of Agriculture and Natural
Resources, shall declare that the same are not necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act . (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to classify lands of the public domain into x x x alienable or
disposable[47] lands. Section 7 of the Act empowered the Governor-General to declare what lands are open to disposition or concession.
Section 8 of the Act limited alienable or disposable lands only to those lands which have been officially delimited and classified.
Section 56 of Act No. 2874 stated that lands disposable under this title [48] 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 States natural resources, became inalienable by constitutional fiat,
available only for lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands only after these lands
were reclaimed and classified as alienable agricultural lands of the public domain. Government reclaimed and marshy lands of the public
domain, being neither timber nor mineral lands, fell under the classification of public agricultural lands. [50] However, government reclaimed and
marshy lands, although subject to classification as disposable public agricultural lands, could only be leased and not sold to private parties
because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of the public domain was only a
statutory prohibition and the legislature could therefore remove such prohibition. The 1935 Constitution did not prohibit individuals and
corporations from acquiring government reclaimed and marshy lands of the public domain that were classified as agricultural lands under
existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows:
Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in excess of one thousand
and twenty four hectares, nor may any individual acquire such lands by purchase in excess of one hundred and forty hectares ,
or by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to
grazing, not exceeding two thousand hectares, may be leased to an individual, private corporation, or association.(Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874 to open for sale to private parties
government reclaimed and marshy lands of the public domain. On the contrary, the legislature continued the long established State policy of
retaining for the government title and ownership of government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the Public Land Act, which compiled the
then existing laws on lands of the public domain. CA No. 141, as amended, remains to this day the existing general law governing the
classification and disposition of lands of the public domain other than timber and mineral lands. [51]
Section 6 of CA No. 141 empowers the President to classify lands of the public domain into alienable or disposable [52] lands of the public
domain, which prior to such classification are inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President
to declare what lands are open to disposition or concession. Section 8 of CA No. 141 states that the government can declare open for
disposition or concession only lands that are officially delimited and classified. Sections 6, 7 and 8 of CA No. 141 read as follows:
Sec. 6. The President , upon the recommendation of the Secretary of Agriculture and Commerce , shall from time to time classify
the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to another,[53] for the purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable public lands, the President, upon
recommendation by the Secretary of Agriculture and Commerce , shall from time to time declare what lands are open to
disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited and
classified and, when practicable, surveyed, and which have not been reserved for public or quasi-public uses , nor appropriated by the
Government, nor in any manner become private property, nor those on which a private right authorized and recognized by this Act or any other
valid law may be claimed, or which, having been reserved or appropriated, have ceased to be so. x x x.
Thus, before the government could alienate or dispose of lands of the public domain, the President must first officially classify these lands as
alienable or disposable, and then declare them open to disposition or concession. There must be no law reserving these lands for public or
quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public domain, are as follows:
Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is intended to be used for residential
purposes or for commercial, industrial, or other productive purposes other than agricultural, and is open to disposition or
concession, shall be disposed of under the provisions of this chapter and not otherwise .
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore ;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation, or association
authorized to purchase or lease public lands for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to private parties by lease only
and not otherwise , as soon as the President , upon recommendation by the Secretary of Agriculture, shall declare that the same are not
necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of
by sale or lease under the provisions of this Act . (Emphasis supplied)
Section 61 of CA No. 141 readopted , after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874 prohibiting the sale of
government reclaimed, foreshore and marshy disposable lands of the public domain. All these lands are intended for residential, commercial,
industrial or other 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 , [55] Justice 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 domain [63] 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 tohold 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 AMARIs 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 PEAs 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 AMARIs 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 AMARIs 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 AMARIs 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 PEAs 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 Force [68] 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 422 [74] 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 Aquinos actual issuance of a special patent covering the Freedom Islands, is equivalent to an official
proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquinos
issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom
Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties.
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 Governments 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 inalienableand 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 PEAs 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.
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 countrys 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 6 [81] and 7[82] 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 III[83] of CA No. 141 and other applicable laws.[84]
PEAs 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.
PEAs charter, however, expressly tasks PEA to develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all
kinds of lands x x x owned, managed, controlled and/or operated by the government. [87] (Emphasis supplied) There is, therefore,
legislative authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public domain . PEA may sell to
private parties its patrimonial properties in accordance with the PEA charter free from constitutional limitations. The constitutional ban on
private corporations from acquiring alienable lands of the public domain does not apply to the sale of PEAs 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. 89-296 [91] 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 PEAs 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
hectares[96] 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 PEAs patent or certificates of title. In fact, the thrust of the instant petition is that PEAs 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.[104] Alienable lands of the public domain held by government entities under Section 60 of CA No. 141 remain
public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing their 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 Governments 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.
xxx.
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, PEAs 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 PEAs 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 AMARIs 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 hectares [110] of 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 hectares [111] 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 1409[112] 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.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-
Martinez, and Corona, JJ., concur.
[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.
DECISION
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 FirstInstance (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 versus 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:
SECTION 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 aforecited 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 Websters 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 Martinez, 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
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 bidding, award contracts for the construction of such projects, 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. x x x. (underscoring 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) Plaintiffs 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 Complaint 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) Plaintiffs Exhibits A to YYY-4, (b) Defendant Republic Real Estate Corporations Exhibits 1-RREC to 40-a and (c) Intervenor Pasay Law and
Conscience Union, Incs., 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 Plaintiffs 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:
SECTION 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 the submission of RRECs 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;
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 RRECs 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 RRECs 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 the respondent Court of
Appeals erred in not awarding damages to them, movants.
On April 28, 1992, the Court of Appeals acted favorably on the said Motion for Reconsideration, by amending the dispositive portion of its
judgment of January 28, 1992, to read as follows:
WHEREFORE, the dispositive portion of our Decision dated January 28, 1992 is hereby AMENDED to read as follows:
1. The requirement by the trial court on public bidding and the submission of the RRECs 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.
2. Ordering plaintiff-appellant to turn over to Pasay City the ownership and possession of the above enumerated lots (1 to 9).
3. Sustaining RRECs irrevocable option to purchase sixty (60%) percent of the land referred to in No. 2 of this dispositive portion, 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 Pasay City to respect RRECs irrevocable option.
SO ORDERED.
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 seek relief, albeit with different prayers.
On September 10, 1997, the Court commissioned the former thirteenth Division of Court of Appeals to hear and receive evidence on the
controversy. The corresponding Commissioners Report, dated November 25, 1997, was submitted and now forms part of the records.
On October 11, 1997, the Cultural Center of the Philippines (CCP) filed a Petition in Intervention, theorizing that it has a direct interest in the
case being the owner of subject 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 evidence, as it did, before the Court of Appeals, which evidence has been
considered in the formulation of this disposition.
In G.R. No. 103882, the Republic of the Philippines theorizes, by way of assignment of errors, that:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF PASAY CITY ORDINANCE NO. 158 DATED APRIL 21, 1959 AND
THE RECLAMATION CONTRACT ENTERED INTO BETWEEN PASAY CITY AND RREC;
II
THE COURT OF APPEALS ERRED IN FINDING THAT RREC HAD RECLAIMED 55 HECTARES AND IN ORDERING THE TURN-OVER TO
PASAY CITY OF THE OWNERSHIP AND POSSESSION OF NINE (9) LOTS TITLED IN THE NAME OF CCP.
In G.R. No. 105276, the petitioners, Pasay City and RREC, contend, that::
I
THE COURT OF APPEALS ERRED IN NOT DECLARING PRESIDENTIAL DECREE NO. 3-A UNCONSTITUTIONAL;
II
THE COURT OF APPEALS ERRED IN NOT AWARDING DAMAGES IN FAVOR OF PASAY CITY AND RREC.
Let us first tackle the issues posed in G.R. No. 103882.
On the first question regarding the validity of Pasay City Ordinance No. 158 dated April 21, 1959 and the Agreement dated April 24, 1959
between Pasay City and RREC, we rule in the negative.
Section 1 of RA 1899, reads:
SECTION 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 Websters
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.
Websters 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 waters 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 (Websters 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. Websters 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 that defined by Webster. xxx
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 and
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. It 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. 3630, 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 and 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. x x x (underscoring 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 Act 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 Websters 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 Bureaus interpretationof 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. x x x.
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. (Websters 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 have provided 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 3, 1965 in Ponce v. Gomez (L-21870) and Ponce v.
City of Cebu (L-22669) despite the enactment of Republic Act No. 5187 (RA 5187), the relevant portion of which, reads:
Sec. 3. Miscellaneous Projects
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 bidding, award contracts for the construction of such projects, 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. x x x.
There is nothing in the foregoing provision of RA 5187 which can be interpreted to 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 WORKS, SYNCHRONIZING
THE SAME WITH PREVIOUS PUBLIC WORKS APPROPRIATIONS.
All things viewed in proper perspective, we reiterate what was said in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) that the
term foreshore refers to that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides. As
opined by this Court in said cases:
WHEREAS, six (6) members of the Court (Justices Bautista Angelo, Concepcion, Reyes, Barrera, Dizon and Jose P. Bengzon) opine that said
city ordinance and contracts are ultra vires and hence, null and void, insofar as the remaining 60% of the area aforementioned, because the
term foreshore lands as used in Republic Act No. 1899 should be understood in the sense attached thereto by common
parlance; (underscoring ours)
The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his opinion dated December 22, 1966, in a case with
analogous facts as the present one, to wit:
December 22, 1966
The Secretary of Agriculture
and Natural Resources
Diliman, Quezon City
Sir:
xxx
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
3. On March 16, 1961, the Municipal Council of Navotas passed Resolution No. 22 approving and ratifying the contract.
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 of 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 sea 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
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-compliance with law.
Very truly yours,
(SGD) CLAUDIO TEEHANKEE
Secretary of Justice
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 Teehankee opinion accords with RA 1899.
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 the intendment and scope of RA 1899, and therefore ultra vires and null and void.
What is worse, the same Agreement was vitiated by the glaring absence of a public bidding.
Obviously, there is a complete dearth of evidence to prove that RREC had really reclaimed 55 hectares. The letter of Minister Baltazar Aquino
relied upon by RREC is no proof at all that RREC had reclaimed 55 hectares. Said letter was just referring to a tentative schedule of work to
be done by RREC, even as it required RREC to submit the pertinent papers to show its supposed accomplishment, to secure approval by the
Ministry of Public Works and Highways to the reclamation plan, and to submit to a public bidding all contracts and sub-contracts for subject
reclamation project but RREC never complied with such requirements and conditions sine qua non.
No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the reclamation project were presented to reflect any
accomplishment. Not even any statement or itemization of works accomplished by contractors or subcontractors or vouchers and other
relevant papers were introduced to describe the extent of RRECs accomplishment. Neither was the requisite certification from the City
Engineer concerned 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
Works, 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 CDCPs reclamation work, mobilization of the reclamation team
would take one year before a reclamation work could actually begin. Therefore, the reclamation work undertaken 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 1966 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 RRECs 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 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 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 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 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 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 realistic, so much so that on June 25, 1981, RREC, in its reply letter 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
to the Solicitor General, stated: 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
We regret that we are not agreeable to the amount of P10,926,071.29, based on 1962 cost data, etc., as compensation based on quantum Pasay City of the titled lots aforementioned.
meruit. The least we would consider is the amount of P10.926,071.29 plus interest at the rate of 6% per annum from 1962 to the time of 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
payment. We feel that 6% is very much less than the accepted rate of inflation that has supervened since 1962 to the present, and even less posed only in an action brought to impugn or annul it.(Halili vs. National Labor Relations Commission, 257 SCRA 174; Cimafranca vs.
than the present legal rate of 12% per annum.[19] Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and cannot be ignored, is the germane provision of Section 48 of P.D. 1529, that
Undoubtedly, what RREC claimed for was payment for what it had done, and for the dredge fill of 1,558,395 cubic meters it used, on subject 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
reclamation project. instituted in accordance with law.
Respondent Court likewise erred in ordering the turn-over to Pasay City of the following titled lots, to wit: Although Pasay City and RREC did not succeed in their undertaking to reclaim any area within subject reclamation project, it appearing that
LOT NO. BUILDING AREA OCT/TCT something compensable was accomplished by them, following the applicable provision of law and hearkening to the dictates of equity, that no
42 Gloria Maris 9,516 sq.m. OCT 159 in the Restaurant name of GSIS 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
3 Asean Garden 76,299 sq.m. OCT 10251 in the Public Highways, and as claimed by RREC itself in its aforequoted letter dated June 25, 1981.
name of CCP 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
12 Folk Arts Theater 1.7503 sq.m. TCT 18627 in the rightly puts it: Whatever expands the affections, or enlarges the sphere of our sympathies - Whatever makes us feel our relation to the
and PICC parking name of CCP 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
space elevate us in the scale of being.
WHEREFORE:
22 landscaped with 132,924 sq.m. TCT 75676 in the In G.R. No. 103882, the Petition is GRANTED; the Decision, dated January 28, 1992, and Amended Decision, dated April 28, 1992, of the
sculpture of Asean name of CCP 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,
Artists-site of as well as the Reclamation Agreements entered into by Pasay City and Republic Real Estate Corporation (RREC)as authorized by said city
Boom na Boom 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
23 open space, back 34,346 sq.m. TCT 75677 in the 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
of Philcite name of CCP 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
24 Parking space for 10,352 sq.m. TCT 75678 in the MILLION NINE HUNDRED TWENTY-SIX THOUSAND SEVENTY-ONE AND TWENTY-NINE CENTAVOS (P10,926,071.29) PESOS, plus
Star City, CCP, name of CCP 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,
Philcite share and share alike.
In G.R. No. 105276, the Petition is hereby DENIED for lack of merit.
25 open space, 11,323 sq.m. TCT 75679 in the No pronouncement as to costs.
occupied by Star name of CCP SO ORDERED.
City SECOND DIVISION
G.R. No. 184203, November 26, 2014
28 open space, 27,689 sq.m. TCT 75684 in the CITY OF LAPU-LAPU, Petitioner, v. PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
beside PICC name of CCP
G.R. NO. 187583
29 open space, 106,067 sq.m. TCT 75681 in the PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER
leased by El name of CCP CAPACITY AS PROVINCIAL TREASURER OF BATAAN, Petitioners, v. PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
Shaddai DECISION
We discern no factual basis nor any legal justification therefor. In the first place, in their answer to the Complaint and Amended Complaint LEONEN, J. :
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 Philippine Economic Zone Authority is exempt from payment of real property taxes.
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 These are consolidated1 petitions for review on certiorari the City of Lapu-Lapu and the Province of Bataan separately filed against the
RREC any real right superior to the absolute ownership thereover of CCP and GSIS. Besides, the nature of the action did not really warrant Philippine Economic Zone Authority (PEZA).
the issuance of a notice of lis pendens.
Section 14 of Rule 13, Revised Rules of Civil Procedure, reads: In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals decision 2 dated January 11, 2008 and resolution3 dated
Sec. 14. Notice of lis pendens. - In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when August 6, 2008, dismissing the Citys appeal for being the wrong mode of appeal. The City appealed the Regional Trial Court, Branch 111,
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 Pasay Citys decision finding the PEZA exempt from payment of real property taxes.
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 In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals decision 4dated August 27, 2008 and resolution5 dated
encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency April 16, 2009, granting the PEZAs petition for certiorari. The Court of Appeals ruled that the Regional Trial Court, Branch 115, Pasay City
against the parties designated by their real names. gravely abused its discretion in finding the PEZA liable for real property taxes to the Province of Bataan.
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. Facts common to the consolidated petitions

