Chavez v.

Pea and Amari

Fact:
In 1973, the Comissioner on Public Highways entered into a contract to reclaim areas of Manila
Bay with the Construction and Development Corportion of the Philippines (CDCP).

PEA (Public Estates Authority) was created by President Marcos under P.D. 1084, tasked with
developing and leasing reclaimed lands. These lands were transferred to the care of PEA under
P.D. 1085 as part of the Manila Cavite Road and Reclamation Project (MCRRP). CDCP and
PEA entered into an agreement that all future projects under the MCRRP would be funded and
owned by PEA.

By 1988, President Aquino issued Special Patent No. 3517 transferring lands to PEA. It was
followed by the transfer of three Titles (7309, 7311 and 7312) by the Register of Deeds of
Paranaque to PEA covering the three reclaimed islands known as the FREEDOM ISLANDS.

Subsquently, PEA entered into a joint venture agreement (JVA) with AMARI, a Thai-Philippine
corporation to develop the Freedom Islands. Along with another 250 hectares, PEA and AMARI
entered the JVA which would later transfer said lands to AMARI. This caused a stir especially
when Sen. Maceda assailed the agreement, claiming that such lands were part of public domain
(famously known as the mother of all scams).

Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a writ of preliminary
injunction and a TRO against the sale of reclaimed lands by PEA to AMARI and from
implementing the JVA. Following these events, under President Estradas admin, PEA and
AMARI entered into an Amended JVA and Mr. Chaves claim that the contract is null and void.

Issue:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of the stipulations in the
(Amended) JVA between AMARI and PEA violate Sec. 3 Art. XII of the 1987 Constitution

w/n: the court is the proper forum for raising the issue of whether the amended joint venture
agreement is grossly disadvantageous to the government.

Held:
On the issue of Amended JVA as violating the constitution:
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 hectares110 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 hectares111
of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2,
Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than
agricultural lands of the public domain.

PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed
lands as alienable or disposable, and further declare them no longer needed for public service.
Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void
in view of Section 3, Article XII of the 1987Constitution which prohibits private corporations
from acquiring any kind of alienable land of the public domain.

CHAVEZ V. PUBLIC ESTATE

AUTHORITY
FACTS:
From the time of Marcos until Estrada, portions of Manila Bay were being reclaimed. A law was
passed creating the Public Estate Authority which was granted with the power to transfer reclaimed
lands. Now in this case, PEA entered into a Joint Venture Agreement with AMARI, a private
corporation. Under the Joint Venture Agreement between AMARI and PEA, several hectares of
reclaimed lands comprising the Freedom Islands and several portions of submerged areas of Manila
Bay were going to be transferred to AMARI .

ISSUE:
Whether or not the stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or
to be reclaimed, violate the Constitution
RULING: YES!

Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and
disposable lands of the public domain Section 3 of the Constitution: 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 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. Clearly, the
Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article
1409 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.

The Court's Ruling

First issue: whether the principal reliefs prayed for in the petition are moot and academic
because of subsequent events.

The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations
for a new agreement." The petition also prays that the Court enjoin PEA from "privately entering into,
perfecting and/or executing any new agreement with AMARI."

PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner
on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed
upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the
renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot
because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the
Office of the President has approved the Amended JVA on May 28, 1999.

Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking
the signing and approval of the Amended JVA before the Court could act on the issue. Presidential
approval does not resolve the constitutional issue or remove it from the ambit of judicial review.

We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President
cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still
to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on
constitutional grounds necessarily includes preventing its implementation if in the meantime PEA
and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing
the renegotiation of the JVA is its violation of Section 3, Article XII of the Constitution, which prohibits
the government from alienating lands of the public domain to private corporations. If the Amended
JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and if
already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a
single private corporation. It now becomes more compelling for the Court to resolve the issue to
insure the government itself does not violate a provision of the Constitution intended to safeguard
the national patrimony. Supervening events, whether intended or accidental, cannot prevent the
Court from rendering a decision if there is a grave violation of the Constitution. In the instant case, if
the Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of title and
ownership of alienable lands of the public domain in the name of AMARI. Even in cases where
supervening events had made the cases moot, the Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling principles to guide the bench, bar, and the
public.17

Also, the instant petition is a case of first impression. All previous decisions of the Court involving
Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973
Constitution,18 covered agricultural landssold to private corporations which acquired the lands from
private parties. The transferors of the private corporations claimed or could claim the right to judicial
confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for
brevity). In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed
lands and submerged areas for non-agricultural purposes by purchase under PD No. 1084
(charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended
JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim judicial
confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or
still to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and
notorious occupation of agricultural lands of the public domain for at least thirty years since June 12,
1945 or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title
expired on December 31, 1987.20

Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because
of the possible transfer at any time by PEA to AMARI of title and ownership to portions of the
reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy
percent proportionate share in the reclaimed areas as the reclamation progresses. The Amended
JVA even allows AMARI to mortgage at any time the entire reclaimed area to raise financing for the
reclamation project.21

Second issue: whether the petition merits dismissal for failing to observe the principle
governing the hierarchy of courts.

PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the
Court. The principle of hierarchy of courts applies generally to cases involving factual questions. As
it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case,
however, raises constitutional issues of transcendental importance to the public.22 The Court can
resolve this case without determining any factual issue related to the case. Also, the instant case is a
petition for mandamus which falls under the original jurisdiction of the Court under Section 5, Article
VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case.

Third issue: whether the petition merits dismissal for non-exhaustion of administrative
remedies.

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain
information without first asking PEA the needed information. PEA claims petitioner's direct resort to
the Court violates the principle of exhaustion of administrative remedies. It also violates the rule that
mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary
course of law.

PEA distinguishes the instant case from Taada v. Tuvera23 where the Court granted the petition for
mandamus even if the petitioners there did not initially demand from the Office of the President the
publication of the presidential decrees. PEA points out that in Taada, the Executive Department
had an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of
Commonwealth Act No. 63825 to publish the presidential decrees. There was, therefore, no need for
the petitioners in Taada to make an initial demand from the Office of the President. In the instant
case, PEA claims it has no affirmative statutory duty to disclose publicly information about its
renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of
administrative remedies to the instant case in view of the failure of petitioner here to demand initially
from PEA the needed information.

The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation.
Under Section 79 of the Government Auditing Code,26 the disposition of government lands to private
parties requires public bidding. PEA was under a positive legal duty to disclose to the public the
terms and conditions for the sale of its lands. The law obligated PEA to make this public
disclosure even without demand from petitioner or from anyone. PEA failed to make this public
disclosure because the original JVA, like the Amended JVA, was the result of a negotiated
contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make the
public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct
judicial intervention.

Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative
remedies does not apply when the issue involved is a purely legal or constitutional question.27 The
principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of
the constitutional ban prohibiting the alienation of lands of the public domain to private corporations.
We rule that the principle of exhaustion of administrative remedies does not apply in the instant
case.

Fourth issue: whether petitioner has locus standi to bring this suit

PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that PEA refused to perform an affirmative duty
imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will
suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus,
there is no actual controversy requiring the exercise of the power of judicial review.

The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to
comply with its constitutional duties. There are two constitutional issues involved here. First is the
right of citizens to information on matters of public concern. Second is the application of a
constitutional provision intended to insure the equitable distribution of alienable lands of the public
domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly
information on the sale of government lands worth billions of pesos, information which the
Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to prevent
PEA from alienating hundreds of hectares of alienable lands of the public domain in violation of the
Constitution, compelling PEA to comply with a constitutional duty to the nation.

Moreover, the petition raises matters of transcendental importance to the public. In Chavez v.
PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental
importance to the public, thus -
 "Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the
Marcoses is an issue of 'transcendental importance to the public.' He asserts that ordinary
taxpayers have a right to initiate and prosecute actions questioning the validity of acts or
orders of government agencies or instrumentalities, if the issues raised are of 'paramount
public interest,' and if they 'immediately affect the social, economic and moral well being of
the people.'

Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest,
when the proceeding involves the assertion of a public right, such as in this case. He invokes
several decisions of this Court which have set aside the procedural matter of locus standi,
when the subject of the case involved public interest.

xxx

In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the
object of mandamus is to obtain the enforcement of a public duty, the people are regarded
as the real parties in interest; and because it is sufficient that petitioner is a citizen and as
such is interested in the execution of the laws, he need not show that he has any legal or
special interest in the result of the action. In the aforesaid case, the petitioners sought to
enforce their right to be informed on matters of public concern, a right then recognized in
Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to
be valid and enforceable must be published in the Official Gazette or otherwise effectively
promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they
sought to be enforced 'is a public right recognized by no less than the fundamental law of the
land.'

Legaspi v. Civil Service Commission, while reiterating Taada, further declared that 'when a
mandamus proceeding involves the assertion of a public right, the requirement of personal
interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the
general 'public' which possesses the right.'

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have
been involved under the questioned contract for the development, management and
operation of the Manila International Container Terminal, 'public interest [was] definitely
involved considering the important role [of the subject contract] . . . in the economic
development of the country and the magnitude of the financial consideration involved.' We
concluded that, as a consequence, the disclosure provision in the Constitution would
constitute sufficient authority for upholding the petitioner's standing.

Similarly, the instant petition is anchored on the right of the people to information and access
to official records, documents and papers a right guaranteed under Section 7, Article III of
the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of
the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner's
legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen, we
rule that the petition at bar should be allowed."

We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional
rights - to information and to the equitable diffusion of natural resources - matters of transcendental
public importance, the petitioner has the requisite locus standi.

Fifth issue: whether the constitutional right to information includes official information on on-
going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on matters of public
concern in this manner:

"Sec. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to
official acts, transactions, or decisions, as well as to government research data used as
basis for policy development, shall be afforded the citizen, subject to such limitations as may
be provided by law." (Emphasis supplied)

The State policy of full transparency in all transactions involving public interest reinforces the
people's right to information on matters of public concern. This State policy is expressed in Section
28, Article II of the Constitution, thus:

"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest." (Emphasis supplied)

These twin provisions of the Constitution seek to promote transparency in policy-making and in the
operations of the government, as well as provide the people sufficient information to exercise
effectively other constitutional rights. These twin provisions are essential to the exercise of freedom
of expression. If the government does not disclose its official acts, transactions and decisions to
citizens, whatever citizens say, even if expressed without any restraint, will be speculative and
amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x
accountable to the people,"29 for unless citizens have the proper information, they cannot hold public
officials accountable for anything. Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their effective implementation. An
informed citizenry is essential to the existence and proper functioning of any democracy. As
explained by the Court in Valmonte v. Belmonte, Jr.30

"An essential element of these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of the State that
the channels for free political discussion be maintained to the end that the government may
perceive and be responsive to the people's will. Yet, this open dialogue can be effective only
to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only
when the participants in the discussion are aware of the issues and have access to
information relating thereto can such bear fruit."

PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to information
is limited to "definite propositions of the government." PEA maintains the right does not include
access to "intra-agency or inter-agency recommendations or communications during the stage when
common assertions are still in the process of being formulated or are in the 'exploratory stage'."

Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before
the closing of the transaction. To support its contention, AMARI cites the following discussion in the
1986 Constitutional Commission:

"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts,
agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the
consummation of the contract, or does he refer to the contract itself?
 Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover
both steps leading to a contract and already a consummated contract, Mr. Presiding
Officer.

Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation

of the transaction.

Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.

Mr. Suarez: Thank you."32 (Emphasis supplied)

AMARI argues there must first be a consummated contract before petitioner can invoke the right.
Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade
the quality of decision-making in government agencies. Government officials will hesitate to express
their real sentiments during deliberations if there is immediate public dissemination of their
discussions, putting them under all kinds of pressure before they decide.

We must first distinguish between information the law on public bidding requires PEA to disclose
publicly, and information the constitutional right to information requires PEA to release to the public.
Before the consummation of the contract, PEA must, on its own and without demand from anyone,
disclose to the public matters relating to the disposition of its property. These include the size,
location, technical description and nature of the property being disposed of, the terms and conditions
of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must
prepare all these data and disclose them to the public at the start of the disposition process, long
before the consummation of the contract, because the Government Auditing Code requires public
bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at
any time during the bidding process.

Information, however, on on-going evaluation or review of bids or proposals being undertaken by

the bidding or review committee is not immediately accessible under the right to information. While
the evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the
bids or proposals. However, once the committee makes its official recommendation, there arises
a "definite proposition" on the part of the government. From this moment, the public's right to
information attaches, and any citizen can access all the non-proprietary information leading to such
definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:

"Considering the intent of the framers of the Constitution, we believe that it is incumbent
upon the PCGG and its officers, as well as other government representatives, to disclose
sufficient public information on any proposed settlement they have decided to take up with
the ostensible owners and holders of ill-gotten wealth. Such information, though, must
pertain to definite propositions of the government, not necessarily to intra-agency or
inter-agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the "exploratory" stage. There
is need, of course, to observe the same restrictions on disclosure of information in general,
as discussed earlier such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information." (Emphasis supplied)

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission

understood that the right to information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not a requirement for the
exercise of the right to information. Otherwise, the people can never exercise the right if no contract
is consummated, and if one is consummated, it may be too late for the public to expose its defects. 1w phi 1.nt
Requiring a consummated contract will keep the public in the dark until the contract, which may be
grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates
the State policy of full transparency on matters of public concern, a situation which the framers of the
Constitution could not have intended. Such a requirement will prevent the citizenry from participating
in the public discussion of any proposedcontract, 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.39This 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.42The 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 Government by
dredging or filling or otherwise throughout the Philippine Islands, shall be retained by the
Government without prejudice to vested rights and without prejudice to rights conceded to
the City of Manila in the Luneta Extension.

Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made
or reclaimed by the Government by dredging or filling or otherwise to be divided into lots or
blocks, with the necessary streets and alleyways located thereon, and shall cause plats and
plans of such surveys to be prepared and filed with the Bureau of Lands.

(b) Upon completion of such plats and plans the Governor-General shall give notice to the
public that such parts of the lands so made or reclaimed as are not needed for public
purposes will be leased for commercial and business purposes, x x x.

xxx
 (e) The leases above provided for shall be disposed of to the highest and best
bidder therefore, subject to such regulations and safeguards as the Governor-General may
by executive order prescribe." (Emphasis supplied)

Act No. 1654 mandated that the government should retain title to all lands reclaimed by the
government. The Act also vested in the government control and disposition of foreshore lands.
Private parties could lease lands reclaimed by the government only if these lands were no longer
needed for public purpose. Act No. 1654 mandated public bidding in the lease of government
reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that unlike other
public lands which the government could sell to private parties, these reclaimed lands were available
only for lease to private parties.

Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654
did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law
of Waters. Lands reclaimed from the sea by private parties with government permission remained
private lands.

Act No. 2874 of the Philippine Legislature

On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.46 The
salient provisions of Act No. 2874, on reclaimed lands, were as follows:

"Sec. 6. The Governor-General, upon the recommendation of the Secretary of

Agriculture and Natural Resources, shall from time to time classify the lands of the
public domain into

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

Sec. 7. For the purposes of the government and disposition of alienable or disposable public
lands, the Governor-General, upon recommendation by the Secretary of Agriculture
and Natural Resources, shall from time to time declare what lands are open to
disposition or concession under this Act."

Sec. 8. Only those lands shall be declared open to disposition or concession which
have been officially delimited or classified x x x.

xxx

Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land,
shall be classified as suitable for residential purposes or for commercial, industrial, or
other productive purposes other than agricultural purposes, and shall be open to
disposition or concession, shall be disposed of under the provisions of this chapter, and not
otherwise.

Sec. 56. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

 (b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks of
navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

x x x.

Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be
disposed of to private parties by lease only and not otherwise, as soon as the
Governor-General, upon recommendation by the Secretary of Agriculture and Natural
Resources, shall declare that the same are not necessary for the public service and
are open to disposition under this chapter. The lands included in class (d) may be
disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain
into x x x alienable or disposable"47 lands. Section 7 of the Act empowered the Governor-General to
"declare what lands are open to disposition or concession." Section 8 of the Act limited alienable or
disposable lands only to those lands which have been "officially delimited and classified."

Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be classified" as
government reclaimed, foreshore and marshy lands, as well as other lands. All these lands,
however, must be suitable for residential, commercial, industrial or other productive non-
agricultural purposes. These provisions vested upon the Governor-General the power to classify
inalienable lands of the public domain into disposable lands of the public domain. These provisions
also empowered the Governor-General to classify further such disposable lands of the public domain
into government reclaimed, foreshore or marshy lands of the public domain, as well as other non-
agricultural lands.

Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain
classified as government reclaimed, foreshore and marshy lands "shall be disposed of to private
parties by lease only and not otherwise." The Governor-General, before allowing the lease of
these lands to private parties, must formally declare that the lands were "not necessary for the public
service." Act No. 2874 reiterated the State policy to lease and not to sell government reclaimed,
foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in Act No. 1654.
Government reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or
disposable lands of the public domain that the government could not sell to private parties.