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 export processing zones in strategic locations in the Philippines. Presidential Decree No. 66 aimed to encourage exemptions, including real property tax exemptions, previously granted to all persons.
and promote foreign commerce as a means of making the Philippines a center of international trade, of strengthening our export trade and
foreign exchange position, of hastening industrialization, of reducing domestic unemployment, and of accelerating the development of the A reply28 was filed by the PEZA to which the City filed a rejoinder. 29chanRoblesvirtualLawlibrary
country.7chanRoblesvirtualLawlibrary
Pursuant to Rule 63, Section 3 of Rules of Court, 30 the Office of the Solicitor General filed a comment 31 on the PEZAs petition for declaratory
To carry out this policy, the Export Processing Zone Authority (EPZA) was created to operate, administer, and manage the export processing 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
zones established in the Port of Mariveles, Bataan 8and such other export processing zones that may be created by virtue of the 1995.
decree.9chanRoblesvirtualLawlibrary
The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone Act of 1995 provides:chanroblesvirtuallawlibrary
The decree declared the EPZA non-profit in character 10 with all its revenues devoted to its development, improvement, and maintenance. 11 To SEC. 24. Exemption from National and Local Taxes. Except for real property taxes on land owned by developers, no taxes, local and
maintain this non-profit character, the EPZA was declared exempt from all taxes that may be due to the Republic of the Philippines, its national, shall be imposed on business establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income
provinces, cities, municipalities, and other government agencies and instrumentalities. 12 Specifically, Section 21 of Presidential Decree No. 66 earned by all business enterprises within the ECOZONE shall be paid and remitted as follows:
declared the EPZA exempt from payment of real property taxes:chanroblesvirtuallawlibrary
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be non-profit and shall devote and use all its a. Three percent (3%) to the National Government;
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 b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurers office of the municipality or city where
enunciated in Section 1 of this Decree. In consonance therewith, the Authority is hereby declared exempt:ChanRoblesVirtualawlibrary the enterprise is located.
. . . .
Section 51 of the law, on the other hand, provides:chanroblesvirtuallawlibrary
(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 SEC. 51. Ipso-Facto Clause. All privileges, benefits, advantages or exemptions granted to special economic zones under Republic Act No.
provinces, cities, municipalities and other government agencies and instrumentalities[.] 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.
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-Lapu in Mactan, Cebu were reserved to serve as site of the Mactan Export Processing Zone. Based on Section 51, the trial court held that all privileges, benefits, advantages, or exemptions granted to special economic zones created
under the Bases Conversion and Development Act of 1992 apply to special economic zones created under the Special Economic Zone Act of
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, 1995. Since these benefits include exemption from payment of national or local taxes, these benefits apply to special economic zones owned
manage, and develop economic zones in the country.14 The PEZA was granted the power to register, regulate, and supervise the enterprises by the PEZA.
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. 17chanRoblesvirtualLawlibrary 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
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 public developers like the PEZA. The PEZA, therefore, is not liable for real property taxes on the land it owns.
issued for [the] purpose.18chanRoblesvirtualLawlibrary
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
On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing the PEZA to assume and exercise all of the EPZAs Sections 133(o) and 234(a) of the Local Government Code of 1991.
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, In the resolution32 dated June 14, 2006, the trial court granted the PEZAs petition for declaratory relief and declared it exempt from payment of
equipment, and assets, among others, were ordered transferred to the PEZA. 20chanRoblesvirtualLawlibrary real property taxes.

Facts of G.R. No. 184203 The City filed a motion for reconsideration,33 which the trial court denied in its resolution34 dated September 26, 2006.

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 The City then appealed35 to the Court of Appeals.
real property taxes for the period from 1992 to 1998 on the PEZAs properties located in the Mactan Economic Zone.
The Court of Appeals noted the following issues the City raised in its appellants brief: (1) whether the trial court had jurisdiction over the
The City reiterated its demand in the letter 22 dated May 21, 1998. It cited Sections 193 and 234 of the Local Government Code of 1991 that PEZAs petition for declaratory relief; (2) whether the PEZA is a government agency performing governmental functions; and (3) whether the
withdrew the real property tax exemptions previously granted to or presently enjoyed by all persons. The City pointed out that no provision in PEZA is exempt from payment of real property taxes.
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 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
property taxes, the City argued that it can tax the PEZA. 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 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. The City filed a motion for extension of time to file a motion for reconsideration, 37 which the Court of Appeals denied in the resolution 38 dated
April 11, 2008.
On September 11, 2002, the PEZA filed a petition for declaratory relief 25 with the Regional Trial Court of Pasay City, praying that the trial court
declare it exempt from payment of real property taxes. The case was raffled to Branch 111. 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.
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 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
property taxes. The Department of Justice based its opinion on Sections 193 and 234 of the Local Government Code that withdrew the tax 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 the period from June 1995 to December 2004.60chanRoblesvirtualLawlibrary
out.43chanRoblesvirtualLawlibrary
The PEZA again requested the Province to suspend collecting its alleged real property taxes. 61 The Province denied the request in its
Even assuming that the petition involves pure questions of law, the City contends that the subject matter of the case is of extreme importance letter62 dated January 29, 2004, then served on the PEZA a warrant of levy63 covering the PEZAs real properties located in Mariveles, Bataan.
with [far-reaching] consequence that [its magnitude] would surely shape and determine the course of our nations future. 44 The Court of
Appeals, the City argues, should have resolved the case on the merits. 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 taxes 66 and a notice of sale of real property for unpaid real property tax. 67 The Province
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 finally sent the PEZA a notice of public auction of the latters properties in Mariveles, Bataan. 68chanRoblesvirtualLawlibrary
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.45chanRoblesvirtualLawlibrary On June 14, 2004, the PEZA filed a petition for injunction 69 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 of real property taxes. It added that the notice
Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly demanded real property taxes from the PEZA. The of sale issued by the Province was void because it was not published in a newspaper of general circulation as required by Section 260 of the
City argues that the PEZA should have likewise impleaded these local government units as respondents in its petition for declaratory relief. Local Government Code.70chanRoblesvirtualLawlibrary
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.46chanRoblesvirtualLawlibrary The case was raffled to Branch 115.
47 71
This court ordered the PEZA to comment on the Citys petition for review on certiorari. chanRoblesvirtualLawlibrary In its order 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
At the outset of its comment, the PEZA argues that the Court of Appeals decision dated January 11, 2008 had become final and executory. public auction.
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 City On March 3, 2006, the PEZA and Province both manifested that each would file a memorandum after which the case would be deemed
has no more right to appeal to this court. 48chanRoblesvirtualLawlibrary submitted for decision. The parties then filed their respective memoranda. 74chanRoblesvirtualLawlibrary

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 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
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 from payment of real property taxes. According to the trial court, Sections 193 and 234 of the Local Government Code had withdrawn the real
the appellate court. The Court of Appeals, therefore, correctly dismissed outright the Citys appeal under Rule 50, Section 2 of the Rules of property tax exemptions previously granted to all persons, whether natural or juridical. 76 As to the tax exemptions under Section 51 of the
Court.49chanRoblesvirtualLawlibrary 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.77chanRoblesvirtualLawlibrary
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 The PEZA filed before the Court of Appeals a petition for certiorari 78 with prayer for issuance of a temporary restraining order.
51 of the Special Economic Zone Act of 1995 applied to it. 51chanRoblesvirtualLawlibrary
The Court of Appeals issued a temporary restraining order, enjoining the Province and its Provincial Treasurer from selling PEZA's properties
Considering that the site of the Mactan Economic Zone is a reserved land under Proclamation No. 1811, the PEZA claims that the properties at public auction scheduled on October 17, 2007. 79 It also ordered the Province to comment on the PEZAs petition.
sought to be taxed are lands of public dominion exempt from real property taxes. 52chanRoblesvirtualLawlibrary
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
As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had jurisdiction to hear its petition for declaratory relief sold the PEZAs properties at public auction. Arguing that the act sought to be enjoined was already fait accompli, the Province prayed for the
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 dismissal of the petition for certiorari.
Province of Cavite as respondents considering that their demands came after the PEZA had already filed the petition in
court.54chanRoblesvirtualLawlibrary The PEZA then filed a supplemental petition for certiorari, prohibition, and mandamus 81 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
Facts of G.R. No. 187583 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.
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 The PEZA also filed a motion82 for issuance of an order affirming the temporary restraining order and a writ of preliminary injunction to enjoin
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 the Province from consolidating title over the PEZAs properties.
property taxes under Section 24 of the Special Economic Zone Act of 1995.
In its resolution83 dated January 16, 2008, the Court of Appeals admitted the supplemental petition for certiorari, prohibition, and mandamus. It
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 required the Province to comment on the supplemental petition and to file a memorandum on the PEZAs prayer for issuance of temporary
petition for declaratory relief against the City of Lapu-Lapu pending before the Regional Trial Court, Branch 111, Pasay City as basis. restraining order.

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 Province commented84 on the PEZAs supplemental petition, to which the PEZA replied. 85chanRoblesvirtualLawlibrary
[the Regional Trial Court] of Pasay City. 57 Thus, in its letter58 dated June 27, 2003, the Province notified the PEZA of its real property tax
liabilities for June 1, 1995 to December 31, 2002 totalling ?110,549,032.55. 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.
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 City resolves its petition for declaratory relief. 59chanRoblesvirtualLawlibrary 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
The Province ignored the PEZAs request. On January 20, 2004, the Province served on the PEZA a statement of unpaid real property tax for 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 The Court of Appeals did not err in
jurisdiction to resolve. It, therefore, maintained jurisdiction to resolve the PEZAs petition for certiorari. 88chanRoblesvirtualLawlibrary dismissing the City of Lapu-Lapus
appeal for raising pure questions of law
Although it admitted that appeal, not certiorari, was the PEZAs proper remedy to reverse the trial courts decision, 89 the Court of Appeals
proceeded to decide the petition for certiorari in the broader interest of justice. 90chanRoblesvirtualLawlibrary 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.
The Court of Appeals ruled that the trial court judge gravely abused his discretion in dismissing the PEZAs petition for prohibition. It held that 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
Section 21 of Presidential Decree No. 66 and Section 51 of the Special Economic Zone Act of 1995 granted the PEZA exemption from fact and law may be raised.106chanRoblesvirtualLawlibrary
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 The second mode is through a petition for review before the Court of Appeals where the decision assailed was rendered by the Regional Trial
units.93chanRoblesvirtualLawlibrary 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. 107chanRoblesvirtualLawlibrary
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 third mode is through an appeal by certiorari before this court under Rule 45 where only questions of law shall be
raised.108chanRoblesvirtualLawlibrary
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.
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
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 appeal raises doubt as to the applicable law on a certain set of facts. 110chanRoblesvirtualLawlibrary
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. 98chanRoblesvirtualLawlibrary 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:chanroblesvirtuallawlibrary
The Province reiterates that the PEZA is not exempt from payment of real property taxes. The Province points out that the EPZA, the PEZAs 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
predecessor, had to be categorically exempted from payment of real property taxes. The EPZA, therefore, was not inherently exempt from Appeals raising only questions of law shall be dismissed, issues purely of law not being reviewable by said court. Similarly, an appeal by notice
payment of real property taxes and so is the PEZA. Since Congress omitted from the Special Economic Zone Act of 1995 a provision of appeal instead of by petition for review from the appellate judgment of a Regional Trial Court shall be dismissed.
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. 99chanRoblesvirtualLawlibrary An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court but shall be dismissed outright.

With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax exemptions and benefits, the Province argues that 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
these provisions only apply to business establishments operating within special economic zones, 100 not to the PEZA. not be dismissed but shall be certified to the proper court for resolution:chanroblesvirtuallawlibrary
Sec. 3. Where appealed case erroneously, brought. Where the appealed case has been erroneously brought to the Court of Appeals, it
This court ordered the PEZA to comment on the Provinces petition for review on certiorari. 101chanRoblesvirtualLawlibrary shall not dismiss the appeal, but shall certify the case to the proper court, with a specific and clear statement of the grounds therefor.

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 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
trial court committed grave abuse of discretion in denying its petition for injunction. The PEZA maintains that it is exempt from payment of real March 9, 1990 states that this court retains the option, in the exercise of its sound discretion and considering the attendant circumstances,
property taxes under Section 21 of Presidential Decree No. 66 and Section 51 of the Special Economic Zone Act of 1995. either itself to take cognizance of and decide such issues or to refer them to the Court of Appeals for determination.

The Province filed its reply,103 reiterating its arguments in its petition for review on certiorari. 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. 113chanRoblesvirtualLawlibrary
On the PEZAs motion,104 this court consolidated the petitions filed by the City of Lapu-Lapu and the Province of
Bataan.105chanRoblesvirtualLawlibrary 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
The issues for our resolution are the following: 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
I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapus appeal for raising pure questions of law; relating to the PEZA.115chanRoblesvirtualLawlibrary

II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear, try, and decide the City of Lapu-Lapus petition for The Court of Appeals, therefore, did not err in dismissing the Citys appeal pursuant to Rule 50, Section 2 of the Rules of Court.
declaratory relief;
Nevertheless, considering the important questions involved in this case, we take cognizance of the Citys petition for review on certiorari in the
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 interest of justice.
of Tax Appeals; and
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
IV. Whether the PEZA is exempt from payment of real property taxes. 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 infraction117 and should have directly filed a petition for review on certiorari before this court. Nevertheless, in the
We deny the consolidated petitions. interest of justice and in order to write finis to [the] controversy,118 this court opt[ed] to relax the rules 119 and proceeded to decide the case.
I. This court said:chanroblesvirtuallawlibrary
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 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
dockets of the courts is a laudable objective, it nevertheless must not be met at the expense of substantial justice. 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
The Court has allowed some meritorious cases to proceed despite inherent procedural defects and lapses. This is in keeping with the principle proceeding. The dismissal of the action was, therefore, proper in the light of our ruling in De Borja vs. Villadolid, 47 O.G. (5) p. 2315, and
that rules of procedure are mere tools designed to facilitate the attainment of justice, and that strict and rigid application of rules which should 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
result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided. It is a far better and more prudent breach of a contract, statutes or right, and that it is sufficient to bar such action, that there had been a breach which would constitute
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 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
dispose of the case on technicality and cause grave injustice to the parties, giving a false impression of speedy disposal of cases while existing forms of action or proceeding (1 C.J.S. 1027-1028). 132
actually resulting in more delay, if not a miscarriage of justice.120
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
Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA operates or otherwise administers special economic zones question.133 There must be an actual justiciable controversy or the ripening seeds of one 134 between the parties. The issue between the
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 parties must be ripe for judicial determination. 135 An action for declaratory relief based on theoretical or hypothetical questions cannot be filed
local government units where special economic zones are operated. This case, therefore, should be decided on the merits. for our courts are not advisory courts.136chanRoblesvirtualLawlibrary
II.
In Republic v. Roque,137 this court dismissed respondents petition for declaratory relief for lack of justiciable controversy. According to this
The Regional Trial Court of Pasay had court, [the respondents] fear of prospective prosecution [under the Human Security Act] was solely based on remarks of certain government
no jurisdiction to hear, try, and decide officials which were addressed to the general public.138chanRoblesvirtualLawlibrary
the PEZAs petition for declaratory relief
against the City of Lapu-Lapu 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
Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63 provides:chanroblesvirtuallawlibrary clause].140 According to the court, there was no justiciable controversy and ordered the dismissal of the Social Justice Societys petition for
SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, or whose rights are declaratory relief. This court explained:chanroblesvirtuallawlibrary
affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation, thereof, Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the petitioner and his co-respondents below
bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his had endorsed or threatened to endorse a candidate or candidates for elective offices; and that such actual or threatened endorsement "will
rights or duties, thereunder. 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 of serious erosion of the peoples faith in the electoral process[;] and reinforc[ing] their belief that
An action for reformation of an instrument, to quiet title to real property or remove clouds therefrom, or to consolidate ownership under Article religious leaders determine the ultimate result of elections," which would then be violative of the separation clause.
1607 of the Civil Code, may be brought under this Rule.
Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to constitute a justiciable controversy.
The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the subject matter of litigation in an action for The Petition does not even allege any indication or manifest intent on the part of any of the respondents below to champion an electoral
declaratory relief being incapable of pecuniary estimation. 121 Section 19 of the Judiciary Reorganization Act of 1980 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
provides:chanroblesvirtuallawlibrary does not give rise to an actionable right.
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive original jurisdiction:
Obviously, there is no factual allegation that SJS rights are being subjected to any threatened, imminent and inevitable violation that should be
(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.] 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.
Consistent with the law, the Rules state that a petition for declaratory relief is filed in the appropriate Regional Trial Court. 122
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
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 an opinion of the trial court on whether the speculated acts of religious leaders endorsing elective candidates for political offices violated the
declaration of rights and duties, under any of the following subject matters: a deed, will, contract or other written instrument, statute, executive 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
order or regulation, ordinance, or any other governmental regulation. 123 However, a declaratory judgment may issue only if there has been no stoppage of any threatened violation of its declared rights. Courts, however, are proscribed from rendering an advisory opinion. 141
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 In sum, a petition for declaratory relief must satisfy six requisites:chanroblesvirtuallawlibrary
preferred over an action for declaratory relief. 126chanRoblesvirtualLawlibrary [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
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 been no breach of the documents in question; fourth, there must be an actual justiciable controversy or the "ripening seeds" of one between
accreditation under oath before they were allowed to certify financial statements submitted to the bank. Among those financial statements the persons whose interests are adverse; fifth, the issue must be ripe for judicial determination; and sixth, adequate relief is not available through
Central Bank disallowed were those certified by accountant Felipe B. Ollada. 128chanRoblesvirtualLawlibrary other means or other forms of action or proceeding.142 (Emphases omitted)

Claiming that the requirement restrained the legitimate pursuit of ones trade, 129 Ollada filed a petition for declaratory relief against the Central 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
Bank. 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,
This court ordered the dismissal of Olladas petition without prejudice to [his] seeking relief in another appropriate action. 130 According to this had no jurisdiction over the petition for declaratory relief.
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 There are several aspects of jurisdiction.143 Jurisdiction over the subject matter is the power to hear and determine cases of the general class
proceeding.131 This court explained:chanroblesvirtuallawlibrary 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
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 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
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 sought as alleged in the complaint are examined to determine whether a court had jurisdiction over the subject matter. 147 Any decision
rendered by a court without jurisdiction over the subject matter of the action is void. 148chanRoblesvirtualLawlibrary 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
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 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
in a particular action to the judgment and other rulings rendered in the action. 149 A court automatically acquires jurisdiction over the person of prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal.
the plaintiff upon the filing of the initiatory pleading. 150 With 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 Payment under protest and appeal to the Local Board of Assessment Appeals are successive administrative remedies to a taxpayer who
actions in personam or those actions based on a partys personal liability.152 The proceedings in an action in personam are void if the court questions the correctness of an assessment. 160 The Local Board Assessment Appeals shall not entertain an appeal without the action of the
had no jurisdiction over the person of the defendant. 153chanRoblesvirtualLawlibrary local assessor161 on the protest.

Jurisdiction over the res or the thing under litigation is acquired either by the seizure of the property under legal process, whereby it is brought If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals, the taxpayer may appeal with the Central Board
into actual custody of the law; or as a result of the institution of legal proceedings, in which the power of the court is recognized and made of Assessment Appeals within 30 days from receipt of the Local Boards decision:chanroblesvirtuallawlibrary
effective.154 Jurisdiction over the res is necessary in actions in rem or those actions directed against the thing or property or status of a SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall decide the appeal within one hundred twenty (120)
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 days from the date of receipt of such appeal. The Board, after hearing, shall render its decision based on substantial evidence or such relevant
no jurisdiction over the thing under litigation. 156chanRoblesvirtualLawlibrary evidence on record as a reasonable mind might accept as adequate to support the conclusion.

In the present case, the Regional Trial Court had no jurisdiction over the subject matter of the action, specifically, over the remedy sought. As (b) In the exercise of its appellate jurisdiction, the Board shall have the power to summon witnesses, administer oaths, conduct ocular
this court explained in Malana v. Tappa:157chanRoblesvirtualLawlibrary inspection, take depositions, and issue subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted solely for the
. . . an action for declaratory relief presupposes that there has been no actual breach of the instruments involved or of rights arising purpose of ascertaining the facts without necessarily adhering to technical rules applicable in judicial proceedings.
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 (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
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 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
refers. A petition for declaratory relief gives a practical remedy for ending controversies that have not reached the state where another relief is his duty to notify the owner of the property or the person having legal interest therein of such fact using the form prescribed for the
immediately available; and supplies the need for a form of action that will set controversies at rest before they lead to a repudiation of 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
obligations, an invasion of rights, and a commission of wrongs. 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)
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 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
infringed or transgressed before the institution of the action.158 (Emphasis supplied) 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.
The trial court should have dismissed the PEZAs petition for declaratory relief for lack of jurisdiction.
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.
Once an assessment has already been issued by the assessor, the proper remedy of a taxpayer depends on whether the assessment was Without resorting to the administrative remedies under the Local Government Code, Ty filed before the Regional Trial Court a petition, praying
erroneous or illegal. 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
An erroneous assessment presupposes that the taxpayer is subject to the tax but is disputing the correctness of the amount assessed. 159 of market values be jointly prepared by the provincial, city, and municipal assessors of the municipalities within the Metropolitan Manila Area.
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 This court ruled that the assessment was illegal for having been issued without authority of the Municipal Assessor. Reconciling provisions of
assessment, the taxpayer must exhaust the administrative remedies provided under the Local Government Code before resorting to judicial the Real Property Tax Code and the Local Government Code, this court held that the schedule of market values must be jointly prepared by
action. the provincial, city, and municipal assessors of the municipalities within the Metropolitan Manila Area.

The taxpayer must first pay the real property tax under protest. Section 252 of the Local Government Code 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
provides:chanroblesvirtuallawlibrary this court, payment under protest is required only where there is a question as to the reasonableness of the amount assessed. 164 As to
SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on appeals before the Local and Central Board of Assessment Appeals, they are fruitful only where questions of fact are
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 involved.165chanRoblesvirtualLawlibrary
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. 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
(b) The tax or a portion thereof paid under protest, shall be held in trust by the treasurer concerned. provided under the Local Government Code.

(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 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
protestant, or applied as tax credit against his existing or future tax liability. the proper remedy once a notice of assessment was already issued.

(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:chanroblesvirtuallawlibrary
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 is enjoined 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 esse or the existence of a right to be protected; and (2) the act against which the injunction is directed to constitute a petition for review on certiorari under Rule 45 of the Rules of Court. An appeal by certiorari, which continues the proceedings commenced
violation of such right.169chanRoblesvirtualLawlibrary before the lower courts,191 is filed to reverse or modify judgments or final orders. 192 Under the Rules, an appeal by certiorari must 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
We note, however, that the City confused the concepts of jurisdiction and venue in contending that the Regional Trial Court of Pasay had no reconsideration.193chanRoblesvirtualLawlibrary
jurisdiction because the real properties involved in this case are located in the City of Lapu-Lapu.
A petition for certiorari under Rule 65, on the other hand, is an independent and original action filed to set aside proceedings conducted
On the one hand, jurisdiction is the power to hear and determine cases of the general class to which the proceedings in question 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
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 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
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 be filed within 60 days from notice of the judgment, order, or resolution. 196chanRoblesvirtualLawlibrary
appeal.173 When a case is filed with a court which has no jurisdiction over the action, the court shall motu proprio dismiss the
case.174chanRoblesvirtualLawlibrary 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. Appeal is the proper remedy even if the
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, 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
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 certiorari cannot be filed.
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
proprio dismiss the case.178chanRoblesvirtualLawlibrary 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,
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 therefore, is appeal.
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 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
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- 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
resident defendant where he may be found, at the election of the plaintiff. 180chanRoblesvirtualLawlibrary 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 have raised this ground in an appeal filed within 15 days from notice of the assailed
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 resolution.
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. 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
However, whatever objections the City has against the venue of the PEZAs action for declaratory relief are already deemed waived. 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
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 an action is determined by the allegations of the complaint or the petition and the character of the relief sought, 201 a petition which actually
that the venue was improperly laid. Neither did the City raise this objection in its answer. avers errors of judgment rather than errors than that of jurisdiction 202 may be considered a petition for review.

In any event, the law sought to be judicially interpreted in this case had already been breached. The Regional Trial Court of Pasay, therefore, However, suspending the application of the Rules has its disadvantages. Relaxing procedural rules may reduce the effective enforcement of
had no jurisdiction over the PEZAs petition for declaratory relief against the City. substantive rights,203 leading to arbitrariness, caprice, despotism, or whimsicality in the settlement of disputes. 204 Therefore, for this court to
III. suspend the application of the Rules, the accomplishment of substantial justice must outweigh the importance of predictability of court
procedures.

The Court of Appeals had no jurisdiction The PEZAs petition for certiorari may be treated as an appeal. First, the petition for certiorari was filed within the 15-day reglementary period
over the PEZAs petition for certiorari 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
against the Province of Bataan October 3, 2007206 when the PEZA had notice of the trial courts order denying the motion for reconsideration.