The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy
public lands for non-agricultural purposes retain their inherent potential as areas for public service.
This is the reason the government prohibited the sale, and only allowed the lease, of these lands to
private parties. The State always reserved these lands for some future public service.

Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy
lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were
the only lands for non-agricultural purposes the government could sell to private parties. Thus, under
Act No. 2874, the government could not sell government reclaimed, foreshore and marshy lands to
private parties, unless the legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of
the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with
government permission remained private lands.

Dispositions under the 1935 Constitution

On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The
1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that

"Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of potential energy and other natural
resources of the Philippines belong to the State, and their disposition, exploitation,
development, or utilization shall be limited to citizens of the Philippines or to corporations or
associations at least sixty per centum of the capital of which is owned by such citizens,
subject to any existing right, grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution. Natural resources, with the exception of
public agricultural land, shall not be alienated, and no license, concession, or lease for
the exploitation, development, or utilization of any of the natural resources shall be granted
for a period exceeding twenty-five years, renewable for another twenty-five years, except as
to water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases beneficial use may be the measure and limit of
the grant." (Emphasis supplied)

The 1935 Constitution barred the alienation of all natural resources except public agricultural lands,
which were the only natural resources the State could alienate. Thus, foreshore lands, considered
part of the State's natural resources, became inalienable by constitutional fiat, available only for
lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands
only after these lands were reclaimed and classified as alienable agricultural lands of the public
domain. Government reclaimed and marshy lands of the public domain, being neither timber nor
mineral lands, fell under the classification of public agricultural lands.50 However, government
reclaimed and marshy lands, although subject to classification as disposable public agricultural
lands, could only be leased and not sold to private parties because of Act No. 2874.

The prohibition on private parties from acquiring ownership of government reclaimed and marshy
lands of the public domain was only a statutory prohibition and the legislature could therefore
remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from
acquiring government reclaimed and marshy lands of the public domain that were classified as
agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution
provided as follows:

"Section 2. No private corporation or association may acquire, lease, or hold public

agricultural lands in excess of one thousand and twenty four hectares, nor may any
individual acquire such lands by purchase in excess of one hundred and forty
hectares, or by lease in excess of one thousand and twenty-four hectares, or by
homestead in excess of twenty-four hectares. Lands adapted to grazing, not exceeding two
thousand hectares, may be leased to an individual, private corporation, or association."
(Emphasis supplied)

Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No.
2874 to open for sale to private parties government reclaimed and marshy lands of the public
domain. On the contrary, the legislature continued the long established State policy of retaining for
the government title and ownership of government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly

On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as
the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No.
141, as amended, remains to this day the existing general law governing the classification and
disposition of lands of the public domain other than timber and mineral lands.51

Section 6 of CA No. 141 empowers the President to classify lands of the public domain into
"alienable or disposable"52 lands of the public domain, 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,55Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:

"Foreshore lands are lands of public dominion intended for public use. So too are lands
reclaimed by the government by dredging, filling, or other means. Act 1654 mandated that
the control and disposition of the foreshore and lands under water remained in the national
government. Said law allowed only the 'leasing' of reclaimed land. The Public Land Acts of
1919 and 1936 also declared that the foreshore and lands reclaimed by the government
were to be "disposed of to private parties by lease only and not otherwise." Before leasing,
however, the Governor-General, upon recommendation of the Secretary of Agriculture and
Natural Resources, had first to determine that the land reclaimed was not necessary for the
public service. This requisite must have been met before the land could be disposed of. But
even then, the foreshore and lands under water were not to be alienated and sold to
 private parties. The disposition of the reclaimed land was only by lease. The land
remained property of the State." (Emphasis supplied)

As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained
in effect at present."

The State policy prohibiting the sale to private parties of government reclaimed, foreshore and
marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA
No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands,
however, became a constitutional edict under the 1935 Constitution. Foreshore lands became
inalienable as natural resources of the State, unless reclaimed by the government and classified as
agricultural lands of the public domain, in which case they would fall under the classification of
government reclaimed lands.

After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of
the public domain continued to be only leased and not sold to private parties.56 These lands
remained sui generis, as the only alienable or disposable lands of the public domain the
government could not sell to private parties.

Since then and until now, the only way the government can sell to private parties government
reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law
authorizing such sale. CA No. 141 does not authorize the President to reclassify government
reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified
under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that the
government could sell to private parties.

Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under
Section 59 that the government previously transferred to government units or entities could be sold
to private parties. Section 60 of CA No. 141 declares that

"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the
Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes
for which such sale or lease is requested, and shall not exceed one hundred and forty-four
hectares: Provided, however, That this limitation shall not apply to grants, donations, or
transfers made to a province, municipality or branch or subdivision of the Government for the
purposes deemed by said entities conducive to the public interest;but the land so granted,
donated, or transferred to a province, municipality or branch or subdivision of the
Government shall not be alienated, encumbered, or otherwise disposed of in a manner
affecting its title, except when authorized by Congress: x x x." (Emphasis supplied)

The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority
required in Section 56 of Act No. 2874.

One reason for the congressional authority is that Section 60 of CA No. 141 exempted government
units and entities from the maximum area of public lands that could be acquired from the State.
These government units and entities should not just turn around and sell these lands to private
parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-
agricultural purposes to government units and entities could be used to circumvent constitutional
limitations on ownership of alienable or disposable lands of the public domain. In the same manner,
such transfers could also be used to evade the statutory prohibition in CA No. 141 on the sale of
government reclaimed and marshy lands of the public domain to private parties. Section 60 of CA
No. 141 constitutes by operation of law a lien on these lands.57
In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No.
141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as
follows:

"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public
purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now
the Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of
such authority, the Director of Lands shall give notice by public advertisement in the same
manner as in the case of leases or sales of agricultural public land, x x x.

Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be
made to the highest bidder. x x x." (Emphasis supplied)

Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable
or disposable lands of the public domain.58

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish
Law of Waters of 1866. Private parties could still reclaim portions of the sea with government
permission. However, thereclaimed land could become private land only if classified as
alienable agricultural land of the public domain open to disposition under CA No. 141. The 1935
Constitution prohibited the alienation of all natural resources except public agricultural lands.

The Civil Code of 1950

The Civil Code of 1950 readopted substantially the definition of property of public dominion found in
the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that

"Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.

x x x.

Art. 422. Property of public dominion, when no longer intended for public use or for public
service, shall form part of the patrimonial property of the State."

Again, the government must formally declare that the property of public dominion is no longer
needed for public use or public service, before the same could be classified as patrimonial property
of the State.59 In the case of government reclaimed and marshy lands of the public domain, the
declaration of their being disposable, as well as the manner of their disposition, is governed by the
applicable provisions of CA No. 141.

Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those
properties of the State which, without being for public use, are intended for public service or the
"development of the national wealth." Thus, government reclaimed and marshy lands of the State,
even if not employed for public use or public service, if developed to enhance the national wealth,
are classified as property of public dominion.
Dispositions under the 1973 Constitution

The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian
doctrine. Section 8, Article XIV of the 1973 Constitution stated that

"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the
Philippines belong to the State. With the exception of agricultural, industrial or
commercial, residential, and resettlement lands of the public domain, natural
resources shall not be alienated, and no license, concession, or lease for the exploration,
development, exploitation, or utilization of any of the natural resources shall be granted for a
period exceeding twenty-five years, renewable for not more than twenty-five years, except as
to water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases, beneficial use may be the measure and the
limit of the grant." (Emphasis supplied)

The 1973 Constitution prohibited the alienation of all natural resources with the exception of
"agricultural, industrial or commercial, residential, and resettlement lands of the public domain." In
contrast, the 1935 Constitution barred the alienation of all natural resources except "public
agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution
encompassed industrial, commercial, residential and resettlement lands of the public domain.60 If the
land of public domain were neither timber nor mineral land, it would fall under the classification of
agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore,
prohibited the alienation of all natural resources except agricultural lands of the public
domain.

The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals
who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine
citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935
Constitution. Section 11, Article XIV of the 1973 Constitution declared that

"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and
development requirements of the natural resources, shall determine by law the size of land
of the public domain which may be developed, held or acquired by, or leased to, any
qualified individual, corporation, or association, and the conditions therefor. No private
corporation or association may hold alienable lands of the public domain except by
lease not to exceed one thousand hectares in area nor may any citizen hold such lands by
lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in
excess of twenty-four hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest resources in
excess of one hundred thousand hectares. However, such area may be increased by the
Batasang Pambansa upon recommendation of the National Economic and Development
Authority." (Emphasis supplied)

Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public
domain only through lease. Only individuals could now acquire alienable lands of the public domain,
and private corporations became absolutely barred from acquiring any kind of alienable land
of the public domain. The constitutional ban extended to all kinds of alienable lands of the public
domain, while the statutory ban under CA No. 141 applied only to government reclaimed, foreshore
and marshy alienable lands of the public domain.

PD No. 1084 Creating the Public Estates Authority

On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084
creating PEA, a wholly government owned and controlled corporation with a special charter.
Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers:

"Sec. 4. Purpose. The Authority is hereby created for the following purposes:

(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or
other means, or to acquire reclaimed land;

(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any
and all kinds of lands, buildings, estates and other forms of real property, owned,
managed, controlled and/or operated by the government;

(c) To provide for, operate or administer such service as may be necessary for the efficient,
economical and beneficial utilization of the above properties.

Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the
purposes for which it is created, have the following powers and functions:

(a)To prescribe its by-laws.

xxx

(i) To hold lands of the public domain in excess of the area permitted to private
corporations by statute.

(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse,
canal, ditch, flume x x x.

xxx

(o) To perform such acts and exercise such functions as may be necessary for the
attainment of the purposes and objectives herein specified." (Emphasis supplied)

PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain.
Foreshore areas are those covered and uncovered by the ebb and flow of the tide.61 Submerged
areas are those permanently under water regardless of the ebb and flow of the tide.62 Foreshore and
submerged areas indisputably belong to the public domain63 and are inalienable unless reclaimed,
classified as alienable lands open to disposition, and further declared no longer needed for public
service.

The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public
domain did not apply to PEA since it was then, and until today, a fully owned government
corporation. The constitutional ban applied then, as it still applies now, only to "private corporations
and associations." PD No. 1084 expressly empowers PEA "to hold lands of the public domain"
even "in excess of the area permitted to private corporations by statute." Thus, PEA can hold title
to private lands, as well as title to lands of the public domain.

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain,
there must be legislative authority empowering PEA to sell these lands. This legislative authority is
necessary in view of Section 60 of CA No.141, which states
 "Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or
branch or subdivision of the Government shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when authorized by Congress; x x x."
(Emphasis supplied)

Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and
submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to
PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional
ban on private corporations from acquiring alienable lands of the public domain. Hence, such
legislative authority could only benefit private individuals.

Dispositions under the 1987 Constitution

The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and
except for alienable agricultural lands of the public domain, natural resources cannot be alienated.
Sections 2 and 3, Article XII of the 1987 Constitution state that

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. x x x.

Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral
lands, and national parks. Agricultural lands of the public domain may be further classified by
law according to the uses which they may be devoted. Alienable lands of the public
domain shall be limited to agricultural lands. Private corporations or associations may
not hold such alienable lands of the public domain except by lease, for a period not
exceeding twenty-five years, renewable for not more than twenty-five years, and not to
exceed one thousand hectares in area. Citizens of the Philippines may lease not more
than five hundred hectares, or acquire not more than twelve hectares thereof by purchase,
homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and
subject to the requirements of agrarian reform, the Congress shall determine, by law, the
size of lands of the public domain which may be acquired, developed, held, or leased and
the conditions therefor." (Emphasis supplied)

The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations fromacquiring any kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public
domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing the
lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public
domain is still CA No. 141.

The Rationale behind the Constitutional Ban

The rationale behind the constitutional ban on corporations from acquiring, except through lease,
alienable lands of the public domain is not well understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed the rationale behind this ban, thus:
 "FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which
says:

`No private corporation or association may hold alienable lands of the public domain except
by lease, not to exceed one thousand hectares in area.'

If we recall, this provision did not exist under the 1935 Constitution, but this was introduced
in the 1973 Constitution. In effect, it prohibits private corporations from acquiring alienable
public lands. But it has not been very clear in jurisprudence what the reason for this is.
In some of the cases decided in 1982 and 1983, it was indicated that the purpose of this
is to prevent large landholdings. Is that the intent of this provision?

MR. VILLEGAS: I think that is the spirit of the provision.

FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances
where the Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a
chapel stood because the Supreme Court said it would be in violation of this." (Emphasis
supplied)

In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:

"Indeed, one purpose of the constitutional prohibition against purchases of public agricultural
lands by private corporations is to equitably diffuse land ownership or to encourage 'owner-
cultivatorship and the economic family-size farm' and to prevent a recurrence of cases like
the instant case. Huge landholdings by corporations or private persons had spawned social
unrest."

However, if the constitutional intent is to prevent huge landholdings, the Constitution could have
simply limited the size of alienable lands of the public domain that corporations could acquire. The
Constitution could have followed the limitations on individuals, who could acquire not more than 24
hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12
hectares under the 1987 Constitution.

If the constitutional intent is to encourage economic family-size farms, placing the land in the name
of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is
registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares
in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing
break-up of farmlands into smaller and smaller plots from one generation to the next.

In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from
acquiring more than the allowed area of alienable lands of the public domain. Without the
constitutional ban, individuals who already acquired the maximum area of alienable lands of the
public domain could easily set up corporations to acquire more alienable public lands. An individual
could own as many corporations as his means would allow him. An individual could even hide his
ownership of a corporation by putting his nominees as stockholders of the corporation. The
corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by
individuals of alienable lands of the public domain.

The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a
limited area of alienable land of the public domain to a qualified individual. This constitutional intent
is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public
domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable
public lands are gradually decreasing in the face of an ever-growing population. The most effective
way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the
public domain only to individuals. This, it would seem, is the practical benefit arising from the
constitutional ban.

The Amended Joint Venture Agreement

The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:

1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo
Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of
1,578,441 square meters;"

2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and

3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to
regularize the configuration of the reclaimed area."65

PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further
reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently reclaim
another 350 hectares x x x."66

In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the
750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are
still submerged areas forming part of Manila Bay.

Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's
"actual cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own
expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation
costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will
share, in the proportion of 70 percent and 30 percent, respectively, the total net usable area which is
defined in the Amended JVA as the total reclaimed area less 30 percent earmarked for common
areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will be issued in the
name of AMARI. Section 5.2 (c) of the Amended JVA provides that

"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or
conveyance of the title pertaining to AMARI's Land share based on the Land Allocation
Plan. PEA, when requested in writing by AMARI, shall then cause the issuance and
delivery of the proper certificates of title covering AMARI's Land Share in the name of
AMARI, x x x; provided, that if more than seventy percent (70%) of the titled area at any
given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the
titles pertaining to AMARI, until such time when a corresponding proportionate area of
additional land pertaining to PEA has been titled." (Emphasis supplied)

Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5
hectares of reclaimed land which will be titled in its name.

To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture
PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila
Bay. Section 3.2.a of the Amended JVA states that
 "PEA hereby contributes to the joint venture its rights and privileges to perform Rawland
Reclamation and Horizontal Development as well as own the Reclamation Area, thereby
granting the Joint Venture the full and exclusive right, authority and privilege to undertake the
Project in accordance with the Master Development Plan."

The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its
supplemental agreement dated August 9, 1995.

The Threshold Issue

The threshold issue is whether AMARI, a private corporation, can acquire and own under the
Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of
Sections 2 and 3, Article XII of the 1987 Constitution which state that:

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. x x x.

xxx

Section 3. x x x Alienable lands of the public domain shall be limited to agricultural

lands. Private corporations or associations may not hold such alienable lands of the
public domain except by lease, x x x."(Emphasis supplied)

Classification of Reclaimed Foreshore and Submerged Areas

PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its Memorandum,67 PEA admits that

"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as
alienable and disposable lands of the public domain:

'Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the government by dredging, filling, or other means;

x x x.'" (Emphasis supplied)

Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365
admitted in its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands
are classified as alienable and disposable lands of the public domain."69 The Legal Task Force
concluded that

"D. Conclusion

Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of
ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of
which PEA, as owner, may validly convey the same to any qualified person without violating
the Constitution or any statute.
 The constitutional provision prohibiting private corporations from holding public land, except
by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands whose
ownership has passed on to PEA by statutory grant."