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 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
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 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
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 1995.207chanRoblesvirtualLawlibrary
on their respective claims and contentions, 186 the judgment is on the merits.
Third, there is sufficient reason to relax the rules given the importance of the substantive issue presented in this case.
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, 188 was originally a remedy in the common law. This However, the PEZAs petition for certiorari was filed before the wrong court. The PEZA should have filed its petition before the Court of Tax
court discussed the history of the remedy of certiorari in Spouses Delos Santos v. Metropolitan Bank and Trust Appeals.
Company:189chanRoblesvirtualLawlibrary
In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out of Chancery, or the Kings Bench, The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases decided by Regional Trial Courts. Section 7, paragraph
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 (a)(3) of Republic Act No. 1125, as amended by Republic Act No. 9282, provides:chanroblesvirtuallawlibrary
speedy justice, for the writ would enable the superior court to determine from an inspection of the record whether the inferior courts judgment Sec. 7. Jurisdiction. The [Court of Tax Appeals] shall exercise:
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 a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
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
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[.] 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
The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended, include cases involving real property was an appeal to the Court of Tax Appeals.
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, 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
fees, and charges.209chanRoblesvirtualLawlibrary 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. 218chanRoblesvirtualLawlibrary
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 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,
real property taxes:chanroblesvirtuallawlibrary 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
Sec. 7. Jurisdiction. The [Court of Tax Appeals] shall exercise: petition for injunction became final and executory.
IV.
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

. . . . The remedy of a taxpayer depends on the

stage in which the local government unit is
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases involving the assessment and enforcing its authority to impose real
taxation of real property originally decided by the provincial or city board of assessment appeals[.] property taxes

This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking cognizance of trial court decisions involving the The proper remedy of a taxpayer depends on the stage in which the local government unit is enforcing its authority to collect real property
collection of real property tax cases. Sections 256210 and 266211 of the Local Government Code expressly allow local government units to file taxes. For the guidance of the members of the bench and the bar, we reiterate the taxpayers remedies against the erroneous or illegal
in any court of competent jurisdiction civil actions to collect basic real property taxes. Should the trial court rule against them, local assessment of real property taxes.
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. 212chanRoblesvirtualLawlibrary 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
We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the exclusive original jurisdiction over petitions for certiorari 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
assailing interlocutory orders issued by Regional Trial Courts in a local tax case. We explained in The City of Manila v. Hon. Grecia- 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
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 The Local Board of Assessment Appeals has 120 days to decide the appeal. 222chanRoblesvirtualLawlibrary
amended, the tax courts judicial power as defined in the Constitution 215 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 If the taxpayer is unsatisfied with the Local Boards decision, the taxpayer may appeal before the Central Board of Assessment Appeals within
jurisdiction in cases falling within the exclusive appellate jurisdiction of the tax court. 216 We further elaborated:chanroblesvirtuallawlibrary 30 days from receipt of the Local Boards decision. 223chanRoblesvirtualLawlibrary
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 The decision of the Central Board of Assessment Appeals is appealable before the Court of Tax Appeals En Banc. 224 The appeal before the
transfer also such power as is deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason Court of Tax Appeals shall be filed following the procedure under Rule 43 of the Rules of Court. 225chanRoblesvirtualLawlibrary
why the transfer should only be considered as partial, not total.
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.226chanRoblesvirtualLawlibrary

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA, this Court would be confirming In case of an illegal assessment where the assessment was issued without authority, exhaustion of administrative remedies is not necessary
the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over basically the same subject matter precisely the split-jurisdiction and the taxpayer may directly resort to judicial action.227 The taxpayer shall file a complaint for injunction before the Regional Trial Court 228 to
situation which is anathema to the orderly administration of justice. The Court cannot accept that such was the legislative motive, especially enjoin the local government unit from collecting real property taxes.
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 party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a petition for certiorari, before the Court of Tax
the CA that since appellate jurisdiction over private respondents' complaint for tax refund is vested in the CTA, it follows that a petition for 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
certiorari seeking nullification of an interlocutory order issued in the said case should, likewise, be filed with the same court. To rule otherwise notice of the trial courts decision.
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. 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.230chanRoblesvirtualLawlibrary
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 In case the local government unit has issued a notice of delinquency, the taxpayer may file a complaint for injunction to enjoin the impending
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 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
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 first deposit with the court the amount for which the real property was sold, together with interest of 2% per month from the date of sale to the
cases filed in and decided by the RTC carries with it the power to issue a writ of certiorari when necessary in aid of such appellate jurisdiction. 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
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 Regional Trial Court in these cases shall be appealable before the Court of Tax Appeals, 232 and the latters decisions appealable before this
complement to, its appellate jurisdiction to review, by appeal, the final orders and decisions of the RTC, in order to have complete supervision court through a petition for review on certiorari under Rule 45 of the Rules of Court.233chanRoblesvirtualLawlibrary
over the acts of the latter.217 (Citations omitted) V.
 (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands,
The PEZA is exempt from payment buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;
of real property taxes
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled
The jurisdictional errors in this case render these consolidated petitions moot. We do not review void decisions rendered without jurisdiction. corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

However, the PEZA alleged that several local government units, including the City of Baguio and the Province of Cavite, have issued their (d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and
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. (e) Machinery and equipment used for pollution control and environmental protection.

In the interest of judicial economy 234 and avoidance of conflicting decisions involving the same issues, 235 we resolve the substantive issue of Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons,
whether the PEZA is exempt from payment of real property taxes. whether natural or juridical, including all government-owned or -controlled corporations are hereby withdrawn upon the effectivity of this Code.
(Emphasis supplied)
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 For persons granted tax exemptions or incentives before the effectivity of the Local Government Code, Section 193 withdrew these tax
proportion of the value of the property.237 Under the law, provinces, cities, and municipalities within the Metropolitan Manila Area have the exemption privileges. These persons consist of both natural and juridical persons, including government-owned or controlled
power to levy real property taxes within their respective territories. 238chanRoblesvirtualLawlibrary corporations:chanroblesvirtuallawlibrary
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this code, tax exemptions or incentives granted to or
The general rule is that real properties are subject to real property taxes. This is true especially since the Local Government Code has presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water
withdrawn exemptions from real property taxes of all persons, whether natural or juridical:chanroblesvirtuallawlibrary districts, cooperatives duly registered under R.A. 6938, non stock and non profit hospitals and educational institutions, are hereby withdrawn
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real property tax: upon effectivity of this Code.

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.
granted, for consideration or otherwise, to a taxable person;
Nevertheless, local government units may grant tax exemptions under such terms and conditions as they may deem
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or religious cemeteries and all lands, necessary:chanroblesvirtuallawlibrary
buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; 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.
(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; 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.
(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and
Ownership exemptions are exemptions based on the ownership of the real property. The exemptions of real property owned by the Republic
(e) Machinery and equipment used for pollution control and environmental protection. of the Philippines, provinces, cities, municipalities, barangays, and registered cooperatives fall under this
classification.241chanRoblesvirtualLawlibrary
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 Character exemptions are exemptions based on the character of the real property. Thus, no real property taxes may be levied on charitable
Code. (Emphasis supplied) institutions, houses and temples of prayer like churches, parsonages, or convents appurtenant thereto, mosques, and non profit or religious
cemeteries.242chanRoblesvirtualLawlibrary
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]. 239chanRoblesvirtualLawlibrary 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
The exceptions to the rule are provided in the Local Government Code. Under Section 133(o), local government units have no power to levy actually, directly and exclusively used by local water districts or by government-owned or controlled corporations engaged in the supply and
taxes of any kind on the national government, its agencies and instrumentalities and local government units:chanroblesvirtuallawlibrary distribution of water and/or generation and transmission of electric power; and (3) machinery and equipment used for pollution control and
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of taxing environmental protection.243chanRoblesvirtualLawlibrary
powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
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.244chanRoblesvirtualLawlibrary
V. (A)
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.
The PEZA is an instrumentality of the national government
Specifically on real property taxes, Section 234 enumerates the persons and real property exempt from real property
taxes:chanroblesvirtuallawlibrary An instrumentality is any agency of the National Government, not integrated within the department framework, vested with special functions or
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real property tax: jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter.245chanRoblesvirtualLawlibrary
(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; 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. 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.
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 Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines the term government-owned or controlled
attachment:chanroblesvirtuallawlibrary corporation:chanroblesvirtuallawlibrary
SEC. 38. Definition of Administrative Relationship. Unless otherwise expressly stated in the Code or in other laws defining the special 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
relationships of particular agencies, administrative relationships shall be categorized and defined as follows: different meaning:

. . . . . . . .

(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[.]
(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.

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:252chanRoblesvirtualLawlibrary
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.256chanRoblesvirtualLawlibrary
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 charters 263to 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:chanroblesvirtuallawlibrary
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. 266chanRoblesvirtualLawlibrary
To be considered a government-owned or controlled corporation, the entity must have been organized as a stock or non-stock
corporation.267chanRoblesvirtualLawlibrary

The PEZA also administers its own funds and operates autonomously, with the PEZA Board formulating and approving the PEZAs annual Government instrumentalities, on the other hand, are also created by law but partake of sovereign functions. When a government entity
budget.257 Appointments and other personnel actions in the PEZA are also free from departmental interference, with the PEZA Board having performs sovereign functions, it need not meet the test of economic viability. In Manila International Airport Authority v. Court of Appeals,268 this
the exclusive and final authority to promote, transfer, assign and reassign officers of the PEZA. 258chanRoblesvirtualLawlibrary court explained:chanroblesvirtuallawlibrary
In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the
As an instrumentality of the national government, the PEZA is vested with special functions or jurisdiction by law. Congress created the PEZA test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State
to operate, administer, manage and develop special economic zones in the Philippines. 259 Special economic zones are areas with highly must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire
developed or which have the potential to be developed into agro-industrial, industrial tourist/recreational, commercial, banking, investment and operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987
financial centers.260 By operating, administering, managing, and developing special economic zones which attract investments and promote Constitution.
use of domestic labor, the PEZA carries out the following policy of the Government:chanroblesvirtuallawlibrary
SECTION 2. Declaration of Policy. It is the declared policy of the government to translate into practical realities the following State policies Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but
and mandates in the 1987 Constitution, namely: 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
(a) The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed creates through special charters corporations that perform economic or commercial activities, such entities known as "government-owned
investments. (Sec. 20, Art. II) or controlled corporations" must meet the test of economic viability because they compete in the market place.

(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)
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as
In pursuance of these policies, the government shall actively encourage, promote, induce and accelerate a sound and balanced industrial, follows:chanroblesvirtuallawlibrary
economic and social development of the country in order to provide jobs to the people especially those in the rural areas, increase their MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which
productivity and their individual and family income, and thereby improve the level and quality of their living condition through the establishment, this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation
among others, of special economic zones in suitable and strategic locations in the country and through measures that shall effectively attract loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the
legitimate and productive foreign investments.261 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
Being an instrumentality of the national government, the PEZA cannot be taxed by local government units. 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 The following sections of the Special Economic Zone Act of 1995 provide for the PEZAs powers, functions, and
enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, responsibilities:chanroblesvirtuallawlibrary
Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the SEC. 5. Establishment of ECOZONES. To ensure the viability and geographical dispersal of ECOZONES through a system of prioritization,
insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good. the following areas are initially identified as ECOZONES, subject to the criteria specified in Section 6:

.... . . . .

Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public The metes and bounds of each ECOZONE are to be delineated and more particularly described in a proclamation to be issued by the
services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non- President of the Philippines, upon the recommendation of the Philippine Economic Zone Authority (PEZA), which shall be established under
economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the this Act, in coordination with the municipal and / or city council, National Land Use Coordinating Committee and / or the Regional Land Use
public.269(Emphases and citations omitted) Committee.

The law created the PEZAs charter. Under the Special Economic Zone Act of 1995, the PEZA was established primarily to perform the SEC. 6. Criteria for the Establishment of Other ECOZONES. In addition to the ECOZONES identified in Section 5 of this Act, other areas
governmental function of operating, administering, managing, and developing special economic zones to attract investments and provide may be established as ECOZONES in a proclamation to be issued by the President of the Philippines subject to the evaluation and
opportunities for preferential use of Filipino labor. recommendation of the PEZA, based on a detailed feasibility and engineering study which must conform to the following criteria:

Under its charter, the PEZA was created a body corporate endowed with some corporate powers. However, it was not organized as a (a) The proposed area must be identified as a regional growth center in the Medium-Term Philippine Development Plan or by the Regional
stock270 or non-stock271 corporation. Nothing in the PEZAs charter provides that the PEZAs capital is divided into shares. 272 The PEZA also Development Council;
has no members who shall share in the PEZAs profits.
(b) The existence of required infrastructure in the proposed ECOZONE, such as roads, railways, telephones, ports, airports, etc., and the
The PEZA does not compete with other economic zone authorities in the country. The government may even subsidize the PEZAs suitability and capacity of the proposed site to absorb such improvements;
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. 273chanRoblesvirtualLawlibrary (c) The availability of water source and electric power supply for use of the ECOZONE;

The PEZA, therefore, need not be economically viable. It is not a government-owned or controlled corporation liable for real property taxes. (d) The extent of vacant lands available for industrial and commercial development and future expansion of the ECOZONE as well as of lands
V. (B) adjacent to the ECOZONE available for development of residential areas for the ECOZONE workers;

The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA (e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and around the ECOZONE;

The PEZAs predecessor, the EPZA, was declared non-profit in character with all its revenues devoted for its development, improvement, and (f) The area must have a significant incremental advantage over the existing economic zones and its potential profitability can be established;
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:chanroblesvirtuallawlibrary (g) The area must be strategically located; and
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 (h) The area must be situated where controls can easily be established to curtail smuggling activities.
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:ChanRoblesVirtualawlibrary 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
(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 to curtail smuggling activities: Provided, finally, That after five (5) years the area must have attained a substantial degree of development, the
provinces, cities, municipalities and other government agencies and instrumentalities[.] indicators of which shall be formulated by the PEZA.

The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the PEZA from payment of real property taxes. 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
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 developed, as much as possible, into a decentralized, self-reliant and self-sustaining industrial, commercial/trading, agro-industrial, tourist,
of 1995 explicitly exempting the PEZA is unnecessary. The PEZA assumed the real property exemption of the EPZA under Presidential banking, financial and investment center with minimum government intervention. Each ECOZONE shall be provided with transportation,
Decree No. 66. telecommunications, and other facilities needed to generate linkage with industries and employment opportunities for its own inhabitants and
those of nearby towns and cities.
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 ECOZONE shall administer itself on economic, financial, industrial, tourism development and such other matters within the exclusive
the PEZA to assume the EPZAs powers, functions, and responsibilities under Presidential Decree No. 66 not inconsistent with the Special competence of the national government.
Economic Zone Act of 1995:chanroblesvirtuallawlibrary
SECTION 1. Assumption of EPZAs Powers and Functions by PEZA. All the powers, functions and responsibilities of EPZA as provided under The ECOZONE may establish mutually beneficial economic relations with other entities within the country, or, subject to the administrative
its Charter, Presidential Decree No. 66, as amended, insofar as they are not inconsistent with the powers, functions and responsibilities of the guidance of the Department of Foreign Affairs and/or the Department of Trade and Industry, with foreign entities or enterprises.
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. 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 subpoena witnesses, administer oaths, and compel the production of books, papers, and other evidences: Provided, That to arrive at the truth,
limits provided for in the Act. 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
SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. The ECOZONE shall be managed and operated by the administrator of the ECOZONE concerned.
PEZA as separate customs territory.
SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of development of each ECOZONE established pursuant to this
The PEZA is hereby vested with the authority to issue certificate of origin for products manufactured or processed in each ECOZONE in Act shall be formulated by the PEZA, in coordination with the Department of Trade and Industry and the National Economic and Development
accordance with the prevailing rules or origin, and the pertinent regulations of the Department of Trade and Industry and/or the Department of Authority; Provided, That such development strategy is consistent with the priorities of the national government as outlined in the medium-term
Finance. 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
SEC. 9. Defense and Security. The defense of the ECOZONE and the security of its perimeter fence shall be the responsibility of the in Republic Act No. 6957 (the build-operate-transfer law).
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. SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate authorities and neighboring cities and
The PEZA may provide and establish the ECOZONES internal security and firefighting forces.
municipalities, immediately conduct a survey of the physical, natural assets and potentialities of the ECOZONE areas under its
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 jurisdiction.
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. 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 shall issue working visas renewable every two (2) years to foreign executives and other aliens, processing highly-technical skills the PEZA.
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 However, in order to protect the domestic industry, there shall be a negative list of Industries that will be drawn up by the PEZA. Enterprises
thereof. 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.
SEC. 13. General Powers and Functions of the Authority. The PEZA shall have the following powers and functions:
The PEZA, in coordination with the Department of Trade and Industry and the Bureau of Customs, shall jointly issue the necessary
(a) To operate, administer, manage and develop the ECOZONE according to the principles and provisions set forth in this Act; implementing rules and guidelines for the effective Implementation of this section.

(b) To register, regulate and supervise the enterprises in the ECOZONE in an efficient and decentralized manner; 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
(c) To coordinate with local government units and exercise general supervision over the development, plans, activities and operations of the adjacent to the ECOZONE for:
ECOZONES, industrial estates, export processing zones, free trade zones, and the like;
a. Consolidation of lands for zone development purposes;
(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, b. Acquisition of right of way to the ECOZONE; and
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 c. The protection of watershed areas and natural assets valuable to the prosperity of the ECOZONE.
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
(e) To create, operate and/or contract to operate such agencies and functional units or offices of the authority as it may deem necessary; 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
(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; 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
and otherwise carry out its duties and functions as provided for in this Act; employment in the project being undertaken.

(g) To coordinate the formulation and preparation of the development plans of the different entities mentioned above; 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.
(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 The PEZA shall, in coordination with the Department of Transportation and Communications, maintain a shipping register for each ECOZONE
and implementation; and as a business register of convenience for ocean-going vessels and issue related certification.

(i) To monitor and evaluate the development and requirements of entities in subsection (a) and recommend to the local government units or Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the ECOZONE, subject only to such reasonable requirement
other appropriate authorities the location, incentives, basic services, utilities and infrastructure required or to be made available for said as may be prescribed by the PEZA In coordination with the appropriate agencies of the national government.
entities.
SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate agencies, shall take concrete and appropriate steps and
SEC. 17. Investigation and Inquiries. Upon a written formal complaint made under oath, which on its face provides reasonable basis to enact the proper measure for the protection of the local environment.
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 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 considering that the PEZA is already exempt by virtue of Section 133(o) of the Local Government Code.
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. 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
SEC. 35. Registration of Business Enterprises. - Business enterprises within a designated ECOZONE shall register with the PEZA to avail of government from payment of real property taxes. 275 It was necessary to put an exempting provision in the EPZAs charter.
all incentives and benefits provided for in this Act.
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
SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for the purpose of facilitating the registration of new 24 of the Special Economic Zone Act of 1995 provides:chanroblesvirtuallawlibrary
enterprises in the ECOZONE. Thus, all appropriate government agencies that are Involved In registering, licensing or issuing permits to Sec. 24. Exemption from National and Local Taxes. Except for real property taxes on land owned by developers, no taxes, local and
investors shall assign their representatives to the ECOZONE to attend to Investors requirements. 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:chanroblesvirtuallawlibrary
SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the Department of Tabor and Employment, shall prescribe a master (a) Three percent (3%) to the National Government;
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. (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)
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 Tax exemptions provided under Section 24 apply only to business establishments operating within economic zones. Considering that the
migrant workers. PEZA is not a business establishment but an instrumentality performing governmental functions, Section 24 is inapplicable to the PEZA.

SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the value of training expenses incurred in developing Also, contrary to the PEZAs claim, developers of economic zones, whether public or private developers, are liable for real property taxes on
skilled or unskilled labor or for managerial or other management development programs incurred by enterprises in the ECOZONE can be lands they own. Section 24 does not distinguish between a public and private developer. Thus, courts cannot distinguish.276 Unless the public
deducted from the national government's share of three percent (3%) as provided In Section 24. 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.
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. 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
SEC. 43. Relationship with the Regional Development Council. - The PEZA shall determine the development goals for the ECOZONE within Code. As this court said in Manila International Airport Authority, there must be express language in the law empowering local governments to
the framework of national development plans, policies and goals, and the administrator shall, upon approval by the PEZA Board, submit the tax national government instrumentalities. Any doubt whether such power exists is resolved against local
ECOZONE plans, programs and projects to the regional development council for inclusion in and as inputs to the overall regional development governments.277chanRoblesvirtualLawlibrary
plan. V. (C)

SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the local government units comprising the ECOZONE Real properties under the PEZAs title are owned by the Republic of the Philippines
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
Under Section 234(a) of the Local Government Code, real properties owned by the Republic of the Philippines are exempt from real property
Code of 1991. taxes:chanroblesvirtuallawlibrary
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real property tax:
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. (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[.]
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 Properties owned by the state are either property of public dominion or patrimonial property. Article 420 of the Civil Code of the Philippines
Conversion Development Authority and those areas identified under Republic Act No. 7227, are hereby transferred to the PEZA as the holding enumerates property of public dominion:chanroblesvirtuallawlibrary
agency. They are hereby detached from their mother agencies and attached to the PEZA for policy, program and operational supervision. Art. 420. The following things are property of public dominion:

The Boards of the affected government-owned industrial estates shall be phased out and only the management level and an appropriate (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores,
number of personnel shall be retained. roadsteads, and others of similar character;

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 they are 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
(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:chanroblesvirtuallawlibrary
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:chanroblesvirtuallawlibrary Even the PEZAs lands and buildings whose beneficial use have been granted to other persons may not be taxed with real property taxes.
Art. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. 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
Patrimonial properties are also properties of the state, but the state may dispose of its patrimonial property similar to private persons disposing Economic Zone Act of 1995, no taxes, whether local or national, shall be imposed on all business establishments operating within the
of their property. Patrimonial properties are within the commerce of man and are susceptible to prescription, unless otherwise economic zones:chanroblesvirtuallawlibrary
provided.280chanRoblesvirtualLawlibrary 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
In this case, the properties sought to be taxed are located in publicly owned economic zones. These economic zones are property of public business enterprises within the ECOZONE shall be paid and remitted as follows:
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 a. Three percent (3%) to the National Government;
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 public use either by law or presidential proclamation. 284 Since no law or presidential b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurers office of the municipality or city where
proclamation has been issued withdrawing the site of the Mactan Economic Zone from public use, the property remains reserved land. the enterprise is located.292(Emphasis supplied)

As for the Bataan Economic Zone, the law consistently characterized the property as a port. Under Republic Act No. 5490, Congress declared 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
Mariveles, Bataan a principal port of entry 285 to serve as site of a foreign trade zone where foreign and domestic merchandise may be establishments operating within the Mactan Economic Zone:chanroblesvirtuallawlibrary
brought in without being subject to customs and internal revenue laws and regulations of the Philippines. 286 Section 4 of Republic Act No. SEC. 24. Exemption from National and Local Taxes. Except for real property on land owned by developers, no taxes, local and national, shall
5490 provided that the foreign trade zone in Mariveles, Bataan shall at all times remain to be owned by the be imposed on business establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all
Government:chanroblesvirtuallawlibrary business enterprises within the ECOZONE shall be paid and remitted as follows:
SEC. 4. Powers and Duties. The Foreign Trade Zone Authority shall have the following powers and duties:
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 a. Three percent (3%) to the National Government;
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 b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurers office of the municipality or city where
for the purpose of this Act[.] (Emphasis supplied) the enterprise is located.293(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. 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
9728 then converted the Bataan Economic Zone into the Freeport Area of Bataan. 288chanRoblesvirtualLawlibrary Freeport Area of Bataan:chanroblesvirtuallawlibrary
Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No taxes, local and national, shall be imposed on
A port of entry, where imported goods are unloaded then introduced in the market for public consumption, is considered property for public business establishments operating within the FAB. In lieu thereof, said business establishments shall pay a five percent (5%) final tax on their
use. Thus, Article 420 of the Civil Code classifies a port as property of public dominion. The Freeport Area of Bataan, where the government gross income earned in the following percentages:
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. (a) One per centum (1%) to the National Government;