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila
Bay are part of the "lands of the public domain, waters x x x and other natural resources" and
consequently "owned by the State." As such, foreshore and submerged areas "shall not be
alienated," unless they are classified as "agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert these inalienable natural resources of the State
into alienable or disposable lands of the public domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-public use.71

Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or
concession which have been officially delimited and classified."72 The President has the authority
to classify inalienable lands of the public domain into alienable or disposable lands of the public
domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive Department
attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the Philippine
Government for use as the Chancery of the Philippine Embassy. Although the Chancery had
transferred to another location thirteen years earlier, the Court still ruled that, under Article 42274of
the Civil Code, a property of public dominion retains such character until formally declared
otherwise. The Court ruled that

"The fact that the Roppongi site has not been used for a long time for actual Embassy
service does not automatically convert it to patrimonial property. Any such conversion
happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co.
v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public domain,
not available for private appropriation or ownership 'until there is a formal declaration
on the part of the government to withdraw it from being such'(Ignacio v. Director of
Lands, 108 Phil. 335 [1960]." (Emphasis supplied)

PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands
reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then
President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84
hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the
Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the
name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of title are still in the name of PEA.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as
alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of
a land patent also constitute a declaration that the Freedom Islands are no longer needed for public
service. The Freedom Islands are thus alienable or disposable lands of the public domain,
open to disposition or concession to qualified parties.

At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the
Freedom Islands although subsequently there were partial erosions on some areas. The government
had also completed the necessary surveys on these islands. Thus, the Freedom Islands were no
longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution
classifies lands of the public domain into "agricultural, forest or timber, mineral lands, and national
parks." Being neither timber, mineral, nor national park lands, the reclaimed Freedom Islands
necessarily fall under the classification of agricultural lands of the public domain. Under the 1987
Constitution, agricultural lands of the public domain are the only natural resources that the State may
alienate to qualified private parties. All other natural resources, such as the seas or bays, are
"waters x x x owned by the State" forming part of the public domain, and are inalienable pursuant to
Section 2, Article XII of the 1987 Constitution.

AMARI claims that the Freedom Islands are private lands because CDCP, then a private
corporation, reclaimed the islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866,
argues that "if the ownership of reclaimed lands may be given to the party constructing the works,
then it cannot be said that reclaimed lands are lands of the public domain which the State may not
alienate."75 Article 5 of the Spanish Law of Waters reads as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State,
or by the provinces, pueblos or private persons, with proper permission, shall become the
property of the party constructing such works, unless otherwise provided by the terms of
the grant of authority." (Emphasis supplied)

Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only
with "proper permission" from the State. Private parties could own the reclaimed land only if not
"otherwise provided by the terms of the grant of authority." This clearly meant that no one could
reclaim from the sea without permission from the State because the sea is property of public
dominion. It also meant that the State could grant or withhold ownership of the reclaimed land
because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a
private person reclaiming from the sea without permission from the State could not acquire
ownership of the reclaimed land which would remain property of public dominion like the sea it
replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of
land ownership that "all lands that were not acquired from the government, either by purchase or by
grant, belong to the public domain."77

Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must
first be classified as alienable or disposable before the government can alienate them. These lands
must not be reserved for public or quasi-public purposes.78 Moreover, the contract between CDCP
and the government was executed after the effectivity of the 1973 Constitution which barred private
corporations from acquiring any kind of alienable land of the public domain. This contract could not
have converted the Freedom Islands into private lands of a private corporation.

Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the
reclamation of areas under water and revested solely in the National Government the power to
reclaim lands. Section 1 of PD No. 3-A declared that

"The provisions of any law to the contrary notwithstanding, the reclamation of areas
under water, whether foreshore or inland, shall be limited to the National Government or
any person authorized by it under a proper contract. (Emphasis supplied)

x x x."

PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas
under water could now be undertaken only by the National Government or by a person contracted by
the National Government. Private parties may reclaim from the sea only under a contract with the
National Government, and no longer by grant or permission as provided in Section 5 of the Spanish
Law of Waters of 1866.

Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the government," which
"shall be undertaken by the PEA or through a proper contract executed by it with any person
or entity." Under such contract, a private party receives compensation for reclamation services
rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of portions of the
reclaimed land, subject to the constitutional ban on private corporations from acquiring alienable
lands of the public domain. The reclaimed land can be used as payment in kind only if the reclaimed
land is first classified as alienable or disposable land open to disposition, and then declared no
longer needed for public service.

The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares
which are still submerged and forming part of Manila Bay. There is no legislative or Presidential
act classifying these submerged areas as alienable or disposable lands of the public domain
open to disposition. These submerged areas are not covered by any patent or certificate of title.
There can be no dispute that these submerged areas form part of the public domain, and in their
present state are inalienable and outside the commerce of man. Until reclaimed from the sea,
these submerged areas are, under the Constitution, "waters x x x owned by the State," forming part
of the public domain and consequently inalienable. Only when actually reclaimed from the sea can
these submerged areas be classified as public agricultural lands, which under the Constitution are
the only natural resources that the State may alienate. Once reclaimed and transformed into public
agricultural lands, the government may then officially classify these lands as alienable or disposable
lands open to disposition. Thereafter, the government may declare these lands no longer needed for
public service. Only then can these reclaimed lands be considered alienable or disposable lands of
the public domain and within the commerce of man.

The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable
lands open to disposition is necessary because PEA is tasked under its charter to undertake public
services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the
functions of PEA include the following: "[T]o own or operate railroads, tramways and other kinds of
land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as
may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary."
PEA is empowered to issue "rules and regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads, utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for their use." Thus, part of the reclaimed foreshore
and submerged lands held by the PEA would actually be needed for public use or service since
many of the functions imposed on PEA by its charter constitute essential public services.

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government." The same section also states that "[A]ll reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a
proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation
to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No. 525
recognized PEA as the government entity "to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests."79 Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal declaration
segregating reclaimed lands no longer needed for public service from those still needed for public
service.1wphi 1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned
by the PEA," could not automatically operate to classify inalienable lands into alienable or disposable
lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the public
domain would automatically become alienable once reclaimed by PEA, whether or not classified as
alienable or disposable.

The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests
in the Department of Environment and Natural Resources ("DENR" for brevity) the following powers
and functions:

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

(1) x x x

xxx

(4) Exercise supervision and control over forest lands, alienable and disposable public
lands, mineral resources and, in the process of exercising such control, impose appropriate
taxes, fees, charges, rentals and any such form of levy and collect such revenues for the
exploration, development, utilization or gathering of such resources;

xxx

(14) Promulgate rules, regulations and guidelines on the issuance of licenses,

permits, concessions, lease agreements and such other privileges concerning the
development, exploration and utilization of the country's marine, freshwater, and
brackish water and over all aquatic resources of the country and shall continue to
oversee, supervise and police our natural resources; cancel or cause to cancel such
privileges upon failure, non-compliance or violations of any regulation, order, and for all other
causes which are in furtherance of the conservation of natural resources and supportive of
the national interest;

(15) Exercise exclusive jurisdiction on the management and disposition of all lands of
the public domain and serve as the sole agency responsible for classification, sub-
classification, surveying and titling of lands in consultation with appropriate
agencies."80 (Emphasis supplied)

As manager, conservator and overseer of the natural resources of the State, DENR exercises
"supervision and control over alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus,
DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should
be reclaimed or not. This means that PEA needs authorization from DENR before PEA can
undertake reclamation projects in Manila Bay, or in any part of the country.

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain.
Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under
Sections 681 and 782 of CA No. 141. Once DENR decides that the reclaimed lands should be so
classified, it then recommends to the President the issuance of a proclamation classifying the lands
as alienable or disposable lands of the public domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the
Revised Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water, while
PEA is vested with the power to undertake the physical reclamation of areas under water, whether
directly or through private contractors. DENR is also empowered to classify lands of the public
domain into alienable or disposable lands subject to the approval of the President. On the other
hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.

Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not
make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial
lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain
to PEA does not make the lands alienable or disposable lands of the public domain, much less
patrimonial lands of PEA.

Absent two official acts a classification that these lands are alienable or disposable and open to
disposition and a declaration that these lands are not needed for public service, lands reclaimed by
PEA remain inalienable lands of the public domain. Only such an official classification and formal
declaration can convert reclaimed lands into alienable or disposable lands of the public domain,
open to disposition under the Constitution, Title I and Title III83of CA No. 141 and other applicable
laws.84

PEA's Authority to Sell Reclaimed Lands

PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain,
the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA,
citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of
the government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting
its title, except when authorized by Congress: x x x."85 (Emphasis by PEA)

In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which
states that

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following: x x x."

Thus, the Court concluded that a law is needed to convey any real property belonging to the
Government. The Court declared that -

"It is not for the President to convey real property of the government on his or her own sole
will. Any such conveyance must be authorized and approved by a law enacted by the
Congress. It requires executive and legislative concurrence." (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to
sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that

"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the
contract for the reclamation and construction of the Manila-Cavite Coastal Road Project
between the Republic of the Philippines and the Construction and Development Corporation
of the Philippines dated November 20, 1973 and/or any other contract or reclamation
covering the same area is hereby transferred, conveyed and assigned to the ownership
and administration of the Public Estates Authority established pursuant to PD No. 1084;
Provided, however, That the rights and interests of the Construction and Development
 Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and
respected.

Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations
of the Republic of the Philippines (Department of Public Highways) arising from, or incident
to, the aforesaid contract between the Republic of the Philippines and the Construction and
Development Corporation of the Philippines.

In consideration of the foregoing transfer and assignment, the Public Estates Authority shall
issue in favor of the Republic of the Philippines the corresponding shares of stock in said
entity with an issued value of said shares of stock (which) shall be deemed fully paid and
non-assessable.

The Secretary of Public Highways and the General Manager of the Public Estates Authority
shall execute such contracts or agreements, including appropriate agreements with the
Construction and Development Corporation of the Philippines, as may be necessary to
implement the above.

Special land patent/patents shall be issued by the Secretary of Natural Resources in

favor of the Public Estates Authority without prejudice to the subsequent transfer to
the contractor or his assignees of such portion or portions of the land reclaimed or to
be reclaimed as provided for in the above-mentioned contract. On the basis of such
patents, the Land Registration Commission shall issue the corresponding certificate
of title." (Emphasis supplied)

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -

"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall
be responsible for its administration, development, utilization or disposition in accordance
with the provisions of Presidential Decree No. 1084. Any and all income that the PEA may
derive from the sale, lease or use of reclaimed lands shall be used in accordance with the
provisions of Presidential Decree No. 1084."

There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed
lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from
Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be
owned by PEA." EO No. 525 expressly states that PEA should dispose of its reclaimed lands "in
accordance with the provisions of Presidential Decree No. 1084," the charter of PEA.

PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled
and/or operated by the government."87 (Emphasis supplied) There is, therefore, legislative
authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public
domain. PEA may sell to private parties itspatrimonial properties in accordance with the PEA
charter free from constitutional limitations. The constitutional ban on private corporations from
acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial lands.

PEA may also sell its alienable or disposable lands of the public domain to private individuals
since, with the legislative authority, there is no longer any statutory prohibition against such sales
and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its
alienable or disposable lands of the public domain to private corporations since Section 3, Article XII
of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only
individuals. Private corporations remain barred from acquiring any kind of alienable land of the public
domain, including government reclaimed lands.

The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by
PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private corporations
but only to individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085
would violate both the 1973 and 1987 Constitutions.

The requirement of public auction in the sale of reclaimed lands

Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to
disposition, and further declared no longer needed for public service, PEA would have to conduct a
public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and
67 of CA No. 141 requiring public auction, in the absence of a law exempting PEA from holding a
public auction.88 Special Patent No. 3517 expressly states that the patent is issued by authority of
the Constitution and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended."
This is an acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed
alienable lands of the public domain unless otherwise provided by law. Executive Order No.
654,89 which authorizes PEA "to determine the kind and manner of payment for the transfer" of its
assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654
merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does
not authorize PEA to dispense with public auction.

Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code,
the government is required to sell valuable government property through public bidding. Section 79
of PD No. 1445 mandates that

"Section 79. When government property has become unserviceable for any cause, or is no
longer needed, it shall, upon application of the officer accountable therefor, be inspected by
the head of the agency or his duly authorized representative in the presence of the auditor
concerned and, if found to be valueless or unsaleable, it may be destroyed in their
presence. If found to be valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or similar body in the
presence of the auditor concerned or other authorized representative of the
Commission, after advertising by printed notice in the Official Gazette, or for not less
than three consecutive days in any newspaper of general circulation, or where the
value of the property does not warrant the expense of publication, by notices posted for a like
period in at least three public places in the locality where the property is to be sold. In the
event that the public auction fails, the property may be sold at a private sale at such
price as may be fixed by the same committee or body concerned and approved by the
Commission."

It is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price.90 The Commission on Audit implements
Section 79 of the Government Auditing Code through Circular No. 89-29691 dated January 27, 1989.
This circular emphasizes that government assets must be disposed of only through public auction,
and a negotiated sale can be resorted to only in case of "failure of public auction."

At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore
and submerged alienable lands of the public domain. Private corporations are barred from bidding at
the auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA
imposed a condition that the winning bidder should reclaim another 250 hectares of submerged
areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of the additional
reclaimed areas in favor of the winning bidder.92 No one, however, submitted a bid. On December
23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands
through negotiation, without need of another public bidding, because of the failure of the public
bidding on December 10, 1991.93

However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the
additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another
350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to 750
hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84 hectares,95 is
not a valid justification for a negotiated sale of 750 hectares, almost double the area publicly
auctioned. Besides, the failure of public bidding happened on December 10, 1991, more than three
years before the signing of the original JVA on April 25, 1995. The economic situation in the country
had greatly improved during the intervening period.

Reclamation under the BOT Law and the Local Government Code

The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear:
"Private corporations or associations may not hold such alienable lands of the public domain except
by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as
legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban.
Section 6 of RA No. 6957 states

"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance
of any infrastructure projects undertaken through the build-operate-and-transfer arrangement
or any of its variations pursuant to the provisions of this Act, the project proponent x x x may
likewise be repaid in the form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed
land, subject to the constitutional requirements with respect to the ownership of the
land: x x x." (Emphasis supplied)

A private corporation, even one that undertakes the physical reclamation of a government BOT
project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional
ban.

Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:

"Section 302. Financing, Construction, Maintenance, Operation, and Management of

Infrastructure Projects by the Private Sector. x x x

xxx

In case of land reclamation or construction of industrial estates, the repayment plan may
consist of the grant of a portion or percentage of the reclaimed land or the industrial estate
constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar to that of the
BOT Law, the constitutional restrictions on land ownership automatically apply even though not
expressly mentioned in the Local Government Code.

Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor
or developer is an individual, portions of the reclaimed land, not exceeding 12 hectares96 of non-
agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing
such conveyance. This is the only way these provisions of the BOT Law and the Local Government
Code can avoid a direct collision with Section 3, Article XII of the 1987 Constitution.

Registration of lands of the public domain

Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public
respondent PEA transformed such lands of the public domain to private lands." This theory is
echoed by AMARI which maintains that the "issuance of the special patent leading to the eventual
issuance of title takes the subject land away from the land of public domain and converts the
property into patrimonial or private property." In short, PEA and AMARI contend that with the
issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84 hectares
comprising the Freedom Islands have become private lands of PEA. In support of their theory, PEA
and AMARI cite the following rulings of the Court:

1. Sumail v. Judge of CFI of Cotabato,97 where the Court held

"Once the patent was granted and the corresponding certificate of title was issued, the land
ceased to be part of the public domain and became private property over which the Director
of Lands has neither control nor jurisdiction."

2. Lee Hong Hok v. David,98 where the Court declared -

"After the registration and issuance of the certificate and duplicate certificate of title based on
a public land patent, the land covered thereby automatically comes under the operation of
Republic Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio Tengco
v. Heirs of Jose Aliwalas,99 where the Court ruled -

"While the Director of Lands has the power to review homestead patents, he may do so only
so long as the land remains part of the public domain and continues to be under his
exclusive control; but once the patent is registered and a certificate of title is issued, the land
ceases to be part of the public domain and becomes private property over which the Director
of Lands has neither control nor jurisdiction."

4. Manalo v. Intermediate Appellate Court,100 where the Court held

"When the lots in dispute were certified as disposable on May 19, 1971, and free patents
were issued covering the same in favor of the private respondents, the said lots ceased to be
part of the public domain and, therefore, the Director of Lands lost jurisdiction over the
same."

5.Republic v. Court of Appeals,101 where the Court stated

 "Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a
land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of
Health, of the whole lot, validly sufficient for initial registration under the Land Registration
Act. Such land grant is constitutive of a 'fee simple' title or absolute title in favor of petitioner
Mindanao Medical Center. Thus, Section 122 of the Act, which governs the registration of
grants or patents involving public lands, provides that 'Whenever public lands in the
Philippine Islands belonging to the Government of the United States or to the Government of
the Philippines are alienated, granted or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the operation of this Act (Land
Registration Act, Act 496) and shall become registered lands.'"