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. (b) One per centum (1%) to the Province of Bataan;
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:chanroblesvirtuallawlibrary (c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and
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: (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 local government units comprising economic zones shall retain their basic autonomy and
(2) For property belonging to the Republic of the Philippines, but titled in the name of any political subdivision or of any corporate agency identity.295chanRoblesvirtualLawlibrary
or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)
All told, the PEZA is an instrumentality of the national government. Furthermore, the lands owned by the PEZA are real properties owned by
In Manila International Airport Authority, this court explained:chanroblesvirtuallawlibrary the Republic of the Philippines. The City of Lapu-Lapu and the Province of Bataan cannot collect real property taxes from the
[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 PEZA.chanrobleslaw
prohibits local governments from imposing [t]axes, fess or charges of any kind on the National Government, its agencies
and instrumentalities x x x. The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of WHEREFORE, the consolidated petitions are DENIED.
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 SO ORDERED.cralawlawlibrary
and continue to be exempt from real estate tax.
Carpio, (Chairperson), Del Castillo, Mendoza, and Reyes,*JJ., concur.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when G.R. No. 155650 July 20, 2006
title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
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 vs.
the Republic loses its tax exemption only if the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG PANGLUNGSOD NG
. . .290 (Emphasis in the original; italics supplied) PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF PARAAQUE, respondents.
DECISION On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease
CARPIO, J .: and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court
The Antecedents issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction.
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paraaque City On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the hearing, MIAA,
Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909 1 and respondent City of Paraaque, and the Solicitor General subsequently submitted their respective Memoranda.
2982 amended the MIAA Charter. MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that
As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The
transferred to MIAA approximately 600 hectares of land, 3 including the runways and buildings ("Airport Lands and Buildings") then under the MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and
Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and
sale or any other mode unless specifically approved by the President of the Philippines.5 Buildings are thus inalienable and are not subject to real estate tax by local governments.
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local 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
Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the
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 Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax
already due. 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
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. creditor.
MIAA's real estate tax delinquency is broken down as follows: Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-
TAX DECLARATION TAXABLE YEAR TAX DUE PENALTY TOTAL 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
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49 and Buildings are exempt from real estate tax.
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00 Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos 8 where we held that the Local Government Code
has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24 estate tax.
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99 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.
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
If so exempt, then the real estate tax assessments issued by the City of Paraaque, and all proceedings taken pursuant to such assessments,
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00 are void. In such event, the other issues raised in this petition become moot.
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50 The Court's Ruling
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00 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
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00 local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42 1. MIAA is Not a Government-Owned or Controlled Corporation
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75 Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim
#9476101 for P28,676,480.00 that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in Section 234(e) of the Local Government
#9476103 for P49,115.006 Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a)
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 of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.
Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-
real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned
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 or controlled corporation as follows:
Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA SEC. 2. General Terms Defined. x x x x
Charter is the proof that MIAA is exempt from real estate tax. (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its
or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and 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
auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878. capital stock: x x x. (Emphasis supplied)
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock
Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or
filed on 5 December 2002 the present petition for review.7 voting shares. Section 10 of the MIAA Charter9provides:
Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and SECTION 10. Capital. The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half
Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall. The City of Paraaque Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:
published the notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation in the (a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which
Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly
a.m., at the Legislative Session Hall Building of Paraaque City. with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover
for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents the City of Paraaque, City Mayor of of the assets and other properties;
Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of Paraaque ("respondents") (b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum (70%) of the unremitted share of the
from auctioning the Airport Lands and Buildings. National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended,
shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the
Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code 10 defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized
to distribute to the holders of such shares dividends x x x. " MIAA has capital but it is not divided into shares of stock. MIAA has no
stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as
"one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have
members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates
MIAA to remit 20% of its annual gross operating income to the National Treasury. 11 This prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional,
cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers."
MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public
use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then
is the legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, 12 police authority13 and the
levying of fees and charges.14 At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this Executive Order." 15
Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National
Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA
into a "separate and autonomous body"16 will make its operation more "financially viable."17
Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a
necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan
International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these
government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section
2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government
corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following :
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.
(Emphasis and underscoring supplied)
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 use the Airport Lands and
Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law
governing the classification and disposition of lands of the public domain other than timber and mineral lands," 27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation
any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the
inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest
requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or
lequas communales, public parks, public quarries, public fishponds, working men's village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall
not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this
Act or by proclamation of the President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain
properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of
public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for
public use, their ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14,
Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government . (1) The President shall have the power to
reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is
not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use,
they are properties of public dominion, owned by the Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative
Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic , thus:
SEC. 48. Official Authorized to Convey Real Property . Whenever real property of the Government is authorized by law to be conveyed, the
deed of conveyance shall be executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is
expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the
deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance. 28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the
Department of Transportation and Communications. The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x
The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are
hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if
any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one
year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof
shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines .
(Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets . All existing public airport facilities, runways, lands, buildings and
other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the
Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of
crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions . The
Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock
since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required
to provide standards of airport accommodation and service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic
and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and
service within the context of a financially viable operation, will best be achieved by a separate and autonomous body ; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given
continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and
instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership
of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a
separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely
by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other
mode unless specifically approved by the President of the Philippines ." This only means that the Republic retained the beneficial
ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a
thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any
consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport
Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines."
Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person ;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes,
fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The real properties owned by the Republic
are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The
Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national
government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when
title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by
the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person."
MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume
that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties
subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the
land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the
beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung
Center of the Philippines v. Quezon City , the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals
are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its
patients, whether paying or non-paying, are exempt from real property taxes. 29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew
the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether natural or juridical , including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are hereby
withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax
exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not
just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies
to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized under our laws, natural and juridical persons.
Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is
a juridical person at all. (Emphasis and underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status whether MIAA is a juridical person
or not. The minority also insists that "Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of
exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical
persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local Government Code expressly provides otherwise,
specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units . Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
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 charter 40 of the Land Bank of the
Philippines provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million
common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million
preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and
eighty-three of this Code. (Emphasis supplied)
Likewise, the special 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 Bank 44 before it was reorganized as a stock
corporation under the Corporation Code. All these government-owned corporations organized under special charters as stock corporations are
subject to real estate tax on real properties owned by them. To rule that they are not government-owned or controlled corporations because
they are not registered with the Securities and Exchange Commission would remove them from the reach of Section 234 of the Local
Government Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in
Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the
common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section
16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and
subject to the test of economic viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if
these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common
good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic
or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good
meaning for economic development purposes these government-owned or controlled corporations with special charters are usually
organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the
test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State
must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire
operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but
performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature
creates through special charters corporations that perform economic or commercial activities, such entities known as "government-owned
or controlled corporations" must meet the test of economic viability because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or
controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in competition with the
private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on
their own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as
follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which
this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation
loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the
common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into
equity infusions to support a few government financial institutions. And this is all taxpayers' money which could have been relocated to
agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all
going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future
enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so,
Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the
insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good. 45
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic
of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the
common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently
in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial
viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public
services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-
economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the
public.
However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives,
must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their
special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the
government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation
Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does
not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international airport of the Philippines. The operation of an international airport requires
the presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without visas or
travel documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of criminals, as well as to
secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave Philippine airspace, as
well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and buildings for the government personnel, passengers, and airlines, and
to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an international airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the
mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory
or administrative 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.
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
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government under the
Reparations Agreement entered into with Japan on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately 2,489.96 square
meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and categorized as a
commercial lot now being used as a warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for national development projects
are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20) years in
accordance with annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2,
Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization
of reparations and development loans. The procurements are divided into those for use by the government sector and those
for private parties in projects as the then National Economic Council shall determine. Those intended for the private sector shall
be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national development
projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed under the
heading "Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of
the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As
intended, it became the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the
Roppongi building needed major repairs. Due to the failure of our government to provide necessary funds, the Roppongi
property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make
the property the subject of a lease agreement with a Japanese firm - Kajima Corporation which shall construct two (2)
buildings in Roppongi and one (1) building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The
consideration of the construction would be the lease to the foreign corporation of one (1) of the buildings to be constructed in
Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be 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-asl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national economy and
patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition 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 definite Abandonment cannot be inferred from the non-use
alone specially if the non-use was attributable not to the government's own deliberate and indubitable will but to a lack of
financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]).
Abandonment must be a certain and positive act based on correct legal premises.
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.
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 Decision 1 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 judgment 2 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. 0-2107 6covering 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 report 7 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. 152911which 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 Resolution 15 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. 21In 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 Memorandum 26 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.
LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:
[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 .
DECISION
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. 53159 [1] and its
Resolution dated October 16, 2000 denying petitioners 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 Blaan and Maguindanaoan tribes. The case was docketed as COSLAP Case No. 98-052.
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 petitioners objection to the COSLAPs 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 Peoples Rights Act of 1997[4] which has jurisdiction over such claims. Petitioner thus submits that the COSLAPs 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 Blaan 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 COSLAPs decision and a Supplement to Respondents Motion for Reconsideration. The Court
also notes the appellate courts observation that petitioner began to question the jurisdiction of the COSLAP only when he realized that his
period to appeal the COSLAPs 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 courts or bodys
recognition and a willingness to abide by the resolution of the case and will bar said party from later on impugning the courts or bodys
jurisdiction.[11] October 10, 2007
Moreover, Executive Order No. 561 creating the COSLAP, the law then prevailing when private respondents filed their complaint for x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
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: DECISION
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 CHICO-NAZARIO, J.:
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 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 Resolution [1] of the
tension or unrest, or other similar critical situations requiring immediate action: 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
(a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires; Resolution[2] of the appellate court which denied petitioners Motion for Reconsideration. The Petition for Annulment of Judgment filed by the
(b) Between occupants/squatters and government reservation grantees; petitioners with the Court of Appeals was, in turn, directed against the 29 October 1993 Decision [3] of the Regional Trial Court (RTC) of Tarlac,
(c) Between occupants/squatters and public land claimants or applicants; Branch 67, in Land Case No. 274-P93, which ordered the reconstitution of the Original Certificates of Title (OCTs) in the name of the
(d) Petitions for classification, release and/or subdivision of lands of the public domain; and Municipality of Paniqui, Tarlac over the subject property.
(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, The factual and procedural antecedents of the case are as follows:
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 Sometime in 1910, officials of the Municipal Government of Paniqui, headed by Maximo Parazo, built a school, a public market, and a
decision shall become final and executory within thirty (30) days from its promulgation and shall be appealable by certiorari only to the 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,
Supreme Court. (Emphasis supplied.) respectively, in the name of the Municipal Government of Paniqui, by virtue of the judicial confirmation of its title to the subject property. OCTs
The Court of Appeals also stated that based on the records, the the land area being claimed by private respondents belongs to the Blaan No. R0-532 (O-116) and No. 388 covered the property being claimed by petitioners.
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 On 29 October 1993, pursuant to a Verified Petition for Reconstitution filed by the Municipality of Paniqui, represented by Mayor Cesar E.
petitioner violated Section 1 of Presidential Decree No. 410 [13] which states that all unappropriated agricultural lands forming part of the public Cuchapin, the RTC issued a Decision resolving that OCTs No. R0-532 (O-116) and No. 388 were indeed lost, and ordering the cancellation
domain are declared part of the ancestral lands of the indigenous cultural groups occupying the same, and these lands are further declared and the reconstitution of the same as Transfer Certificates of Title (TCTs) No. 259969, No. 259970, No. 260900, No. 260901, No. 260902, No.
alienable and disposable, to be distributed exclusively among the members of the indigenous cultural group concerned. 260903, and No. 336772 of the Registry of Deeds of Tarlac City, registered in the name of the Municipality of Paniqui.
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] 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
WHEREFORE, the petition is hereby DENIED. Member of the municipality inadvertently showed a close friend of the petitioners the cancelled OCTs No. RO-532 (O-116) and No. 338
SO ORDERED. covering the lot where the public market is located. The said OCTs allegedly named the petitioners ascendants as the former owners of the
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur. subject property.
THIRD DIVISION
On 28 March 2005, petitioners filed the Petition for Annulment of Judgment [4] 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.
IN THE MATTER OF REVERSION/RECALL OF G.R. No. 171304
RECONSTITUTED OCT NO. 0-116 DECREE NO. 3999 Petitioners based their petition on the claim that their alleged ascendants were the original pioneers/settlers/occupants of the land in question
OF LOT4239; DECREE NO. 59327; OCT NO. 388; IN THE since 1843 as its indigenous inhabitants. In 1910, however, officials of the Municipal Government of Paniqui, headed by Maximo Parazo,
TARLAC REGISTRY OF DEEDS HEIRS OF THE LATE ordered the occupants of the land to vacate their property so that the municipality could build thereon a school, a public market, and a
SPS. TIMOTEA L. PALAGANAS, WIFE OF RAMON Present: cemetery. According to petitioners, their ascendants were not given a chance or opportunity to appear or answer and present their side at the
PARAGAS, ET AL.; GLORIFICADOR D. PALAGANAS; cadastral proceedings involving the subject properties, from which resulted the issuance of the OCTs in the name of
ROSELYN E. MENDOZA and DANILO M. MARCELO, the Municipality of Paniqui.
representing in this act as Attorneys-in-Fact, YNARES-SANTIAGO, J.,
Petitioners, Chairperson, On 29 April 2005, the Court of Appeals issued the first assailed Resolution, wherein it dismissed the Petition for Annulment of Judgment on the
AUSTRIA-MARTINEZ, following grounds:
- versus - CARPIO MORALES,
CHICO-NAZARIO, and 1. The Petition was not verified, contrary to Section 4, Rule 47 of the Rules of Court;
REGISTRY OF DEEDS - TARLAC CITY; RTC-BR. 67 REYES, JJ. 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
PANIQUI, TARLAC; and MUNICIPALITY OF PANIQUI the Rules of Court;
TARLAC, 3. The corresponding Special Powers of Attorney of the alleged Attorneys-in-Fact were not attached; and
Respondents. 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
Promulgated: 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 same[5];

2. a photocopy of the assailed 29 October 1993 RTC Decision[6];
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-Fact[7]; 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 Zamboanga[16]:
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 On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte and
have instituted an action against the Municipal Government of Paniqui or against Maximo Parazo for the allegedly unlawful taking of the 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
property way back in the 1920s. As asserted by petitioners themselves, the Municipality of Paniqui had openly taken over the property and provided:
exercised rights over the same. The period of the omission of petitioners purported predecessors-in-interest since the taking of the property in Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of Zamboanga shall be divided
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 equitably between the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the
subject property, petitioners merely stepped into the shoes of their predecessors-in-interest, and are bound by their actions and inactions. [20] recommendation of the Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations of the defunct Province of
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 Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte therefore became
that they are indeed the successors-in-interest of the supposed former owners of the subject property. Bearing the same surnames as the 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.
individuals indicated in the technical descriptions of the OCTs being reconstituted is woefully inadequate to prove their relationship. As On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding that Zamboanga del Norte had a vested
petitioners failed to establish that they are the descendants of the supposed former owners of the subject property, the case at bar cannot be 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
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. 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
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 transferred to Dipolog.
real interest is meant a present substantial interest, as distinguished from a mere expectancy; or a future, contingent, subordinate, or The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an amount equal to 25% of the regular
consequential interest.[21] Rule 3, Section 2, of the Rules of Court provides explicitly that every action must be prosecuted and defended in the internal revenue allotment for the City of Zamboanga for the quarter ending March 31, 1960, then for the quarter ending June 30, 1960, and
name of the real party-in-interest. Petitioners failure to prove such real interest constrained the Court of Appeals to dismiss the petition. 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.
WHEREFORE, the Petition is DENIED. The 29 April 2005 Resolution of the Court of Appeals dismissing petitioners Petition for Annulment of However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing that
Judgment in CA-G.R. SP UDK No. 5314 and the 5 August 2005 Resolution of the same court denying petitioners Motion for Reconsideration All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga are
are AFFIRMED. 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
SO ORDERED. 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
G.R. No. L-24440 March 28, 1968 been returned to it.
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee, This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint entitled "Declaratory Relief with
vs. Preliminary Mandatory Injunction" in the Court of First Instance of Zamboanga del Norte against defendants-appellants Zamboanga City, the
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, defendants-appellants. Secretary of Finance and the Commissioner of Internal Revenue. It was prayed that: (a) Republic Act 3039 be declared unconstitutional for
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee. depriving plaintiff province of property without due process and just compensation; (b) Plaintiff's rights and obligations under said law be
Office of the Solicitor General for defendants-appellants. declared; (c) The Secretary of Finance and the Internal Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to
BENGZON, J.P., J.: 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
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then Zamboanga revenue allotments.
Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After defendants filed their respective
of the Act also provided that answers, trial was held. On August 12, 1963, judgment was rendered, the dispositive portion of which reads:
Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be acquired and paid for WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional insofar as it deprives plaintiff Zamboanga
by the City of Zamboanga at a price to be fixed by the Auditor General. del Norte of its private properties, consisting of 50 parcels of land and the improvements thereon under certificates of title (Exhibits "A" to "A-
The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon, located in the City of Zamboanga 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
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 payment thereof to be deducted from its regular quarterly internal revenue allotment equivalent to 25% thereof every quarter until said amount
properties were being utilized as follows shall have been fully paid; ordering defendant Secretary of Finance to direct defendant Commissioner of Internal Revenue to deduct 25% from
No. of Lots Use the regular quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to plaintiff Zamboanga del Norte until
1 ................................................ Capitol Site said sum of P704,220.05 shall have been fully paid; ordering plaintiff Zamboanga del Norte to execute through its proper officials the
3 ................................................ School Site 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
3 ................................................ Hospital Site of defendant City of Zamboanga; and declaring permanent the preliminary mandatory injunction issued on June 8, 1962, pursuant to the order
3 ................................................ Leprosarium of the Court dated June 4, 1962. No costs are assessed against the defendants.
1 ................................................ Curuan School It is SO ORDERED.
1 ................................................ Trade School Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to reconsider praying that Zamboanga
2 ................................................ Burleigh School 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
2 ................................................ High School Playground plaintiff province's motion.
The defendants then brought the case before Us on appeal.
9 ................................................ Burleighs
Brushing aside the procedural point concerning the property of declaratory relief filed in the lower court on the assertion that the law had
1 ................................................ Hydro-Electric Site (Magay) already been violated and that plaintiff sought to give it coercive effect, since assuming the same to be true, the Rules anyway authorize the
1 ................................................ San Roque conversion of the proceedings to an ordinary action, 5 We proceed to the more important and principal question of the validity of Republic Act
23 ................................................ vacant 3039.
It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. 2 Subsequently, or on June 16, 1948, Republic 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
Act 286 was approved creating the municipality of Molave and making it the capital of Zamboanga Province. 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
On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to Commonwealth Act 39, fixed the value of the property is owned by the municipality (meaning municipal corporation) in its public and governmental capacity, the property is public and
properties and buildings in question left by Zamboanga Province in Zamboanga City at P1,294,244.00. 3
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 5562 ...................................... 180 ...................................... Burleigh School
no absolute control. The municipality cannot be deprived of it without due process and payment of just compensation. 6 5565 ...................................... 172-B ...................................... Burleigh
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 5570 ...................................... 171-A ...................................... Burleigh
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? 5571 ...................................... 172-C ...................................... Burleigh
The Civil Code classification is embodied in its Arts. 423 and 424 which provide: 1wph1.t 5572 ...................................... 174 ...................................... Burleigh
ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and patrimonial property . 5573 ...................................... 178 ...................................... Burleigh
ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets, municipal 5585 ...................................... 171-B ...................................... Burleigh
streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or 5586 ...................................... 173 ...................................... Burleigh
municipalities. 5587 ...................................... 172-A ...................................... Burleigh
All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special
We noticed that the eight Burleigh lots above described are adjoining each other and in turn are between the two lots wherein the
laws. (Stressed for emphasis).
Burleigh schools are built, as per records appearing herein and in the Bureau of Lands. Hence, there is sufficient basis for holding that said
Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could be
eight lots constitute the appurtenant grounds of the Burleigh schools, and partake of the nature of the same.
considered as patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the
Regarding the several buildings existing on the lots above-mentioned, the records do not disclose whether they were constructed at 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
expense of the former Province of Zamboanga. Considering however the fact that said buildings must have been erected even before 1936
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
when Commonwealth Act 39 was enacted and the further fact that provinces then had no power to authorize construction of buildings such as
preceding enumerated properties in the first paragraph of Art 424. 7 The playgrounds, however, would fit into this category.
those in the case at bar at their own expense, 14 it can be assumed that said buildings were erected by the National Government, using
This was the norm applied by the lower court. And it cannot be said that its actuation was without jurisprudential precedent for
national funds. Hence, Congress could very well dispose of said buildings in the same manner that it did with the lots in question.
in Municipality of Catbalogan v. Director of Lands , 8 and in Municipality of Tacloban v. Director of Lands, 9 it was held that the capitol site and
But even assuming that provincial funds were used, still the buildings constitute mere accessories to the lands, which are public in
the school sites in municipalities constitute their patrimonial properties. This result is understandable because, unlike in the classification
nature, and so, they follow the nature of said lands, i.e., public. Moreover, said buildings, though located in the city, will not be for the exclusive
regarding State properties, properties for public service in the municipalities are not classified as public. Assuming then the Civil Code
use and benefit of city residents for they could be availed of also by the provincial residents. The province then and its successors-in-
classification to be the chosen norm, the lower court must be affirmed except with regard to the two (2) lots used as playgrounds.
interest are not really deprived of the benefits thereof.
On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all those of the 50
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
properties in question which are devoted to public service are deemed public; the rest remain patrimonial. Under this norm, to be considered
which are patrimonial properties since they are not being utilized for distinctly, governmental purposes. Said lots are:
public, it is enough that the property be held and, devoted for governmental purposes like local administration, public education, public health,
etc. 10
TCT Number Lot Number Use
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF LANDS, 11where it was stated that "... 5577 ...................................... 177 ...................................... Mydro, Magay
where the municipality has occupied lands distinctly for public purposes, such as for the municipal court house, the public school, the public 13198 ...................................... 127-0 ...................................... San Roque
market, or other necessary municipal building, we will, in the absence of proof to the contrary, presume a grant from the States in favor of the 5569 ...................................... 169 ...................................... Burleigh 15
municipality; but, as indicated by the wording, that rule may be invoked only as to property which is used distinctly for public purposes...." (2) 5558 ...................................... 175 ...................................... Vacant
VIUDA DE TANTOCO V. MUNICIPAL COUNCIL OF ILOILO 12 held that municipal properties necessary for governmental purposes are public 5559 ...................................... 188 ...................................... "
in nature. Thus, the auto trucks used by the municipality for street sprinkling, the police patrol automobile, police stations and concrete
5560 ...................................... 183 ...................................... "
structures with the corresponding lots used as markets were declared exempt from execution and attachment since they were not patrimonial
properties. (3) MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a municipal lot which had always been devoted to school 5561 ...................................... 186 ...................................... "
purposes is one dedicated to public use and is not patrimonial property of a municipality. 5563 ...................................... 191 ...................................... "
Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol site, school sites and its grounds, 5566 ...................................... 176 ...................................... "
hospital and leprosarium sites and the high school playground sites a total of 24 lots since these were held by the former Zamboanga 5568 ...................................... 179 ...................................... "
province in its governmental capacity and therefore are subject to the absolute control of Congress. Said lots considered as public property are 5574 ...................................... 196 ...................................... "
the following:
5575 ...................................... 181-A ...................................... "
TCT Number Lot Number Use
5576 ...................................... 181-B ...................................... "
2200 ...................................... 4-B ...................................... Capitol Site
5578 ...................................... 182 ...................................... "
2816 ...................................... 149 ...................................... School Site
5579 ...................................... 197 ...................................... "
3281 ...................................... 1224 ...................................... Hospital Site
5580 ...................................... 195 ...................................... "
3282 ...................................... 1226 ...................................... Hospital Site
5581 ...................................... 159-B ...................................... "
3283 ...................................... 1225 ...................................... Hospital Site
5582 ...................................... 194 ...................................... "
3748 ...................................... 434-A-1 ...................................... School Site
5584 ...................................... 190 ...................................... "
5406 ...................................... 171 ...................................... School Site
5588 ...................................... 184 ...................................... "
5564 ...................................... 168 ...................................... High School Play-ground
5589 ...................................... 187 ...................................... "
5567 ...................................... 157 & 158 ...................................... Trade School
5590 ...................................... 189 ...................................... "
5583 ...................................... 167 ...................................... High School Play-ground
5591 ...................................... 192 ...................................... "
6181 ...................................... (O.C.T.) ...................................... Curuan School
5592 ...................................... 193 ...................................... "
11942 ...................................... 926 ...................................... Leprosarium
5593 ...................................... 185 ...................................... "
11943 ...................................... 927 ...................................... Leprosarium
7379 ...................................... 4147 ...................................... "
11944 ...................................... 925 ...................................... Leprosarium
5557 ...................................... 170 ...................................... Burleigh School
 Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly private in nature. On the other hand,
that the 24 lots used for governmental purposes are also registered is of no significance since registration cannot convert public property to
private. 16
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. 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 17 clearly 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.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.
[G.R. No. 97764. August 10, 1992.]
LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic Command, Petitioner , v. 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.
SYLLABUS
1. POLITICAL LAW; PUBLIC CORPORATION; MUNICIPAL ORDINANCE; RESOLVING ITS VALIDITY; LAWS IN FORCE AT ITS
ENACTMENT CONTROL. 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 on property and
settled jurisprudence on the matter.
2. PROPERTY OF PROVINCES, CITIES, AND MUNICIPALITIES; CLASSIFICATION; PROPERTY FOR PUBLIC USE. 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. 24. 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."cralaw virtua1aw library
3. PROPERTY OF LOCAL GOVERNMENT DEVOTED TO PUBLIC SERVICE; DEEMED PUBLIC; UNDER THE ABSOLUTE CONTROL OF
CONGRESS; LOCAL GOVERNMENTS HAVE NO AUTHORITY TO CONTROL OR REGULATE THEM UNLESS SPECIFIC AUTHORITY IS
VESTED UPON THEM BY CONGRESS; AUTHORITY TO BE INTERPRETED ACCORDING TO BASIC PRINCIPLES OF LAW; ART. 424 OF
THE CIVIL CODE. 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 thereof shall be closed 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." 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.
4. ROADS AND STREETS ORDINARILY USED FOR VEHICULAR TRAFFIC CONSIDERED PUBLIC PROPERTY; LOCAL GOVERNMENT
HAS NO POWER TO USE IT FOR ANOTHER PURPOSE OR TO DISPOSE OF OR LEASE IT TO PRIVATE PERSONS. 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.
5. PROPERTY WITHDRAWN FROM PUBLIC USE; BECOMES PATRIMONIAL PROPERTY OF THE LOCAL GOVERNMENT UNIT; CAN BE
OBJECT OF ORDINARY CONTRACT. 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. 333, known
as Local Government Code. 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).
6. POWERS OF LOCAL GOVERNMENT UNIT; NOT ABSOLUTE; SUBJECT TO LIMITATION SET BY THE CONSTITUTION AND THE
LAWS. Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down by the 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.
7. LEGAL RIGHT OF GENERAL PUBLIC TO DEMAND THE DEMOLITION OF ILLEGALLY CONSTRUCTED STALLS IN PUBLIC ROADS
AND STREETS. 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.
8. BATAS PAMBANSA BLG. 337 (LOCAL GOVERNMENT CODE); REPEALED BY R.A. NO. 7160 (LOCAL GOVERNMENT CODE OF 1991);
SECTION 5(D) THEREOF. However, at this point, We find it worthy to note that Batas Pambansa Blg. 337, known as Local Government
Code, 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.
 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.
DECISION
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.
MEDIALDEA, J. :
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.
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, Petitioner submits that a property already dedicated to public use cannot be used for another public purpose and that absent a clear showing
Branch 62, which granted the writ of preliminary injunction applied for by respondents Municipality of Paraaque and Palanyag Kilusang that the Municipality of Paraaque has been granted by the legislature a specific authority to convert a property already in public use to
Bayan for Service (Palanyag for brevity) against petitioner herein.chanrobles virtual lawlibrary 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
The antecedent facts are as follows:chanrob1es virtual 1aw library 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
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which authorized the closure of J. Gabrielle, G.G. municipality violated its duty under the Local Government Code to promote the general welfare of the residents of the municipality.
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 MCC Ordinance No. 2, Series of 1979, authorizing and In upholding the legality of the disputed ordinance, the trial court ruled:jgc:chanrobles.com.ph
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. ". . . that Chapter 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
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the municipal council of respondent municipality accordance with existing laws and the provisions of this code).
subject to the following conditions:chanrob1es virtual 1aw library x x x

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; "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
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 Police Superintendent ceases to be operative on the ground that the streets covered by the ordinance ceases to be a public thoroughfare."
road shall be used by pedestrians; (pp. 33-34, Rollo)

3. That the time during which the vending area is to be used shall be clearly designated; 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.
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 337, otherwise known as Local Government Code, in connection with established principles embodied in the Civil Code on property and
Public Estate Authority. settled jurisprudence on the matter.