The first four cases cited involve petitions to cancel the land patents and the corresponding
certificates of titlesissued to private parties. These four cases uniformly hold that the Director of
Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land
automatically comes under the Torrens System. The fifth case cited involves the registration under
the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao
Medical Center, a government unit under the Department of Health. The National Government
transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other
facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the
registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section
122 of Act No. 496. This fifth case is an example of a public land being registered under Act No. 496
without the land losing its character as a property of public dominion.

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a
wholly government owned corporation performing public as well as proprietary functions. No patent
or certificate of title has been issued to any private party. No one is asking the Director of Lands to
cancel PEA's patent or certificates of title. In fact, the thrust of the instant petition is that PEA's
certificates of title should remain with PEA, and the land covered by these certificates, being
alienable lands of the public domain, should not be sold to a private corporation.

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or
public ownership of the land. Registration is not a mode of acquiring ownership but is merely
evidence of ownership previously conferred by any of the recognized modes of acquiring ownership.
Registration does not give the registrant a better right than what the registrant had prior to the
registration.102 The registration of lands of the public domain under the Torrens system, by itself,
cannot convert public lands into private lands.103

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to government
units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the
provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President
Aquino, to wit:

"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and
in conformity with the provisions of Presidential Decree No. 1084, supplemented by
Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto
the Public Estates Authority the aforesaid tracts of land containing a total area of one million
nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the
technical description of which are hereto attached and made an integral part hereof."
(Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No.
1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of
alienable lands of the public domain that are transferred to government units or entities. Section 60
of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of the
registered land even if not annotated on the certificate of title.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 Government's declared
policy to provide for a coordinated, economical and efficient reclamation of lands;

Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited
to the National Government or any person authorized by it under proper contract;

Whereas, a central authority is needed to act on behalf of the National Government

which shall ensure a coordinated and integrated approach in the reclamation of lands;

Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a
government corporation to undertake reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests; and

Whereas, Presidential Decree No. 1416 provides the President with continuing authority to
reorganize the national government including the transfer, abolition, or merger of functions
and offices.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of

the powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416,
do hereby order and direct the following:
 Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of
the National Government. All reclamation projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; Provided, that, reclamation projects of any
national government agency or entity authorized under its charter shall be undertaken in
consultation with the PEA upon approval of the President.

x x x ."

As the central implementing agency tasked to undertake reclamation projects nationwide, with
authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged
with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or
sold by PEA are not private lands, in the same manner that DENR, when it disposes of other
alienable lands, does not dispose of private lands but alienable lands of the public domain. Only
when qualified private parties acquire these lands will the lands become private lands. In the hands
of the government agency tasked and authorized to dispose of alienable of disposable lands
of the public domain, these lands are still public, not private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as
well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands.
Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's name does not
automatically make such lands private.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands
will sanction a gross violation of the constitutional ban on private corporations from acquiring any
kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done
under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to
be reclaimed lands to a single private corporation in only one transaction. This scheme will
effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was
intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos,
now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain
since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to
corporations and even individuals acquiring hundreds of hectares of alienable lands of the public
domain under the guise that in the hands of PEA these lands are private lands. This will result in
corporations amassing huge landholdings never before seen in this country - creating the very evil
that the constitutional ban was designed to prevent. This will completely reverse the clear direction
of constitutional development in this country. The 1935 Constitution allowed private corporations to
acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution prohibited private
corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally
reiterated this prohibition.

The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No.
1529, automatically become private lands is contrary to existing laws. Several laws authorize lands
of the public domain to be registered under the Torrens System or Act No. 496, now PD No. 1529,
without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD No.
1529, respectively, provide as follows:

Act No. 496

 "Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x
Government of the Philippine Islands are alienated, granted, or conveyed to persons or
the public or private corporations, the same shall be brought forthwith under the operation
of this Act and shall become registered lands."

PD No. 1529

"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government
alienated, granted or conveyed to any person, the same shall be brought forthwith under the
operation of this Decree." (Emphasis supplied)

Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529
includes conveyances of public lands to public corporations.

Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or
branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be
registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration,
however, is expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not be
alienated, encumbered or otherwise disposed of in a manner affecting its title, except when
authorized by Congress." This provision refers to government reclaimed, foreshore and marshy
lands of the public domain that have been titled but still cannot be alienated or encumbered unless
expressly authorized by Congress. The need for legislative authority prevents the registered land of
the public domain from becoming private land that can be disposed of to qualified private parties.

The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be
registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed
in behalf of the government by the following:

(1) x x x

(2) For property belonging to the Republic of the Philippines, but titled in the name of
any political subdivision or of any corporate agency or instrumentality, by the
executive head of the agency or instrumentality." (Emphasis supplied)

Thus, private property purchased by the National Government for expansion of a public wharf may
be titled in the name of a government corporation regulating port operations in the country. Private
property purchased by the National Government for expansion of an airport may also be titled in the
name of the government agency tasked to administer the airport. Private property donated to a
municipality for use as a town plaza or public school site may likewise be titled in the name of the
municipality.106 All these properties become properties of the public domain, and if already registered
under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in
any existing law for the de-registration of land from the Torrens System.

Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the
Register of Deeds to issue in the name of the National Government new certificates of title covering
such expropriated lands. Section 85 of PD No. 1529 states
 "Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein,
is expropriated or taken by eminent domain, the National Government, province, city or
municipality, or any other agency or instrumentality exercising such right shall file for
registration in the proper Registry a certified copy of the judgment which shall state definitely
by an adequate description, the particular property or interest expropriated, the number of
the certificate of title, and the nature of the public use. A memorandum of the right or interest
taken shall be made on each certificate of title by the Register of Deeds, and where the fee
simple is taken, a new certificate shall be issued in favor of the National Government,
province, city, municipality, or any other agency or instrumentality exercising such right for
the land so taken. The legal expenses incident to the memorandum of registration or
issuance of a new certificate of title shall be for the account of the authority taking the land or
interest therein." (Emphasis supplied)

Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or
patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.

AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands
or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the
Amended JVA "is not a sale but a joint venture with a stipulation for reimbursement of the original
cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP
under its 1973 contract with the Republic." Whether the Amended JVA is a sale or a joint venture,
the fact remains that the Amended JVA requires PEA to "cause the issuance and delivery of the
certificates of title conveying AMARI's Land Share in the name of AMARI."107

This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that
private corporations "shall not hold such alienable lands of the public domain except by lease." The
transfer of title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands
other than by lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a
transaction considered a sale or alienation under CA No. 141,108 the Government Auditing
Code,109 and Section 3, Article XII of the 1987 Constitution.

The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas
form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged
areas also form part of the public domain and are also inalienable, unless converted pursuant to law
into alienable or disposable lands of the public domain. Historically, lands reclaimed by the
government are sui generis, not available for sale to private parties unlike other alienable public
lands. Reclaimed lands retain their inherent potential as areas for public use or public service.
Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be
distributed equitably among our ever-growing population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable
land of the public domain. Those who attempt to dispose of inalienable natural resources of the
State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to
private corporations, do so at their own risk.

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by
certificates of title in the name of PEA, are alienable lands of the public domain. PEA may
lease these lands to private corporations but may not sell or transfer ownership of these
lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to
the ownership limitations in the 1987 Constitution and existing laws.
 2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural
resources of the public domain until classified as alienable or disposable lands open to
disposition and declared no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed these submerged areas.
Only then can these lands qualify as agricultural lands of the public domain, which are the
only natural resources the government can alienate. In their present state, the 592.15
hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of
77.34 hectares110 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
hectares111 of still submerged areas of Manila Bay, such transfer is void for being contrary to
Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural
resources other than agricultural lands of the public domain. PEA may reclaim these
submerged areas. Thereafter, the government can classify the reclaimed lands as alienable
or disposable, and further declare them no longer needed for public service. Still, the transfer
of such reclaimed alienable lands of the public domain to AMARI will be void in view of
Section 3, Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution.
Under Article 1409112 of the Civil Code, contracts whose "object or purpose is contrary to law," or
whose "object is outside the commerce of men," are "inexistent and void from the beginning." The
Court must perform its duty to defend and uphold the Constitution, and therefore declares the
Amended JVA null and void ab initio.

Seventh issue: whether the Court is the proper forum to raise the issue of whether the
Amended JVA is grossly disadvantageous to the government.

Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last
issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual
matters.

WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint
Venture Agreement which is hereby declared NULL and VOID ab initio.

SO ORDERED.

The Public Estates Authority (PEA) is the central implementing agency tasked to undertake
reclamation projects nationwide. It took over the leasing and selling functions of the DENR
(Department of Environmental and Natural Resources) insofar as reclaimed or about to be
reclaimed foreshore lands are concerned.
PEA sought the transfer to the Amari Coastal Bay and Development Corporation, a private
corporation, of the ownership of 77.34 hectares of the Freedom Islands. PEA also sought to
have 290.156 hectares of submerged areas of Manila Bay to Amari.
ISSUE: Whether or not the transfer is valid.
HELD: No. To allow vast areas of reclaimed lands of the public domain to be transferred to
Amari 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.
The Supreme Court affirmed that 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. The 592.15 hectares of submerged areas of Manila Bay remain
inalienable natural resources of the public domain. The transfer (as embodied in a joint
venture agreement) to AMARI, a private corporation, ownership of 77.34 hectares of the
Freedom Islands, 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. Furthermore, since the Amended JVA also seeks to transfer to Amari ownership of
290.156 hectares 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.

Chavez vs. NHA

Francisco I. Chavez vs. National Housing Authority
G.R. No 164527. August 15, 2007.
Velasco, Jr., J.
Doctrine: There must be a law or presidential proclamation officially classifying these reclaimed lands as
alienable or disposable and open to disposition or concession.
Facts: Petitioner Francisco Chavez in his capacity as taxpayer seeks to declare null and void the Joint Venture
Agreement (JVA) between the NHA and R-II Builders Inc (RBI) for being unconstitutional and invalid, and
to enjoin respondents particularly respondent NHA from implementing and/or enforcing the said project
and other agreements related thereto. On March 1, 1988, then President Corazon C. Aquino issued
Memorandum Order No. 161 (MO 161) approving and directing the implementation of the Comprehensive
and Integrated Metropolitan Manila Waste Management Plan. Specifically, respondent NHA was ordered to
conduct feasibility studies and develop low-cost housing projects at the dumpsite and absorb scavengers in
NHA resettlement/low-cost housing projects.
Pursuant to MO 161-A, NHA prepared the feasibility studies which resulted in the formulation of the Smokey
Mountain Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain Development
and Reclamation Project (SMDRP). SMDRP aimed to convert the Smokey Mountain dumpsite into a habitable
housing project, inclusive of the reclamation of the area across R-10, adjacent to the Smokey Mountain as the
enabling component of the project. Once finalized, the Plan was submitted to President Aquino for her
approval.

On January 17, 1992, President Aquino proclaimed MO 415, approving and directing the implementation of
the SMDRP through a private sector joint venture. Said MO stipulated that the land area covered by the
Smokey Mountain dumpsite is conveyed to the NHA as well as the area to be reclaimed across R-10. In the
same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the implementation
of the Plan and an inter-agency technical committee (TECHCOM) was created composed of the technical
representatives of the EXECOM. Based on the evaluation of the pre-qualification documents, the EXECOM
declared the New San Jose Builders, Inc. and RBI as top two contractors. Thereafter, TECHCOM submitted its
recommendation to the EXECOM to approve the RBI proposal which garnered the highest score.

On October 7, 1992, President Ramos authorized NHA to enter into a JVA with RBI. Afterwards, President
Ramos issued Proclamation No. 465 increasing the proposed area for reclamation across R-10 from 40
hectares to 79 hectares. On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special
Patent No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain
Dumpsite. The land reclamation was completed in August 1996. Sometime later in 1996, pursuant likewise to
Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying in favor of NHA an additional
390,000 square meter area. After some time, the JVA was terminated. RBI demanded the payment of just
compensation for all accomplishments and costs incurred in developing the SMDRP plus a reasonable rate of
return. In a Memorandum of Agreement (MOA) executed by NHA and RBI, both parties agreed to terminate
the JVA and other subsequent agreements, which stipulated, among others, that unpaid balance may be paid in
cash, bonds or through the conveyance of properties or any combination thereof.

Issues:
1. Whether RBI can acquire reclaimed foreshore and submerged land areas because they are allegedly
inalienable lands of the public domain
2. Whether RBI can acquire reclaimed lands when there was no declaration that said lands are no longer
needed for public use.
3. Whether RBI, being a private corporation, is barred from the Constitution to acquire lands of the public
domain.
Held:
1. Yes. The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the
State. First, there were three presidential proclamations classifying the reclaimed lands across R-10 as
alienable or disposable hence open to disposition or concession. These were MO 415 issued by President
Aquino, Proclamation No. 39 and Proclamation No. 465 both issued by President Ramos. Secondly, Special
Patents Nos. 3591, 3592, and 3598 issued by the DENR classified the reclaimed areas as alienable and
disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the
lands to be reclaimed are classified as alienable and disposable. We find however that such conclusion is
derived and implicit from the authority given to the NHA to transfer the reclaimed lands to qualified
beneficiaries. In line with the ruling in Chavez v. PEA, the court held that MO 415 and Proclamations Nos. 39
and 465 cumulatively and jointly taken together with Special Patent Nos. 3591, 3592, and 3598 more than
satisfy the requirement in PEA that [t]here must be a law or presidential proclamation officially classifying
these reclaimed lands as alienable or disposable and open to disposition or concession.

2. Yes. Even if it is conceded that there was no explicit declaration that the lands are no longer needed for
public use or public service, there was however an implicit executive declaration that the reclaimed areas R-10
are not necessary anymore for public use or public service. President Aquino through MO 415 conveyed the
same to the NHA partly for housing project and related commercial/industrial development intended for
disposition to and enjoyment of certain beneficiaries and not the public in general and partly as enabling
component to finance the project. Also, President Ramos, in issuing Proclamation No. 39, declared, though
indirectly, that the reclaimed lands of the Smokey Mountain project are no longer required for public use or
service. In addition, President Ramos issued Proclamation No. 465 increasing the area to be reclaimed from
forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are undoubtedly set aside for the
beneficiaries of SMDRP and not the public. MO 415 and Proclamations Nos. 39 and 465 are declarations that
proclaimed the non-use of the reclaimed areas for public use or service as the SMDRP cannot be successfully
implemented without the withdrawal of said lands from public use or service.

3. Yes. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said proclamations
were converted to alienable and disposable lands of public domain. When the titles to the reclaimed lands were
transferred to the NHA, said alienable and disposable lands of public domain were automatically classified as
lands of the private domain or patrimonial properties of the State because the NHA is an agency NOT tasked to
dispose of alienable or disposable lands of public domain. The only way it can transfer the reclaimed land in
conjunction with its projects and to attain its goals is when it is automatically converted to patrimonial
properties of the State. Being patrimonial or private properties of the State, then it has the power to sell the
same to any qualified personunder the Constitution, Filipino citizens as private corporations, 60% of which
is owned by Filipino citizens like RBI.
Case Digest: Chavez v. National Housing Authority
Posted: August 4, 2010 in Case Digests
Tags: case, constitution, digest, land, law, nha, Philippines, territory

2
G.R. No. 164527 15 August 2007

Ponente: VELASCO, JR., J.

FACTS:

On August 5, 2004, former Solicitor General Francisco Chavez, filed an instant petition raising constitutional issues on the JVA

entered by National Housing Authority and R-II Builders, Inc.

On March 1, 1988, then-President Cory Aquino issued Memorandum order No. (MO) 161 approving and directing

implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan. During this time, Smokey

Mountain, a wasteland in Tondo, Manila, are being made residence of many Filipinos living in a subhuman state.

As presented in MO 161, NHA prepared feasibility studies to turn the dumpsite into low-cost housing project, thus, Smokey

Mountain Development and Reclamation Project (SMDRP), came into place. RA 6957 (Build-Operate-Transfer Law) was

passed on July 1990 declaring the importance of private sectors as contractors in government projects. Thereafter, Aquino

proclaimed MO 415 applying RA 6957 to SMDRP, among others. The same MO also established EXECOM and TECHCOM in

the execution and evaluation of the plan, respectively, to be assisted by the Public Estates Authority (PEA).

Notices of public bidding to become NHAs venture partner for SMDRP were published in newspapers in 1992, from which R-II

Builders, Inc. (RBI) won the bidding process. Then-President Ramos authorized NHA to enter into a Joint Venture Agreement

with RBI.

Under the JVA, the project involves the clearing of Smokey Mountain for eventual development into a low cost housing complex

and industrial/commercial site. RBI is expected to fully finance the development of Smokey Mountain and reclaim 40 hectares

of the land at the Manila Bay Area. The latter together with the commercial area to be built on Smokey Mountain will be owned
 by RBI as enabling components. If the project is revoked or terminated by the Government through no fault of RBI or by mutual

agreement, the Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable rate of return

not exceeding that stated in the feasibility study and in the contract as of the date of such revocation, cancellation, or termination

on a schedule to be agreed upon by both parties.

To summarize, the SMDRP shall consist of Phase I and Phase II. Phase I of the project involves clearing, levelling-off the

dumpsite, and construction of temporary housing units for the current residents on the cleared and levelled site. Phase II involves

the construction of a fenced incineration area for the on-site disposal of the garbage at the dumpsite.

Due to the recommendations done by the DENR after evaluations done, the JVA was amended and restated (now ARJVA) to

accommodate the design changes and additional work to be done to successfully implement the project. The original 3,500 units

of temporary housing were decreased to 2,992. The reclaimed land as enabling component was increased from 40 hectares to 79

hectares, which was supported by the issuance of Proclamation No. 465 by President Ramos. The revision also provided for the

119-hectare land as an enabling component for Phase II of the project.

Subsequently, the Clean Air Act was passed by the legislature which made the establishment of an incinerator illegal, making the

off-site dumpsite at Smokey Mountain necessary. On August 1, 1998, the project was suspended, to be later reconstituted by

President Estrada in MO No. 33.

On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement whereby both parties agreed to terminate the

JVA and subsequent agreements. During this time, NHA reported that 34 temporary housing structures and 21 permanent

housing structures had been turned over by RBI.

ISSUES:

1. Whether respondents NHA and RBI have been granted the power and authority to reclaim lands of the public domain as this

power is vested exclusively in PEA as claimed by petitioner

2. Whether respondents NHA and RBI were given the power and authority by DENR to reclaim foreshore and submerged lands
3. Whether respondent RBI can acquire reclaimed foreshore and submerged lands considered as alienable and outside the

commerce of man

4. Whether respondent RBI can acquire reclaimed lands when there was no declaration that said lands are no longer needed for

public use

5. Whether there is a law authorizing sale of reclaimed lands

6. Whether the transfer of reclaimed lands to RBI was done by public bidding

7. Whether RBI, being a private corporation, is barred by the Constitution to acquire lands of public domain

8. Whether respondents can be compelled to disclose all information related to the SMDRP

9. Whether the operative fact doctrine applies to the instant position

HELD:

1. Executive Order 525 reads that the PEA shall be primarily responsible for integrating, directing, and coordinating all

reclamation projects for and on behalf of the National Government. This does not mean that it shall be responsible for all. The

requisites for a valid and legal reclamation project are approval by the President (which were provided for by MOs), favourable

recommendation of PEA (which were seen as a part of its recommendations to the EXECOM), and undertaken either by PEA

or entity under contract of PEA or by the National Government Agency (NHA is a government agency whose authority to

reclaim lands under consultation with PEA is derived under PD 727 and RA 7279).

2. Notwithstanding the need for DENR permission, the DENR is deemed to have granted the authority to reclaim in the Smokey

Mountain Project for the DENR is one of the members of the EXECOM which provides reviews for the project. ECCs and

Special Patent Orders were given by the DENR which are exercises of its power of supervision over the project. Furthermore,

it was the President via the abovementioned MOs that originally authorized the reclamation. It must be noted that the

reclamation of lands of public domain is reposed first in the Philippine President.

3. The reclaimed lands were classified alienable and disposable via MO 415 issued by President Aquino and Proclamation Nos.

39 and 465 by President Ramos.

4. Despite not having an explicit declaration, the lands have been deemed to be no longer needed for public use as stated in

Proclamation No. 39 that these are to be disposed to qualified beneficiaries. Furthermore, these lands have already been

necessarily reclassified as alienable and disposable lands under the BOT law.
5. Letter I of Sec. 6 of PD 757 clearly states that the NHA can acquire property rights and interests and encumber or otherwise

dispose of them as it may deem appropriate.

6. There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture partner in the

Smokey Mountain Project. It was noted that notices were published in national newspapers. The bidding proper was done by

the Bids and Awards Committee on May 18, 1992.

7. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a portion as percentage of the reclaimed land

subject to the constitutional requirement that only Filipino citizens or corporation with at least 60% Filipino equity can acquire

the same. In addition, when the lands were transferred to the NHA, these were considered Patrimonial lands of the state, by

which it has the power to sell the same to any qualified person.

8. This relief must be granted. It is the right of the Filipino people to information on matters of public concerned as stated in

Article II, Sec. 28, and Article III, Sec. 7 of the 1987 Constitution.

9. When the petitioner filed the case, the JVA had already been terminated by virtue of MOA between RBI and NHA. The

properties and rights in question after the passage of around 10 years from the start of the projects implementation cannot be

disturbed or questioned. The petitioner, being the Solicitor General at the time SMDRP was formulated, had ample

opportunity to question the said project, but did not do so. The moment to challenge has passed.

Facts: Former Solicitor General Frank Chavez files a case

against BHA for prohibition to enjoin the NHA from
implementing the Joint Venture Agreement (JVA) entered
into by NHA with R-II Builders for the reclamation and
development of the Smokey Mountain area in Tondo.
Chavez imputes certain constitutional infirmities against the
JVA, for instance that the NHA had no authority to order
reclamation, the DENRs approval was not secured, etc.
Chavez also filed for Mandamus for the disclosure of papers
and documents related to the project.

Issue: Whether or not prohibition is proper

Held: No. It was not shown that the NHA exercises quasi-
judicial or judicial functions I relation to the project. It must
be noted that under the ROC, among the entities mentioned
are quasi-judicial or judicial agencies.

It was not shown that there is no plain, adequate or speedy

remedy in the ordinary course of law. It appears that
Chavez could have filed administrative remedies against
the NHA.

Lastly, prohibition does not lie against acts which are

already fait accompli. Note that the project has already
been partially completed.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 164527 August 15, 2007

FRANCISCO I. CHAVEZ, Petitioner,

vs.
NATIONAL HOUSING AUTHORITY, R-II BUILDERS, INC., R-II HOLDINGS, INC., HARBOUR
CENTRE PORT TERMINAL, INC., and MR. REGHIS ROMERO II, Respondents.

DECISION

VELASCO, JR., J.:

In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order and/or
Writ of Preliminary Injunction under Rule 65, petitioner, in his capacity as taxpayer, seeks:

to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993 between the
National Housing Authority and R-II Builders, Inc. and the Smokey Mountain Development and
Reclamation Project embodied therein; the subsequent amendments to the said JVA; and all other
agreements signed and executed in relation thereto including, but not limited to the Smokey
Mountain Asset Pool Agreement dated 26 September 1994 and the separate agreements for Phase
I and Phase II of the Projectas well as all other transactions which emanated therefrom, for being
UNCONSTITUTIONAL and INVALID;
to enjoin respondentsparticularly respondent NHAfrom further implementing and/or enforcing
the said project and other agreements related thereto, and from further deriving and/or enjoying any
rights, privileges and interest therefrom x x x; and

to compel respondents to disclose all documents and information relating to the projectincluding,
but not limited to, any subsequent agreements with respect to the different phases of the project, the
revisions over the original plan, the additional works incurred thereon, the current financial condition
of respondent R-II Builders, Inc., and the transactions made respecting the project.1

The Facts

On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO)
1612 approving and directing the implementation of the Comprehensive and Integrated Metropolitan
Manila Waste Management Plan (the Plan). The Metro Manila Commission, in coordination with
various government agencies, was tasked as the lead agency to implement the Plan as formulated
by the Presidential Task Force on Waste Management created by Memorandum Circular No. 39. A
day after, on March 2, 1988, MO 161-A3 was issued, containing the guidelines which prescribed the
functions and responsibilities of fifteen (15) various government departments and offices tasked to
implement the Plan, namely: Department of Public Works and Highway (DPWH), Department of
Health (DOH), Department of Environment and Natural Resources (DENR), Department of
Transportation and Communication, Department of Budget and Management, National Economic
and Development Authority (NEDA), Philippine Constabulary Integrated National Police, Philippine
Information Agency and the Local Government Unit (referring to the City of Manila), Department of
Social Welfare and Development, Presidential Commission for Urban Poor, National Housing
Authority (NHA), Department of Labor and Employment, Department of Education, Culture and
Sports (now Department of Education), and Presidential Management Staff.

Specifically, respondent NHA was ordered to "conduct feasibility studies and develop low-cost
housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing
projects."4 On the other hand, the DENR was tasked to "review and evaluate proposed projects
under the Plan with regard to their environmental impact, conduct regular monitoring of activities of
the Plan to ensure compliance with environmental standards and assist DOH in the conduct of the
study on hospital waste management."5

At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland in Balut,
Tondo, Manila, where numerous Filipinos resided in subhuman conditions, collecting items that may
have some monetary value from the garbage. The Smokey Mountain dumpsite is bounded on the
north by the Estero Marala, on the south by the property of the National Government, on the east by
the property of B and I Realty Co., and on the west by Radial Road 10 (R-10).

Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain low-cost
housing project which resulted in the formulation of the "Smokey Mountain Development Plan and
Reclamation of the Area Across R-10" or the Smokey Mountain Development and Reclamation
Project (SMDRP; the Project). The Project aimed to convert the Smokey Mountain dumpsite into a
habitable housing project, inclusive of the reclamation of the area across R-10, adjacent to the
Smokey Mountain as the enabling component of the project.6 Once finalized, the Plan was submitted
to President Aquino for her approval.

On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was
enacted.7 Its declared policy under Section 1 is "[t]o recognize the indispensable role of the private
sector as the main engine for national growth and development and provide the most appropriate
favorable incentives to mobilize private resources for the purpose." Sec. 3 authorized and
empowered "[a]ll government infrastructure agencies, including government-owned and controlled
corporations and local government units x x x to enter into contract with any duly pre-qualified
private contractor for the financing, construction, operation and maintenance of any financially viable
infrastructure facilities through the build-operate-transfer or build and transfer scheme."

RA 6957 defined "build-and-transfer" scheme as "[a] contractual arrangement whereby the

contractor undertakes the construction, including financing, of a given infrastructure facility, and its
turnover after the completion to the government agency or local government unit concerned which
shall pay the contractor its total investment expended on the project, plus reasonable rate of return
thereon." The last paragraph of Sec. 6 of the BOT Law provides that the repayment scheme in the
case of "land reclamation or the building of industrial estates" may consist of "[t]he grant of a portion
or percentage of the reclaimed land or industrial estate built, subject to the constitutional
requirements with respect to the ownership of lands."

On February 10, 1992, Joint Resolution No. 038 was passed by both houses of Congress. Sec. 1 of
this resolution provided, among other things, that:

Section 1. There is hereby approved the following national infrastructure projects for implementation
under the provisions of Republic Act No. 6957 and its implementing rules and regulations:

xxxx

(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and related facilities;

xxxx

(k) Land reclamation, dredging and other related development facilities;

(l) Industrial estates, regional industrial centers and export processing zones including steel mills,
iron-making and petrochemical complexes and related infrastructure and utilities;

xxxx

(p) Environmental and solid waste management-related facilities such as collection equipment,
composting plants, incinerators, landfill and tidal barriers, among others; and

(q) Development of new townsites and communities and related facilities.

This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the approval of all
national infrastructure projects by the Congress.

On January 17, 1992, President Aquino proclaimed MO 4159 approving and directing the
implementation of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated:

Section 3. The National Housing Authority is hereby directed to implement the Smokey Mountain
Development Plan and Reclamation of the Area Across R-10 through a private sector joint venture
scheme at the least cost to the government.

Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed to the
National Housing Authority as well as the area to be reclaimed across R-10. (Emphasis supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of proposals
regarding the technical feasibility of reclamation, while the DENR was directed to (1) facilitate titling
of Smokey Mountain and of the area to be reclaimed and (2) assist in the technical evaluation of
proposals regarding environmental impact statements.10

In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the
implementation of the Plan, chaired by the National Capital Region-Cabinet Officer for Regional
Development (NCR-CORD) with the heads of the NHA, City of Manila, DPWH, PEA, Philippine Ports
Authority (PPA), DENR, and Development Bank of the Philippines (DBP) as members.11 The NEDA
subsequently became a member of the EXECOM. Notably, in a September 2, 1994 Letter,12 PEA
General Manager Amado Lagdameo approved the plans for the reclamation project prepared by the
NHA.

In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was created
composed of the technical representatives of the EXECOM "[t]o assist the NHA in the evaluation of
the project proposals, assist in the resolution of all issues and problems in the project to ensure that
all aspects of the development from squatter relocation, waste management, reclamation,
environmental protection, land and house construction meet governing regulation of the region and
to facilitate the completion of the project."13

Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for the
right to become NHAs joint venture partner in the implementation of the SMDRP. The notices were
published in newspapers of general circulation on January 23 and 26 and February 1, 14, 16, and
23, 1992, respectively. Out of the thirteen (13) contractors who responded, only five (5) contractors
fully complied with the required pre-qualification documents. Based on the evaluation of the pre-
qualification documents, the EXECOM declared the New San Jose Builders, Inc. and R-II Builders,
Inc. (RBI) as the top two contractors.14

Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and Financing
Plan) of the top two (2) contractors in this manner:

(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;

(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing
Construction and Reclamation;

(3) The DENR evaluated Technical Proposals on Waste Management and Disposal by
conducting the Environmental Impact Analysis; and

(4) The NHA and the City of Manila evaluated the socio-economic benefits presented by the
proposals.

On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the Philippines.

On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to approve the
R-II Builders, Inc. (RBI) proposal which garnered the highest score of 88.475%.

Subsequently, the EXECOM made a Project briefing to President Ramos. As a result, President
Ramos issued Proclamation No. 3915 on September 9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan to convert the
Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area
across Road Radial 10 (R-10) adjacent to the Smokey Mountain as the enabling component of the
project;

xxxx

These parcels of land of public domain are hereby placed under the administration and disposition of
the National Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well
as its development for mix land use (commercial/industrial) to provide employment opportunities to
on-site families and additional areas for port-related activities.

In order to facilitate the early development of the area for disposition, the Department of
Environment and Natural Resources, through the Lands and Management Bureau, is hereby
directed to approve the boundary and subdivision survey and to issue a special patent and title in the
name of the National Housing Authority, subject to final survey and private rights, if any there be.
(Emphasis supplied.)

On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture Agreement with
RBI "[s]ubject to final review and approval of the Joint Venture Agreement by the Office of the
President."16

On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement17 (JVA) for the
development of the Smokey Mountain dumpsite and the reclamation of the area across R-10 based
on Presidential Decree No. (PD) 75718 which mandated NHA "[t]o undertake the physical and socio-
economic upgrading and development of lands of the public domain identified for housing," MO 161-
A which required NHA to conduct the feasibility studies and develop a low-cost housing project at
the Smokey Mountain, and MO 415 as amended by MO 415-A which approved the Conceptual Plan
for Smokey Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project
"involves the clearing of Smokey Mountain for eventual development into a low cost medium rise
housing complex and industrial/commercial site with the reclamation of the area directly across [R-
10] to act as the enabling component of the Project."19 The JVA covered a lot in Tondo, Manila with
an area of two hundred twelve thousand two hundred thirty-four (212,234) square meters and
another lot to be reclaimed also in Tondo with an area of four hundred thousand (400,000) square
meters.

The Scope of Work of RBI under Article II of the JVA is as follows:

a) To fully finance all aspects of development of Smokey Mountain and reclamation of no

more than 40 hectares of Manila Bay area across Radial Road 10.

b) To immediately commence on the preparation of feasibility report and detailed engineering

with emphasis to the expedient acquisition of the Environmental Clearance Certificate (ECC)
from the DENR.

c) The construction activities will only commence after the acquisition of the ECC, and

d) Final details of the contract, including construction, duration and delivery timetables, shall
be based on the approved feasibility report and detailed engineering.

Other obligations of RBI are as follows:

 2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed
Engineering as approved by the Office of the President. All costs and expenses for hiring
technical personnel, date gathering, permits, licenses, appraisals, clearances, testing and
similar undertaking shall be for the account of the [RBI].

2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units complete
with basic amenities such as plumbing, electrical and sewerage facilities within the
temporary housing project as staging area to temporarily house the squatter families from
the Smokey Mountain while development is being undertaken. These temporary housing
units shall be turned over to the [NHA] for disposition.

2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on the
leveled Smokey Mountain complete with basic utilities and amenities, in accordance with the
plans and specifications set forth in the Final Report approved by the [NHA]. Completed units
ready for mortgage take out shall be turned over by the [RBI] to NHA on agreed schedule.

2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10] as
contained in Proclamation No. 39 as the enabling component of the project and payment to
the [RBI] as its asset share.

2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to complete
all herein development works to be undertaken on a phase to phase basis in accordance
with the work program stipulated therein.

The profit sharing shall be based on the approved pre-feasibility report submitted to the EXECOM,
viz:

For the developer (RBI):

1. To own the forty (40) hectares of reclaimed land.

2. To own the commercial area at the Smokey Mountain area composed of 1.3 hectares, and

3. To own all the constructed units of medium rise low cost permanent housing units beyond
the 3,500 units share of the [NHA].