On June 20, 1990, the municipal council of Paraaque issued a resolution authorizing Paraaque Mayor Walfrido N. Ferrer to enter into The property of provinces, cities and municipalities is divided into property for public use and patrimonial property (Art. 423, Civil Code). As to
contract with any service cooperative for the establishment, operation, maintenance and management of flea markets and/or vending what consists of property for public use, Article 424 of Civil Code states:jgc:chanrobles.com.ph
areas.chanrobles lawlibrary : rednad
"ART. 424. Property for public use, in the provinces, cities and municipalities, consists of the provincial roads, city streets, the squares,
On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative, entered into an agreement whereby the latter fountains, public waters, promenades, and public works for public service paid for by said provinces, cities or municipalities.chanroblesvirtual|
shall operate, maintain and manage the flea market in the aforementioned streets with the obligation to remit dues to the treasury of the awlibrary
municipal government of Paraaque. Consequently, market stalls were put up by respondent Palanyag on the said streets.
"All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special
On September 13, 1990 petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan Traffic Command, ordered the destruction laws."cralaw virtua1aw library
and confiscation of stalls along G.G. Cruz and J. Gabrielle St. in Baclaran. These stalls were later returned to respondent Palanyag.
Based on the foregoing, J. Gabrielle G.G. Cruz, Bayanihan, Lt. Gacia Extension and Opena streets are local roads used for public service and
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag giving the latter ten (10) days to discontinue are therefore considered public properties of respondent municipality. Properties of the local government which are devoted to public service
the flea market; otherwise, the market stalls shall be dismantled. 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
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint petition for prohibition and mandamus with specific authority is vested upon them by Congress. One such example of this authority given by Congress to the local governments is the
damages and prayer for preliminary injunction, to which the petitioner filed his memorandum/opposition to the issuance of the writ of power to close roads as provided in Section 10, Chapter II of the Local Government Code, which states:chanrobles.com.ph : virtual law library
preliminary injunction.chanrobles virtual lawlibrary
"SEC. 10. Closure of roads. A local government unit may likewise, through its head acting pursuant to a resolution of its sangguniang and in
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from enforcing his letter-order of October 16, 1990 accordance with existing law and the provisions of this Code, close any barangay, municipal, city or provincial road, street, alley, park or
pending the hearing on the motion for writ of preliminary injunction. square. No such way or place or any part thereof shall be closed 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
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 be lawfully used or conveyed." (Emphasis ours)
enjoining petitioner Brig. Gen. Macasiano from enforcing his letter-order against petitioner Palanyag.
However, the aforestated legal provision which gives authority to local government units to close roads and other similar public places should Further, it is of public notice that the streets along Baclaran area are congested with people, houses and traffic brought about by the
be read and interpreted in accordance with basic principles already established by law. These basic principles have the effect of limiting such proliferation of vendors occupying the streets. To license and allow the establishment of a flea market along J. Gabrielle, G.G. Cruz,
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 Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not help in solving the problem of congestion. We take note of the other
that properties of public dominion devoted to public use and made available to the public in general are outside the commerce of man and observations of the Solicitor General when he said:jgc:chanrobles.com.ph
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 ". . . . There have been many instances of emergencies and fires where ambulances and fire engines, instead of using the roads for a more
from public use when circumstances show that such property is no longer intended or necessary for public use or public service. When it is direct access to the fire area, have to maneuver and look for other streets which are not occupied by stalls and vendors thereby losing
already withdrawn from public use, the property then becomes patrimonial property of the local government unit concerned (Article 422, Civil valuable time which could, otherwise, have been spent in saving properties and lives.
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 "Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the people rushing their patients to the hospital
used or conveyed" in accordance with the last sentence of Section 10, Chapter II of Blg. 333, known as Local Government Code. In one case, cannot pass through G.G. Cruz because of the stalls and the vendors. Once can only imagine the tragedy of losing a life just because of a few
the City Council of Cebu, through a resolution, declared the terminal road of M. Borces Street, Mabolo, Cebu City as an abandoned road, the seconds delay brought about by the inaccessibility of the streets leading to the hospital.
same not being included in the City Development Plan. Thereafter, the City Council passed 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 children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal transportation flow is disrupted and school
the same from public use. Such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract (Cebu children have to get off at a distance still far from their schools and walk, rain or shine.
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 "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
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 pollution, sickness and deterioration of health of the residents therein." (pp. 21-22, Rollo)
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 Macario Asistio, Jr., Et Al., Respondents., G.R. No. 93654, May 6, 1992." This Court ruled:jgc:chanrobles.com.ph 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
"There is no doubt that the disputed areas from which the private respondents market stalls are sought to be evicted are public streets, as a local government which should not be interfered with by the courts.
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 other contract (Villanueva, Et. Al. v. Castaeda and Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down by the Constitution and the laws such
Macalino, 15 SCRA 142 citing the Municipality of Cavite v. Rojas, 30 SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869; and as our Civil Code. Moreover, the exercise of such powers should be subservient to paramount considerations of health and well-being of the
Muyot v. De la Fuente, 48 O.G. 4860). 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,
"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, the local government should refrain from acting towards that which might prejudice or adversely affect the general welfare.
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 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
in the community whose health, peace, safety, good order and general welfare, the respondent city officials are under legal obligation to public roads and streets and the officials of respondent municipality have the corresponding duty arising from public office to clear the city
protect.chanrobles law library streets and restore them to their specific public purpose.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del 96 Street as a vending area for stallholders who were 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
granted licenses by the city government contravenes the general law that reserves city streets and roads for public use. Mayor Robles during its time. However, at this point, We find it worthy to note that Batas Pambansa Blg. 337, known as Local Government Code, has already
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 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
arteries of travel for vehicles and pedestrians."cralaw virtua1aw library 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
Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed ordinance, the same cannot be validly force at the time such rights were vested.
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:cralawnad 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
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 market stalls along J. Gabrielle, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets is hereby REVERSED and SET ASIDE.
the flea market/vending areas thereon;
SO ORDERED.
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; Narvasa, C.J., Gutierrez, Jr ., Cruz, Feliciano, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur.
.R. No. L-61311 September 2l, 1987
3. That the time during which the vending area is to be used shall be clearly designated; FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA MIRANDA, RICARDO PUNO, FLORENCIO LAXA,
and RENE OCAMPO, petitioners,
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 vs.
Public Estate Authority. (p. 38, Rollo) 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.
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 CRUZ, J.:
residents do not oppose the establishment of a flea market on said streets are unsupported by any evidence that will show that this first 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
condition has been met. Likewise, the designation by respondents of a time schedule during which the flea market shall operate is absent. 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.
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 Naguit 5 (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. 15 This 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 law 32 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)33 in 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. 1wphi1
WHEREFORE, the Court DENIES the petitioners' Motion for Reconsideration and the respondent's Partial Motion for Reconsideration for their
lack of merit.
SO ORDERED.
G.R. No. 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. 1wph1.t an integral portion of Plaza Soledad, which if for public use and is reserved for the common benefit.
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.
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
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 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
the said land. 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
For all the foregoing reasons we must reverse the judgment appealed from and declare, as we do declare, that the land occupied by Hilaria 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
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 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,
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 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
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 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
ordered. someone connected with the office of the registrar of titles under the Torrens system.
Arellano, C.J., Johnson and Araullo, JJ., concur. 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
Moreland, J., concurs in the result. 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
G.R. No. L-26337 December 17, 1926 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
CELSO LEDESMA, plaintiff-appellant, certificate of title. Later and on the 11th day of August, 1919, Concepcion Lopez, representing Maximo M. Kalaw, sold said lots (228, 537 and
vs. 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
THE MUNICIPALITY OF ILOILO, CONCEPCION LOPEZ, MAXIMO M. KALAW, and wife, and JULIO LEDESMA, defendants- 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
appellees. 703 were included by mistake.
Juan Ledesma for appellant. 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
Provincial Fiscal Borromeo Veloso for the appellee municipality. remained the property of Julio Ledesma (see transfer certificate of title No. 1131, Exhibit I). Said lots 537 and 703, according to said transfer
Santos and Benitez for the other appellees. certificate, remained the property of Julio Ledesma.1awphil.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
JOHNSON, J.: 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
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 Ledesma by mistake.
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 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
appropriated, together with the sum of P5,000 as damages and costs. The recovery of said sums was opposed by the defendants upon the Concepcion Lopez in November, 1915, and Concepcion included in each succeeding transfer of title to him said lots, that he was 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 indisputable owner thereof, and because the City of Iloilo had appropriated said lots, that he was entitled to recover the value of said lots
contended that it had purchased said lots from Concepcion Lopez on the 9th day of March, 1925, for the purpose of widening the adjoining together with damages.
streets and had paid therefore the sum of P25,000. The other defendants answered the petition and supported the contention of the 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
municipality. After hearing the evidence upon the issue presented, the Honorable Leopoldo Rovira reached the conclusion that a 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
preponderance of the evidence supported the contention of the defendants, and rendered a judgment absolving them from all liability under 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
the complaint, without any finding as to costs. From that judgment the plaintiff appealed. 537 and 703 had become a part of a public highway established by law. The same were therefore illegally included, in accordance with the
In order that the facts in the present cause may be more clearly understood, reference to the following map may be made: 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.
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 United Church Board for
the state legislature of Massachussets . 5 World Ministries
The basis of this ruling was Article XII, Sections I and 5 of the 1935 Constitution, which barred foreigners, including Americans, from acquiring 185-B Anda Street, Davao City
agricultural lands in this country except only by hereditary succession. The court directed that a copy of its order be sent to the Solicitor WITH OUR CONCURRENCE:
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 UNITED CHURCH BOARD FOR
Its motion for reconsideration having been denied, the petitioner came to this Court, contending that the above-cited constitutional provisions WORLD MINISTRIES
were not applicable because the object of the legacy was not land but shares of stocks. Moreover, even assuming that what was really by:
involved was a transfer of land, the petitioner was nonetheless qualified to acquire it under the provisions of the Parity Amendment and the (Sgd.) BYRON W. CLARK
Laurel-Langley Agreement. Treasurer
The Solicitor General disagreed at first, insisting that the legacy was prohibited by the 1935 Constitution and did not come under any of the NO OBJECTION TO THE DELIVERY
allowed exceptions. During the protracted exchange of pleadings among the parties, however, certain events transpired to considerably OF THE LEGACY TO BROKENSHIRE
change the original situation and, consequently, also the position of government. MEMORIAL HOSPITAL, INC.
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 (Sgd.) MELENCIO B. DELENA (Sgd.) DARIO C. RAMA
Brokenshire Memorial Hospital was situated was already registered in the name of the Mindanao District Conference, an affiliate of the United Executor-Respondent Counsel for the Estate
Church of Christ in the Philippines (PUCC). 7 It was this non-stock corporation, organized in 1949 under Philippine law with a 100% Filipino and Respondents
membership, that owned and was operating the Hospital at the time of Jacobson's death. 8 Later, the Brokenshire Memorial Hospital was itself Melencio Delena and
incorporated as a charitable institution, with Filipinos constituting the majority of its membership, 9 and on December 16,1970, became the the late Mauro
successor-in-interest of the UCCP to the devised parcel of land. 10 Gementiza
In proof of these circumstances, the new counsel for Brokenshire presented, among many other documents, the articles of incorporation of the (deceased-Executor)
UCCP and the Hospital and their corresponding certificates of registration issued by the Securities and Exchange Commission, the licenses Security Bank Bldg.
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 Magsaysay Ave., Davao City
Hospital, Inc. from 1973 to 1974, and the certificate of title over the subject land in the name of the "Mindanao District Conference, commonly (Sgd.) DEAN CLAIR (Sgd.) ROSALINO D. ISIDRO
known as the Brokenshire Memorial Hospital." 11 Executor Counsel for the Estate
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 and Executor Dean Clair
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 205 Aldavinco Bldg.,
Atty. Rodolfo D. de la Cruz, who disavowed his predecessor's representations. At any rate, the above-stated documents have now made it C.M. Recto Ave., Davao City 12
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 Parenthetically, it should be observed, in fairness to Judge Sebastian, that he was unaware of these circumstances when he declared the
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 legacy invalid to enforce the nationalistic provisions of Article XIII of the 1935 Constitution. For his vigilance in the protection of the national
Brokenshire Memorial Hospital itself upon its incorporation in 1970 when it thus became the proper party-in-interest to claim the property patrimony, he should be, as he is hereby, commenced.
directly devised by Jacobson to it. 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
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 for that reason unenforceable, the defect in the will should be deemed rectified by the subsequent transfer of the property to the Brokenshire
sur rejoinder to the rejoinder of the movant Brokenshire Memorial Hospital, Inc., which had asked to be substituted for the former as petitioner Memorial Hospital, Inc. Our consistent ruling on this matter is that if land is invalidly transferred to an alien who subsequently becomes a
in this case. The body of this pleading is reproduced in full as follows: citizen or transfers it to a ctitizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.
PETITIONER, by the Undersigned Counsel, to this Honorable Court most respectfully states: 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
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 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
United Church Board for World Ministries and other religion boards in the United States of America; 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
2. It was the intention, following the independence of the Philippines from the U.S.A. the constitution of an independent and autonomous 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
United Church of Christ in the Philippines, to eventually transfer all properties, schools, and hospitals established by said mission boards, to 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
the United Church of Christ in the Philippines; 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
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 naturalized Filipino. We also sustained the sale.
United Church of Christ in the Philippines, its religious organizations and/or instrumentalities; This action has been pending for quite some time now because of the confusion regarding the status of the Brokenshire Memorial Hospital as
4. That when the Brokenshire Memorial Hospital was destroyed by fire in 1964, reconstruction efforts and responsibilities was assumed by the the ultimate beneficiary of the challenged legacy. The curious thing is that this case was mired in factual and legal complications caused by
United Church of Christ in the Philippines, it was the intention of the United Church Board for World Ministries to relinquish the rights, interests needless misunderstanding among the parties which, it now appears, were never in any substantial disagreement over the ownership of the
and ownership to the Brokenshire Memorial Hospital, now Brokenshire Memorial Hospital, Inc. and considered it so relinquished, with Hospital. Their common concern for its welfare, in line with the charitable spirit and purposes of the testator, should have avoided all this
continuing funding assistance from the United Church Board for World Ministries and other mission boards overseas; tedious and acrimonious dispute.
5. The United Church Board for World Ministries continues to this date, with its fraternal and cooperative relationship with the United Church of WHEREFORE, the Brokenshire Memorial Hospital, Inc. is hereby substituted for the United Church Board for World Ministries as petitioner in
Christ in the Philippines; this case and DECLARED to be qualified to accept the legacy of the late David Jacobson. The petition as thus modified is GRANTED. The
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 order of the respondent judge dated December 9, 1971, and his Resolution dated December 9, 1971, are SET ASIDE. This decision is
David Jacobson and has manifested and mandated that all properties that may be derived therefrom shall be used entirely and exclusively for immediately executory. No costs.
the work of the Brokenshire Memorial Hospital and its School of Nursing in accordance with the wishes of David Jacobson; SO ORDERED.
7. Considering the clear intention of David Jacobson to support the life and work of Brokenshire Memorial Hospital and its School of Nursing, Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.
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 SPECIAL FIRST DIVISION
succeeded to the ownership of and the humanitarian, and charitable service of said Hospital. G.R. No. 124293 January 31, 2005
Respectfully submitted. J.G. SUMMIT HOLDINGS, INC., petitioner,
September 3, 1983, Davao City, Philippines. vs.
(Sgd.) JUAN V. FAUNE COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET PRIVATIZATION TRUST; and
Counsel for Petitioner 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 utility 4 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 Reconsideration 8 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. 16 This 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 Court 20 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. 28Further, 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 .45 It 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 land 49 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.