For the NHA:

1. To own the temporary housing consisting of 3,500 units.

2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at the
Smokey Mountain area.

3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the Smokey
Mountain area to be awarded to qualified on site residents.

4. To own the Industrial Area site consisting of 3.2 hectares, and

5. To own the open spaces, roads and facilities within the Smokey Mountain area.
In the event of "extraordinary increase in labor, materials, fuel and non-recoverability of total project
expenses,"20the OP, upon recommendation of the NHA, may approve a corresponding adjustment in
the enabling component.

The functions and responsibilities of RBI and NHA are as follows:

For RBI:

4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to the
expedient acquisition, with the assistance of the [NHA] of Environmental Compliance Certificate
(ECC) from the Environmental Management Bureau (EMB) of the [DENR]. Construction shall only
commence after the acquisition of the ECC. The Environment Compliance Certificate (ECC) shall
form part of the FINAL REPORT.

The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed
engineering and architectural drawings, technical specifications and other related and required
documents relative to the Smokey Mountain area.

With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to develop the
same in a manner that it deems necessary to recover the [RBIs] investment, subject to
environmental and zoning rules.

4.02 Finance the total project cost for land development, housing construction and reclamation of the
PROJECT.

4.03 Warrant that all developments shall be in compliance with the requirements of the FINAL
REPORT.

4.04 Provide all administrative resources for the submission of project accomplishment reports to the
[NHA] for proper evaluation and supervision on the actual implementation.

4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to the
PROJECT, from the owners of the adjacent lots for access road, water, electrical power connections
and drainage facilities.

4.06 Provide temporary field office and transportation vehicles (2 units), one (1) complete set of
computer and one (1) unit electric typewriter for the [NHAs] field personnel to be charged to the
PROJECT.

For the NHA:

4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within Smokey
Mountain to the Temporary Housing Complex or to other areas prepared as relocation areas with the
assistance of the [RBI]. The [RBI] shall be responsible in releasing the funds allocated and
committed for relocation as detailed in the FINAL REPORT.

4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all necessary
permits, licenses, appraisals, clearances and accreditations for the PROJECT subject to existing
laws, rules and regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain and
Reclamation Area while the land development and construction of housing units are in progress to
determine whether the development and construction works are undertaken in accordance with the
FINAL REPORT. If in its judgment, the PROJECT is not pursued in accordance with the FINAL
REPORT, the [NHA] shall require the [RBI] to undertake necessary remedial works. All expenses,
charges and penalties incurred for such remedial, if any, shall be for the account of the [RBI].

4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x

4.11 Handle the processing and documentation of all sales transactions related to its assets shares
from the venture such as the 3,500 units of permanent housing and the allotted industrial area of 3.2
hectares.

4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be deducted from the
proceeds due to the [NHA].

4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for the Smokey Mountain
and Reclamation Area within 90 days upon submission of Survey returns to the Land Management
Sector. The land titles to the 40-hectare reclaimed land, the 1.3 hectare commercial area at the
Smokey Mountain area and the constructed units of medium-rise permanent housing units beyond
the 3,500 units share of the [NHA] shall be issued in the name of the [RBI] upon completion of the
project. However, the [RBI] shall have the authority to pre-sell its share as indicated in this
agreement.

The final details of the JVA, which will include the construction duration, costs, extent of reclamation,
and delivery timetables, shall be based on the FINAL REPORT which will be contained in a
Supplemental Agreement to be executed later by the parties.

The JVA may be modified or revised by written agreement between the NHA and RBI specifying the
clauses to be revised or modified and the corresponding amendments.

If the Project is revoked or terminated by the Government through no fault of RBI or by mutual
agreement, the Government shall compensate RBI for its actual expenses incurred in the Project
plus a reasonable rate of return not exceeding that stated in the feasibility study and in the contract
as of the date of such revocation, cancellation, or termination on a schedule to be agreed upon by
both parties.

As a preliminary step in the project implementation, consultations and dialogues were conducted
with the settlers of the Smokey Mountain Dumpsite Area. At the same time, DENR started
processing the application for the Environmental Clearance Certificate (ECC) of the SMDRP. As a
result however of the consultative dialogues, public hearings, the report on the on-site field
conditions, the Environmental Impact Statement (EIS) published on April 29 and May 12, 1993 as
required by the Environmental Management Bureau of DENR, the evaluation of the DENR, and the
recommendations from other government agencies, it was discovered that design changes and
additional work have to be undertaken to successfully implement the Project.21

Thus, on February 21, 1994, the parties entered into another agreement denominated as the
Amended and Restated Joint Venture Agreement22 (ARJVA) which delineated the different phases of
the Project. Phase I of the Project involves the construction of temporary housing units for the
current residents of the Smokey Mountain dumpsite, the clearing and leveling-off of the dumpsite,
and the construction of medium-rise low-cost housing units at the cleared and leveled
dumpsite.23 Phase II of the Project involves the construction of an incineration area for the on-site
disposal of the garbage at the dumpsite.24 The enabling component or consideration for Phase I of
the Project was increased from 40 hectares of reclaimed lands across R-10 to 79 hectares.25 The
revision also provided for the enabling component for Phase II of 119 hectares of reclaimed lands
contiguous to the 79 hectares of reclaimed lands for Phase I.26 Furthermore, the amended contract
delineated the scope of works and the terms and conditions of Phases I and II, thus:

The PROJECT shall consist of Phase I and Phase II.

Phase I shall involve the following:

a. the construction of 2,992 units of temporary housing for the affected residents while
clearing and development of Smokey Mountain [are] being undertaken

b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units of
medium rise housing and the development of the industrial/commercial site within the
Smokey Mountain area

c. the reclamation and development of a 79 hectare area directly across Radial Road 10 to
serve as the enabling component of Phase I

Phase II shall involve the following:

a. the construction and operation of an incinerator plant that will conform to the emission
standards of the DENR

b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed

under Phase I to serve as the enabling component of Phase II.

Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from 3,500 units
under the JVA.27 However, it was required to construct 3,520 medium-rise low-cost permanent
housing units instead of 3,500 units under the JVA. There was a substantial change in the design of
the permanent housing units such that a "loft shall be incorporated in each unit so as to increase the
living space from 20 to 32 square meters. The additions and changes in the Original Project
Component are as follows:

ORIGINAL CHANGES/REVISIONS

1. TEMPORARY HOUSING

Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life of 3

years, gauge 26 G.I. roofing sheets future 12 SM floor area. use as permanent
structures for factory and warehouses mixed 17 sm & 12 sm floor area.

2. MEDIUM RISE MASS

HOUSING

Box type precast Shelter Conventional and precast component 20 square meter
concrete structures, 32 square floor area with 2.4 meter meter floor area with loft
floor height; bare type, 160 units/ (sleeping quarter) 3.6 m. floor building. height,
painted and improved
 architectural faade, 80 units/building.

3. MITIGATING MEASURES

3.1 For reclamation work Use of clean dredgefill material below the MLLW and SM
material mixed with dredgefill above MLLW.

a. 100% use of Smokey Mountain material as dredgefill Use of Steel Sheet

Piles needed for longer depth of embedment.

b. Concrete Sheet Piles short depth of embedment

c. Silt removal approximately Need to remove more than 3.0

1.0 meter only meters of silt after sub-soil investigation.28

These material and substantial modifications served as justifications for the increase in the
share of RBI from 40 hectares to 79 hectares of reclaimed land.

Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA, the
stipulated cost for Phase I was pegged at six billion six hundred ninety-three million three
hundred eighty-seven thousand three hundred sixty-four pesos (PhP 6,693,387,364).

In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM submitted
the ARJVA for approval by the OP. After review of said agreement, the OP directed that
certain terms and conditions of the ARJVA be further clarified or amended preparatory to its
approval. Pursuant to the Presidents directive, the parties reached an agreement on the
clarifications and amendments required to be made on the ARJVA.

On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and
Restated Joint Venture Agreement (AARJVA)29 clarifying certain terms and condition of the
ARJVA, which was submitted to President Ramos for approval, to wit:

Phase II shall involve the following:

a. the construction and operation of an incinerator plant that will conform to the
emission standards of the DENR

b. the reclamation and development of 119-hectare area contiguous to that to be

reclaimed under Phase I to serve as the enabling component of Phase II, the exact
size and configuration of which shall be approved by the SMDRP Committee30

Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:

2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area
directly across Radial Road 10 (R-10) to serve as payment to the DEVELOPER as its asset
share for Phase I and to develop such land into commercial area with port facilities; provided,
that the port plan shall be integrated with the Philippine Port Authoritys North Harbor plan for
the Manila Bay area and provided further, that the final reclamation and port plan for said
 reclaimed area shall be submitted for approval by the Public Estates Authority and the
Philippine Ports Authority, respectively: provided finally, that subject to par. 2.02 above,
actual reclamation work may commence upon approval of the final reclamation plan by the
Public Estates Authority.

xxxx

9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and shall
read as follows:

5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY through
no fault of the DEVELOPER, the AUTHORITY shall compensate the DEVELOPER for the value of
the completed portions of, and actual expenditures on the PROJECT plus a reasonable rate of
return thereon, not exceeding that stated in the Cost Estimates of Items of Work previously approved
by the SMDRP Executive Committee and the AUTHORITY and stated in this Agreement, as of the
date of such revocation, cancellation, or termination, on a schedule to be agreed upon by the
parties, provided that said completed portions of Phase I are in accordance with the approved FINAL
REPORT.

Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 199431 increasing the
proposed area for reclamation across R-10 from 40 hectares to 79 hectares,32 to wit:

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of
the powers vested in me by the law, and as recommended by the SMDRP Executive Committee, do
hereby authorize the increase of the area of foreshore or submerged lands of Manila Bay to be
reclaimed, as previously authorized under Proclamation No. 39 (s. 1992) and Memorandum Order
No. 415 (s. 1992), from Four Hundred Thousand (400,000) square meters, more or less, to Seven
Hundred Ninety Thousand (790,000) square meters, more or less.

On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591
conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain
Dumpsite.

In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary Teofisto T.
Guingona, Jr., approved the ARJVA as amended by the AARJVA.

On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No. 39,
conveying in favor of NHA a 401,485-square meter area.

On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC), now
known as the Home Guaranty Corporation, and the Philippine National Bank (PNB)33 executed the
Smokey Mountain Asset Pool Formation Trust Agreement (Asset Pool Agreement).34 Thereafter, a
Guaranty Contract was entered into by NHA, RBI, and HIGC.

On June 23, 1994, the Legislature passed the Clean Air Act.35 The Act made the establishment of an
incinerator illegal and effectively barred the implementation of the planned incinerator project under
Phase II. Thus, the off-site disposal of the garbage at the Smokey Mountain became necessary.36

The land reclamation was completed in August 1996.37

Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent
No. 3598 conveying in favor of NHA an additional 390,000 square meter area.

During the actual construction and implementation of Phase I of the SMDRP, the Inter-Agency
Technical Committee found and recommended to the EXECOM on December 17, 1997 that
additional works were necessary for the completion and viability of the Project. The EXECOM
approved the recommendation and so, NHA instructed RBI to implement the change orders or
necessary works.38

Such necessary works comprised more than 25% of the original contract price and as a result, the
Asset Pool incurred direct and indirect costs. Based on C1 12 A of the Implementing Rules and
Regulations of PD 1594, a supplemental agreement is required for "all change orders and extra work
orders, the total aggregate cost of which being more than twenty-five (25%) of the escalated original
contract price."

The EXECOM requested an opinion from the Department of Justice (DOJ) to determine whether a
bidding was required for the change orders and/or necessary works. The DOJ, through DOJ Opinion
Nos. 119 and 155 dated August 26, 1993 and November 12, 1993, opined that "a rebidding,
pursuant to the aforequoted provisions of the implementing rules (referring to PD 1594) would not be
necessary where the change orders inseparable from the original scope of the project, in which
case, a negotiation with the incumbent contractor may be allowed."

Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a
supplemental agreement covering said necessary works.

On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the
aforementioned necessary works and submitted it to the President on March 24, 1998 for approval.

Outgoing President Ramos decided to endorse the consideration of the Supplemental Agreement to
incoming President Joseph E. Estrada. On June 30, 1998, Estrada became the 13th Philippine
President.

However, the approval of the Supplemental Agreement was unacted upon for five months. As a
result, the utilities and the road networks were constructed to cover only the 79-hectare original
enabling component granted under the ARJVA. The 220-hectare extension of the 79-hectare area
was no longer technically feasible. Moreover, the financial crises and unreliable real estate situation
made it difficult to sell the remaining reclaimed lots. The devaluation of the peso and the increase in
interest cost led to the substantial increase in the cost of reclamation.

On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due to "the
delay in the approval of the Supplemental Agreement, the consequent absence of an enabling
component to cover the cost of the necessary works for the project, and the resulting inability to
replenish the Asset Pool funds partially used for the completion of the necessary works."39

As of August 1, 1998 when the project was suspended, RBI had "already accomplished a portion of
the necessary works and change orders which resulted in [RBI] and the Asset Pool incurring
advances for direct and indirect cost which amount can no longer be covered by the 79-hectare
enabling component under the ARJVA."40

Repeated demands were made by RBI in its own capacity and on behalf of the asset pool on NHA
for payment for the advances for direct and indirect costs subject to NHA validation.
In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the SMDRP
EXECOM and further directed it to review the Supplemental Agreement and submit its
recommendation on the completion of the SMDRP.

The reconstituted EXECOM conducted a review of the project and recommended the amendment of
the March 20, 1998 Supplemental Agreement "to make it more feasible and to identify and provide
new sources of funds for the project and provide for a new enabling component to cover the
payment for the necessary works that cannot be covered by the 79-hectare enabling component
under the ARJVA."41

The EXECOM passed Resolution Nos. 99-16-01 and 99-16-0242 which approved the modification of
the Supplemental Agreement, to wit:

a) Approval of 150 hectares additional reclamation in order to make the reclamation feasible
as part of the enabling component.

b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based on
surveys) to the SMDRP Asset Pool.

c) The inclusion in the total development cost of other additional, necessary and
indispensable infrastructure works and the revision of the original cost stated in the
Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP
2,969,134,053.13.

d) Revision in the sharing agreement between the parties.

In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and complete the
SMDRP subject to certain guidelines and directives.

After the parties in the case at bar had complied with the March 23, 2000 Memorandum, the NHA
November 9, 2000 Resolution No. 4323 approved "the conveyance of the 17-hectare Vitas property
in favor of the existing or a newly created Asset Pool of the project to be developed into a mixed
commercial-industrial area, subject to certain conditions."

On January 20, 2001, then President Estrada was considered resigned. On the same day, President
Gloria M. Arroyo took her oath as the 14th President of the Philippines.

As of February 28, 2001, "the estimated total project cost of the SMDRP has reached P8.65 billion
comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost,"43 subject to validation by
the NHA.

On August 28, 2001, NHA issued Resolution No. 4436 to pay for "the various necessary
works/change orders to SMDRP, to effect the corresponding enabling component consisting of the
conveyance of the NHAs Vitas Property and an additional 150-hectare reclamation area" and to
authorize the release by NHA of PhP 480 million "as advance to the project to make the Permanent
Housing habitable, subject to reimbursement from the proceeds of the expanded enabling
component."44

On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the parties,
and on February 28, 2002, the Housing and Urban Development Coordinating Council (HUDCC)
submitted the agreement to the OP for approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed "to submit the works covered by the
PhP 480 million [advance to the Project] and the ASA to public bidding."45 On August 28, 2002, the
HUDCC informed RBI of the decision of the Cabinet.

In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the
government "to bid out the remaining works under the ASA thereby unilaterally terminating the
Project with RBI and all the agreements related thereto." RBI demanded the payment of just
compensation "for all accomplishments and costs incurred in developing the SMDRP plus a
reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA and Section 6.2 of the
ASA."46

Consequently, the parties negotiated the terms of the termination of the JVA and other subsequent
agreements.

On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA) whereby both
parties agreed to terminate the JVA and other subsequent agreements, thus:

1. TERMINATION

1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the works
covered by the P480 Million and the ASA to public bidding, the following agreements
executed by and between the NHA and the DEVELOPER are hereby terminated, to
wit:

a. Joint Venture Agreement (JVA) dated 19 March 1993

b. Amended and Restated Joint Venture Agreement (ARJVA) dated 21

February 1994

c. Amendment and Restated Joint Venture Agreement dated 11 August 1994

d. Supplemental Agreement dated 24 March 1998

e. Amended Supplemental Agreement (ASA) dated 19 November 2001.

xxxx

5. SETTLEMENT OF CLAIMS

5.1 Subject to the validation of the DEVELOPERs claims, the NHA hereby agrees to initially
compensate the Developer for the abovementioned costs as follows:

a. Direct payment to DEVELOPER of the amounts herein listed in the following

manner:

a.1 P250 Million in cash from the escrow account in accordance with Section
2 herewith;

a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area

immediately after joint determination of the appraised value of the said
property in accordance with the procedure herein set forth in the last
 paragraph of Section 5.3. For purposes of all payments to be made through
conveyance of real properties, the parties shall secure from the NHA Board
of Directors all documents necessary and sufficient to effect the transfer of
title over the properties to be conveyed to RBI, which documents shall be
issued within a reasonable period.

5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation process
referred to in Section 4 hereof, may be paid in cash, bonds or through the conveyance of
properties or any combination thereof. The manner, terms and conditions of payment of the
balance shall be specified and agreed upon later within a period of three months from the
time a substantial amount representing the unpaid balance has been validated pursuant
hereto including, but not limited to the programming of quarterly cash payments to be
sourced by the NHA from its budget for debt servicing, from its income or from any other
sources.

5.3 In any case the unpaid balance is agreed to be paid, either partially or totally through
conveyance of properties, the parties shall agree on which properties shall be subject to
conveyance. The NHA and DEVELOPER hereby agree to determine the valuation of the
properties to be conveyed by getting the average of the appraisals to be made by two (2)
mutually acceptable independent appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an agreement with
the asset pool for the development and operations of a port in the Smokey Mountain Area which is a
major component of SMDRP to provide a source of livelihood and employment for Smokey Mountain
residents and spur economic growth. A Subscription Agreement was executed between the Asset
Pool and HCPTI whereby the asset pool subscribed to 607 million common shares and 1,143 million
preferred shares of HCPTI. The HCPTI preferred shares had a premium and penalty interest of 7.5%
per annum and a mandatory redemption feature. The asset pool paid the subscription by conveying
to HCPTI a 10-hectare land which it acquired from the NHA being a portion of the reclaimed land of
the SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT Nos. 251355,
251356, 251357, and 251358.

Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from PPA, it suffered
a net income loss of PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in 2003. The
Project Governing Board of the Asset Pool later conveyed by way of dacion en pago a number of
HCPTI shares to RBI in lieu of cash payment for the latters work in SMDRP.

On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition which
impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero
II, raising constitutional issues.

The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21) permanent
housing structures had been turned over by respondent RBI. It claimed that 2,510 beneficiary-
families belonging to the poorest of the poor had been transferred to their permanent homes and
benefited from the Project.

The Issues

The grounds presented in the instant petition are:

I
Neither respondent NHA nor respondent R-II builders may validly reclaim foreshore and submerged
land because:

1. Respondent NHA and R-II builders were never granted any power and authority to reclaim
lands of the public domain as this power is vested exclusively with the PEA.

2. Even assuming that respondents NHA and R-II builders were given the power and
authority to reclaim foreshore and submerged land, they were never given the authority by
the denr to do so.

II

Respondent R-II builders cannot acquire the reclaimed foreshore and submerged land areas
because:

1. The reclaimed foreshore and submerged parcels of land are inalienable public lands which
are beyond the commerce of man.

2. Assuming arguendo that the subject reclaimed foreshore and submerged parcels of land
were already declared alienable lands of the public domain, respondent R-II builders still
could not acquire the same because there was never any declaration that the said lands
were no longer needed for public use.

3. Even assuming that the subject reclaimed lands are alienable and no longer needed for
public use, respondent R-II builders still cannot acquire the same because there was never
any law authorizing the sale thereof.

4. There was never any public bidding awarding ownership of the subject land to respondent
R-II builders.

5. Assuming that all the requirements for a valid transfer of alienable public had been
performed, respondent R-II Builders, being private corporation is nonetheless
expresslyprohibited by the Philippine Constitution to acquire lands of the public domain.

III

Respondent harbour, being a private corporation whose majority stocks are owned and controlled by
respondent Romeros Corporations R-II builders and R-II Holdings is disqualified from being a
transferee of public land.

IV

Respondents must be compelled to disclose all information related to the smokey mountain
development and reclamation project.

The Courts Ruling

Before we delve into the substantive issues raised in this petition, we will first deal with several
procedural matters raised by respondents.

Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the petition.

Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the
avails of the suit can file a complaint or petition.47 Respondents claim that petitioner is not a proper
party-in-interest as he was unable to show that "he has sustained or is in immediate or imminent
danger of sustaining some direct and personal injury as a result of the execution and enforcement of
the assailed contracts or agreements."48Moreover, they assert that not all government contracts can
justify a taxpayers suit especially when no public funds were utilized in contravention of the
Constitution or a law.

We explicated in Chavez v. PCGG49 that in cases where issues of transcendental public importance
are presented, there is no necessity to show that petitioner has experienced or is in actual danger of
suffering direct and personal injury as the requisite injury is assumed. We find our ruling in Chavez v.
PEA50 as conclusive authority on locus standi in the case at bar since the issues raised in this
petition are averred to be in breach of the fair diffusion of the countrys natural resources and the
constitutional right of a citizen to information which have been declared to be matters of
transcendental public importance. Moreover, the pleadings especially those of respondents readily
reveal that public funds have been indirectly utilized in the Project by means of Smokey Mountain
Project Participation Certificates (SMPPCs) bought by some government agencies.

Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.

Whether petitioners direct recourse to this Court was proper

Respondents are one in asserting that petitioner circumvents the principle of hierarchy of courts in
his petition. Judicial hierarchy was made clear in the case of People v. Cuaresma, thus:

There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and
should also serve as a general determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Courts original jurisdiction to issue these writs should be allowed only
when there are special and important reasons therefor, clearly and specifically set out in the petition.
This is established policy. It is a policy that is necessary to prevent inordinate demands upon the
Courts time and attention which are better devoted to those matters within its exclusive jurisdiction,
and to prevent further over-crowding of the Courts docket.51 x x x

The OSG claims that the jurisdiction over petitions for prohibition and mandamus is concurrent with
other lower courts like the Regional Trial Courts and the Court of Appeals. Respondent NHA argues
that the instant petition is misfiled because it does not introduce special and important reasons or
exceptional and compelling circumstances to warrant direct recourse to this Court and that the lower
courts are more equipped for factual issues since this Court is not a trier of facts. Respondents RBI
and RHI question the filing of the petition as this Court should not be unduly burdened with
"repetitions, invocation of jurisdiction over constitutional questions it had previously resolved and
settled."

In the light of existing jurisprudence, we find paucity of merit in respondents postulation.

While direct recourse to this Court is generally frowned upon and discouraged, we have however
ruled in Santiago v. Vasquez that such resort to us may be allowed in certain situations, wherein this
Court ruled that petitions for certiorari, prohibition, or mandamus, though cognizable by other courts,
may directly be filed with us if "the redress desired cannot be obtained in the appropriate courts or
where exceptional compelling circumstances justify availment of a remedy within and calling for the
exercise of [this Courts] primary jurisdiction."52
1avvphi1

The instant petition challenges the constitutionality and legality of the SMDRP involving several
hectares of government land and hundreds of millions of funds of several government agencies.
Moreover, serious constitutional challenges are made on the different aspects of the Project which
allegedly affect the right of Filipinos to the distribution of natural resources in the country and the
right to information of a citizenmatters which have been considered to be of extraordinary
significance and grave consequence to the public in general. These concerns in the instant action
compel us to turn a blind eye to the judicial structure meant to provide an orderly dispensation of
justice and consider the instant petition as a justified deviation from an established precept.

Core factual matters undisputed

Respondents next challenge the projected review by this Court of the alleged factual issues
intertwined in the issues propounded by petitioner. They listed a copious number of questions
seemingly factual in nature which would make this Court a trier of facts.53

We find the position of respondents bereft of merit.

For one, we already gave due course to the instant petition in our January 18, 2005 Resolution.54 In
said issuance, the parties were required to make clear and concise statements of established facts
upon which our decision will be based.

Secondly, we agree with petitioner that there is no necessity for us to make any factual findings
since the facts needed to decide the instant petition are well established from the admissions of the
parties in their pleadings55and those derived from the documents appended to said submissions.
Indeed, the core facts which are the subject matter of the numerous issues raised in this petition are
undisputed.

Now we will tackle the issues that prop up the instant petition.

Since petitioner has cited our decision in PEA as basis for his postulations in a number of issues, we
first resolve the queryis PEA applicable to the case at bar?

A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.

The Court finds that PEA is not a binding precedent to the instant petition because the facts in said
case are substantially different from the facts and circumstances in the case at bar, thus:

(1) The reclamation project in PEA was undertaken through a JVA entered into between PEA
and AMARI. The reclamation project in the instant NHA case was undertaken by the NHA, a
national government agency in consultation with PEA and with the approval of two Philippine
Presidents;

(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim
submerged areas without public bidding on April 25, 1995. In the instant NHA case, the NHA
and RBI executed a JVA after RBI was declared the winning bidder on August 31, 1992 as
the JVA partner of the NHA in the SMDRP after compliance with the requisite public bidding.
 (3) In PEA, there was no law or presidential proclamation classifying the lands to be
reclaimed as alienable and disposal lands of public domain. In this RBI case, MO 415 of
former President Aquino and Proclamation No. 39 of then President Ramos, coupled with
Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed lands as alienable and
disposable;

(4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA
and AMARI. In this NHA case, the JVA and subsequent amendments were already
1avv phi1

substantially implemented. Subsequently, the Project was terminated through a MOA signed
on August 27, 2003. Almost one year later on August 5, 2004, the Chavez petition was filed;

(5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA after the
Chavez petition was filed with the Court and after Senate Committee Report No. 560 was
issued finding that the subject lands are inalienable lands of public domain. In the instant
petition, RBI and other respondents are considered to have signed the agreements in good
faith as the Project was terminated even before the Chavez petition was filed;

(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the parties
and not in accordance with the BOT Law. The NHA-RBI JVA and subsequent amendments
constitute a BOT contract governed by the BOT Law; and

(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a
government entity tasked to dispose of public lands under Executive Order No. (EO)
525.56 In the NHA case, the reclaimed lands were transferred to NHA, a government entity
NOT tasked to dispose of public land and therefore said alienable lands were converted to
patrimonial lands upon their transfer to NHA.57

Thus the PEA Decision58 cannot be considered an authority or precedent to the instant case. The
principle of stare decisis59 has no application to the different factual setting of the instant case.

We will now dwell on the substantive issues raised by petitioner. After a perusal of the grounds
raised in this petition, we find that most of these issues are moored on our PEA Decision which, as
earlier discussed, has no application to the instant petition. For this reason alone, the petition can
already be rejected. Nevertheless, on the premise of the applicability of said decision to the case at
bar, we will proceed to resolve said issues.

First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner

Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim foreshore
and submerged land because they were not given any power and authority to reclaim lands of the
public domain as this power was delegated by law to PEA.

Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public domain, the
Public Estates Authority (PEA), petitioner claims, is "the primary authority for the reclamation of all
foreshore and submerged lands of public domain," and relies on PEA where this Court held:

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government." The same section also states that "[A]ll reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a
proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation
to PD No. 3-A and PD No. 1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No. 525
recognized PEA as the government entity "to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests." Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal declaration
segregating reclaimed lands no longer needed for public service from those still needed for public
service.60

In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by PEA or
through a contract executed by PEA with another person or entity but by the NHA through an
agreement with respondent RBI. Therefore, he concludes that the reclamation is null and void.

Petitioners contention has no merit.

EO 525 reads:

Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National Government. All
reclamation projects shall be approved by the President upon recommendation of the PEA, and shall
be undertaken by the PEA or through a proper contract executed by it with any person or entity;
Provided, that, reclamation projects of any national government agency or entity authorized under its
charter shall be undertaken in consultation with the PEA upon approval of the President. (Emphasis
supplied.)

The aforequoted provision points to three (3) requisites for a legal and valid reclamation project, viz:

(1) approval by the President;

(2) favorable recommendation of PEA; and

(3) undertaken by any of the following:

a. by PEA

b. by any person or entity pursuant to a contract it executed with PEA

c. by the National Government agency or entity authorized under its charter to

reclaim lands subject to consultation with PEA

Without doubt, PEA under EO 525 was designated as the agency primarily responsible for
integrating, directing, and coordinating all reclamation projects. Primarily means "mainly, principally,
mostly, generally." Thus, not all reclamation projects fall under PEAs authority of supervision,
integration, and coordination. The very charter of PEA, PD 1084,61 does not mention that PEA has
the exclusive and sole power and authority to reclaim lands of public domain. EO 525 even reveals
the exceptionreclamation projects by a national government agency or entity authorized by its
charter to reclaim land. One example is EO 405 which authorized the Philippine Ports Authority
(PPA) to reclaim and develop submerged areas for port related purposes. Under its charter, PD 857,
PPA has the power "to reclaim, excavate, enclose or raise any of the lands" vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily
responsible for integrating, directing and coordinating reclamation projects, such authority is NOT
exclusive and such power to reclaim may be granted or delegated to another government agency or
entity or may even be undertaken by the National Government itself, PEA being only an agency and
a part of the National Government.

Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP. After a
scrutiny of the facts culled from the records, we find that the project met all the three (3)
requirements, thus:

1. There was ample approval by the President of the Philippines; as a matter of fact, two Philippine
Presidents approved the same, namely: Presidents Aquino and Ramos. President Aquino
sanctioned the reclamation of both the SMDRP housing and commercial-industrial sites through MO
415 (s. 1992) which approved the SMDRP under Sec. 1 and directed NHA "x x x to implement the
Smokey Mountain Development Plan and Reclamation of the Area across R-10 through a private
sector joint venture scheme at the least cost to government" under Section 3.

For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly reserved
the Smokey Mountain Area and the Reclamation Area for a housing project and related
commercial/industrial development.

Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the increase of
the Reclamation Area from 40 hectares of foreshore and submerged land of the Manila Bay to 79
hectares. It speaks of the reclamation of 400,000 square meters, more or less, of the foreshore and
submerged lands of Manila Bay adjoining R-10 as an enabling component of the SMDRP.

As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975 square
meters of Smokey Mountain, Special Patent No. 3592 covering 401,485 square meters of reclaimed
land, and Special Patent No. 3598 covering another 390,000 square meters of reclaimed land were
issued by the DENR.

Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.

2. The requisite favorable endorsement of the reclamation phase was impliedly granted by PEA.
President Aquino saw to it that there was coordination of the project with PEA by designating its
general manager as member of the EXECOM tasked to supervise the project implementation. The
assignment was made in Sec. 2 of MO 415 which provides:

Section 2. An Executive Committee is hereby created to oversee the implementation of the Plan,
chaired by the NCR-CORD, with the heads of the following agencies as members: The National
Housing Authority, the City of Manila, the Department of Public Works and Highways, the Public
Estates Authority, the Philippine Ports Authority, the Department of Environment and Natural
Resources and the Development Bank of the Philippines. (Emphasis supplied.)

The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated
as part of the recommendations of the EXECOM created under MO 415. While there was no specific
recommendation on the SMDRP emanating solely from PEA, we find that the approbation of the
Project and the land reclamation as an essential component by the EXECOM of which PEA is a
member, and its submission of the SMDRP and the agreements on the Project to the President for
approval amply met the second requirement of EO 525.
3. The third element was also presentthe reclamation was undertaken either by PEA or any
person or entity under contract with PEA or by the National Government agency or entity authorized
under its charter to reclaim lands subject to consultation with PEA. It cannot be disputed that the
reclamation phase was not done by PEA or any person or entity under contract with PEA. However,
the reclamation was implemented by the NHA, a national government agency whose authority to
reclaim lands under consultation with PEA is derived from its charterPD 727 and other pertinent
lawsRA 727962 and RA 6957 as amended by RA 7718.

While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had
more than enough authority to do so under existing laws. While PD 757, the charter of NHA, does
not explicitly mention "reclamation" in any of the listed powers of the agency, we rule that the NHA
has an implied power to reclaim land as this is vital or incidental to effectively, logically, and
successfully implement an urban land reform and housing program enunciated in Sec. 9 of Article
XIII of the 1987 Constitution.

Basic in administrative law is the doctrine that a government agency or office has express and
implied powers based on its charter and other pertinent statutes. Express powers are those powers
granted, allocated, and delegated to a government agency or office by express provisions of law. On
the other hand, implied powers are those that can be inferred or are implicit in the wordings of the
law63 or conferred by necessary or fair implication in the enabling act.64 In Angara v. Electoral
Commission, the Court clarified and stressed that when a general grant of power is conferred or duty
enjoined, every particular power necessary for the exercise of the one or the performance of the
other is also conferred by necessary implication.65 It was also explicated that when the statute does
not specify the particular method to be followed or used by a government agency in the exercise of
the power vested in it by law, said agency has the authority to adopt any reasonable method to carry
out its functions.66

The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA 6957,
and PD 3-A,67viz:

1. NHAs power to reclaim derived from PD 757 provisions:

a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the goals of NHA:

Section 3. Progress and Objectives. The Authority shall have the following purposes and objectives:

xxxx

b) To undertake housing, development, resettlement or other activities as would enhance the

provision of housing to every Filipino;

c) To harness and promote private participation in housing ventures in terms of capital

expenditures, land, expertise, financing and other facilities for the sustained growth of the
housing industry. (Emphasis supplied.)

Land reclamation is an integral part of the development of resources for some of the housing
requirements of the NHA. Private participation in housing projects may also take the form of land
reclamation.

b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore
Development Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing
Corporation (PHHC), the Presidential Assistant on Housing Resettlement Agency (PAHRA), the
Tondo Foreshore Development Authority (TFDA), the Central Institute for the Training and
Relocation of Urban Squatters (CITRUS), the Presidential Committee for Housing and Urban
Resettlement (PRECHUR), Sapang Palay Development Committee, Inter-Agency Task Force to
Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all other
existing government housing and resettlement agencies, task forces and ad-hoc committees, are
hereby dissolved. Their powers and functions, balance of appropriations, records, assets, rights, and
choses in action, are transferred to, vested in, and assumed by the Authority. x x x (Emphasis
supplied.)

PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers, and
functions. Sec. 2 provides:

Section 2. Objectives and Purposes. The Authority shall have the following purposes and
objectives:

a) To undertake all manner of activity, business or development projects for the

establishment of harmonious, comprehensive, integrated and healthy living community in the
Tondo Foreshoreland and its resettlement site;

b) To undertake and promote the physical and socio-economic amelioration of the Tondo
Foreshore residents in particular and the nation in general (Emphasis supplied.)

The powers and functions are contained in Sec. 3, to wit:

a) To develop and implement comprehensive and integrated urban renewal programs for the
Tondo Foreshore and Dagat-dagatan lagoon and/or any other additional/alternative
resettlement site and to formulate and enforce general and specific policies for its
development which shall ensure reasonable degree of compliance with environmental
standards.

b) To prescribe guidelines and standards for the reservation, conservation and utilization of
public lands covering the Tondo Foreshore land and its resettlement sites;

c) To construct, acquire, own, lease, operate and maintain infrastructure facilities, housing
complex, sites and services;

d) To determine, regulate and supervise the establishment and operation of housing, sites,
services and commercial and industrial complexes and any other enterprises to be
constructed or established within the Tondo Foreshore and its resettlement sites;

e) To undertake and develop, by itself or through joint ventures with other public or private
entities, all or any of the different phases of development of the Tondo Foreshore land and
its resettlement sites;

f) To acquire and own property, property-rights and interests, and encumber or otherwise
dispose of the same as it may deem appropriate (Emphasis supplied.)

From the foregoing provisions, it is readily apparent that the TFDA has the explicit power to develop
public lands covering the Tondo foreshore land and any other additional and alternative resettlement
sites under letter b, Sec. 3 of PD 570. Since the additional and/or alternative sites adjacent to Tondo
foreshore land cover foreshore and submerged areas, the reclamation of said areas is necessary in
order to convert them into a comprehensive and integrated resettlement housing project for the slum
dwellers and squatters of Tondo. Since the powers of TFDA were assumed by the NHA, then the
NHA has the power to reclaim lands in the Tondo foreshore area which covers the 79-hectare land
subject of Proclamations Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.

c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the authority to
reclaim land, thus:

Sec. 6. Powers and functions of the Authority.The Authority shall have the following powers and
functions to be exercised by the Board in accordance with its established national human
settlements plan prepared by the Human Settlements Commission:

(a) Develop and implement the comprehensive and integrated housing program provided for in
Section hereof;

xxxx

(c) Prescribe guidelines and standards for the reservation, conservation and utilization of public
lands identified for housing and resettlement;

xxxx

(e) Develop and undertake housing development and/or resettlement projects through joint ventures
or other arrangements with public and private entities;

xxxx

(k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper
and reasonable;

(l) Acquire property rights and interests and encumber or otherwise dispose the same as it may
deem appropriate;

xxxx

(s) Perform such other acts not inconsistent with this Decree, as may be necessary to effect the
policies and objectives herein declared. (Emphasis supplied.)

The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It can make
use of public lands under letter (c) of Sec. 6 which includes reclaimed land as site for its
comprehensive and integrated housing projects under letter (a) which can be undertaken through
joint ventures with private entities under letter (e). Taken together with letter (s) which authorizes
NHA to perform such other activities "necessary to effect the policies and objectives" of PD 757, it is
safe to conclude that the NHAs power to reclaim lands is a power that is implied from the exercise
of its explicit powers under Sec. 6 in order to effectively accomplish its policies and objectives under
Sec. 3 of its charter. Thus, the reclamation of land is an indispensable component for the
development and construction of the SMDRP housing facilities.

2. NHAs implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHAs mandate to "[d]evelop and undertake housing development and/or
resettlement projects through joint ventures or other arrangements with public and private entities."

The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and 29 of RA
7279, which provide:

Section 12. Disposition of Lands for Socialized Housing.The National Housing Authority, with
respect to lands belonging to the National Government, and the local government units with respect
to other lands within their respective localities, shall coordinate with each other to formulate and
make available various alternative schemes for the disposition of lands to the beneficiaries of the
Program. These schemes shall not be limited to those involving transfer of ownership in fee simple
but shall include lease, with option to purchase, usufruct or such other variations as the local
government units or the National Housing Authority may deem most expedient in carrying out the
purposes of this Act.

xxxx

Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local government
units, in coordination with the National Housing Authority, shall implement the relocation and
resettlement of persons living in danger areas such as esteros, railroad tracks, garbage dumps,
riverbanks, shorelines, waterways, and in other public places as sidewalks, roads, parks, and
playgrounds. The local government unit, in coordination with the National Housing Authority, shall
provide relocation or resettlement sites with basic services and facilities and access to employment
and livelihood opportunities sufficient to meet the basic needs of the affected families. (Emphasis
supplied.)

Lands belonging to the National Government include foreshore and submerged lands which can be
reclaimed to undertake housing development and resettlement projects.

3. MO 415 explains the undertaking of the NHA in SMDRP:

WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to conduct
feasibility studies and develop low-cost housing projects at the dumpsites of Metro Manila;

WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to convert the
Smokey Mountain dumpsite into a habitable housing project inclusive of the reclamation area across
R-10 as enabling component of the Project;

WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of Manila
and other government agencies and instrumentalities to ensure effective and efficient
implementation;

WHEREAS, the government encourages private sector initiative in the implementation of its projects.
(Emphasis supplied.)

Proceeding from these "whereas" clauses, it is unequivocal that reclamation of land in the Smokey
Mountain area is an essential and vital power of the NHA to effectively implement its avowed goal of
developing low-cost housing units at the Smokey Mountain dumpsites. The interpretation made by
no less than the President of the Philippines as Chief of the Executive Branch, of which the NHA is a
part, must necessarily command respect and much weight and credit.
4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and EO
525.

Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is unequivocal
that all government infrastructure agencies like the NHA can undertake infrastructure or
development projects using the contractual arrangements prescribed by the law, and land
reclamation is one of the projects that can be resorted to in the BOT project implementation under
the February 10, 1992 Joint Resolution No. 3 of the 8th Congress.

From the foregoing considerations, we find that the NHA has ample implied authority to undertake
reclamation projects.

Even without an implied power to reclaim lands under NHAs charter, we rule that the authority
granted to NHA, a national government agency, by the President under PD 3-A reinforced by EO
525 is more than sufficient statutory basis for the reclamation of lands under the SMDRP.

PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers on
September 23, 1972. It provided that "[t]he provisions of any law to the contrary notwithstanding, the
reclamation of areas, underwater, whether foreshore or inland, shall be limited to the National
Government or any person authorized by it under the proper contract." It repealed, in effect, RA
1899 which previously delegated the right to reclaim lands to municipalities and chartered cities and
revested it to the National Government.68 Under PD 3-A, "national government" can only mean the
Executive Branch headed by the President. It cannot refer to Congress as it was dissolved and
abolished at the time of the issuance of PD 3-A on September 23, 1972. Moreover, the Executive
Branch is the only implementing arm in the government with the equipment, manpower, expertise,
and capability by the very nature of its assigned powers and functions to undertake reclamation
projects. Thus, under PD 3-A, the Executive Branch through the President can implement
reclamation of lands through any of its departments, agencies, or offices.

Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA, which was
granted, among others, the power "to reclaim land, including foreshore and submerged areas by
dredging, filling or other means or to acquire reclaimed lands." The PEAs power to reclaim is not
however exclusive as can be gleaned from its charter, as the President retained his power under PD
3-A to designate another agency to reclaim lands.

On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for integrating,
directing, and coordinating reclamation projects for and on behalf of the National Government
although other national government agencies can be designated by the President to reclaim lands in
coordination with the PEA. Despite the issuance of EO 525, PD 3-A remained valid and subsisting.
Thus, the National Government through the President still retained the power and control over all
reclamation projects in the country.

The power of the National Government through the President over reclamation of areas, that is,
underwater whether foreshore or inland, was made clear in EO 54369 which took effect on June 24,
2006. Under EO 543, PEA was renamed the Philippine Reclamation Authority (PRA) and was
granted the authority to approve reclamation projects, a power previously reposed in the President
under EO 525. EO 543 reads:

Section 1. The power of the President to approve reclamation projects is hereby delegated to the
Philippine Reclamation Authority [formerly PEA], through its governing board, subject to compliance
with existing laws and rules and subject to the condition that reclamation contracts to be executed
with any person or entity go through public bidding.
Section 2. Nothing in the Order shall be construed as diminishing the Presidents authority to modify,
amend or nullify PRAs action.

Section 3. All executive issuances inconsistent with this Executive Order are hereby repealed or
amended accordingly. (Emphasis supplied.)

Sec. 2 of EO 543 strengthened the power of control and supervision of the President over
reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now PRA).

From the foregoing issuances, we conclude that the Presidents delegation to NHA, a national
government agency, to reclaim lands under the SMDRP, is legal and valid, firmly anchored on PD 3-
A buttressed by EO 525 notwithstanding the absence of any specific grant of power under its
charter, PD 757.

Second Issue: Whether respondents NHA and RBI were given the

power and authority by DENR to reclaim foreshore and submerged

lands

Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to
reclaim, they were not authorized to do so by the DENR.

Again, reliance is made on our ruling in PEA where it was held that the DENRs authority is
necessary in order for the government to validly reclaim foreshore and submerged lands. In PEA, we
expounded in this manner:

As manager, conservator and overseer of the natural resources of the State, DENR exercises
"supervision and control over alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus,
DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should
be reclaimed or not. This means that PEA needs authorization from DENR before PEA can
undertake reclamation projects in Manila Bay, or in any part of the country.

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain.
Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under
Sections 6 and 7 of CA No. 141. Once DENR decides that the reclaimed lands should be so
classified, it then recommends to the President the issuance of a proclamation classifying the lands
as alienable or disposable lands of the public domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the
Revised Administrative Code and Sections 6 and 7 of CA No. 141.

In short, DENR is vested with the power to authorize the reclamation of areas under water, while
PEA is vested with the power to undertake the physical reclamation of areas under water, whether
directly or through private contractors. DENR is also empowered to classify lands of the public
domain into alienable or disposable lands subject to the approval of the President. On the other
hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.70

Despite our finding that PEA is not a precedent to the case at bar, we find after all that under existing
laws, the NHA is still required to procure DENRs authorization before a reclamation project in
Manila Bay or in any part of the Philippines can be undertaken. The requirement applies to PEA,
NHA, or any other government agency or office granted with such power under the law.

Notwithstanding the need for DENR permission, we nevertheless find petitioners position bereft of
merit.

The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for
the following reasons:

1. Sec. 17, Art. VII of the Constitution provides that "the President shall have control of all executive
departments, bureaus and offices." The President is assigned the task of seeing to it that all laws are
faithfully executed. "Control," in administrative law, means "the power of an officer to alter, modify,
nullify or set aside what a subordinate officer has done in the performance of his duties and to
substitute the judgment of the former for that of the latter."71

As such, the President can exercise executive power motu proprio and can supplant the act or
decision of a subordinate with the Presidents own. The DENR is a department in the executive
branch under the President, and it is only an alter ego of the latter. Ordinarily the proposed action
and the staff work are initially done by a department like the DENR and then submitted to the
President for approval. However, there is nothing infirm or unconstitutional if the President decides
on the implementation of a certain project or activity and requires said department to implement it.
Such is a presidential prerogative as long as it involves the department or office authorized by law to
supervise or execute the Project. Thus, as in this case, when the President approved and ordered
the development of a housing project with the corresponding reclamation work, making DENR a
member of the committee tasked to implement the project, the required authorization from the DENR
to reclaim land can be deemed satisfied. It cannot be disputed that the ultimate power over alienable
and disposable public lands is reposed in the President of the Philippines and not the DENR
Secretary. To still require a DENR authorization on the Smokey Mountain when the President has
already authorized and ordered the implementation of the Project would be a derogation of the
powers of the President as the head of the executive branch. Otherwise, any department head can
defy or oppose the implementation of a project approved by the head of the executive branch, which
is patently illegal and unconstitutional.

In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the executive
department, the President may act directly or order the said department to undertake an activity,
thus:

[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII of the
Constitution specifies [her] power as Chief executive departments, bureaus and offices. [She] shall
ensure that the laws be faithfully executed. As Chief Executive, President Arroyo holds the steering
wheel that controls the course of her government. She lays down policies in the execution of her
plans and programs. Whatever policy she chooses, she has her subordinates to implement them. In
short, she has the power of control. Whenever a specific function is entrusted by law or regulation to
her subordinate, she may act directly or merely direct the performance of a duty x x x. Such act is
well within the prerogative of her office (emphasis supplied).72

Moreover, the power to order the reclamation of lands of public domain is reposed first in the
Philippine President. The Revised Administrative Code of 1987 grants authority to the President to
reserve lands of public domain for settlement for any specific purpose, thus:

Section 14. Power to Reserve Lands of the Public and Private Domain of the Government.(1) The
President shall have the power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not otherwise directed by law.
The reserved land shall thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation. (Emphasis supplied.)

President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and issued MO
415 authorizing the implementation of the Smokey Mountain Development Project plus the
reclamation of the area across R-10. Then President Ramos issued Proclamation No. 39 covering
the 21-hectare dumpsite and the 40-hectare commercial/industrial area, and Proclamation No. 465
and MO 415 increasing the area of foreshore and submerged lands of Manila Bay to be reclaimed
from 40 to 79 hectares. Having supervision and control over the DENR, both Presidents directly
assumed and exercised the power granted by the Revised Administrative Code to the DENR
Secretary to authorize the NHA to reclaim said lands. What can be done indirectly by the DENR can
be done directly by the President. It would be absurd if the power of the President cannot be
exercised simply because the head of a department in the executive branch has not acted favorably
on a project already approved by the President. If such arrangement is allowed then the department
head will become more powerful than the President.

2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by the NCR-
CORD to oversee the implementation of the Project. The EXECOM was the one which
recommended approval of the project plan and the joint venture agreements. Clearly, the DENR
retained its power of supervision and control over the laws affected by the Project since it was
tasked to "facilitate the titling of the Smokey Mountain and of the area to be reclaimed," which shows
that it had tacitly given its authority to the NHA to undertake the reclamation.

3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592 while then
Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced the areas covered by the
reclamation. These patents conveyed the lands to be reclaimed to the NHA and granted to said
agency the administration and disposition of said lands for subdivision and disposition to qualified
beneficiaries and for development for mix land use (commercial/industrial) "to provide employment
opportunities to on-site families and additional areas for port related activities." Such grant of
authority to administer and dispose of lands of public domain under the SMDRP is of course subject
to the powers of the EXECOM of SMDRP, of which the DENR is a member.

4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of supervision and
control over the lands of public domain covered by the Project.

Based on these reasons, it is clear that the DENR, through its acts and issuances, has ratified and
confirmed the reclamation of the subject lands for the purposes laid down in Proclamations Nos. 39
and 465.

Third Issue: Whether respondent RBI can acquire reclaimed

foreshore and submerged lands considered as inalienable and

outside the commerce of man

Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and submerged
areas as these are inalienable public lands beyond the commerce of man based on Art. 1409 of the
Civil Code which provides:

Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or
public policy;

xxxx

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.

Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State
and they cannot be alienated except for alienable agricultural lands of the public domain. One of the
States natural resources are lands of public domain which include reclaimed lands.

Petitioner contends that for these reclaimed lands to be alienable, there must be a law or
presidential proclamation officially classifying these reclaimed lands as alienable and disposable and
open to disposition or concession. Absent such law or proclamation, the reclaimed lands cannot be
the enabling component or consideration to be paid to RBI as these are beyond the commerce of
man.

We are not convinced of petitioners postulation.

The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of
the State for the following reasons, viz:

First, there were three (3) presidential proclamations classifying the reclaimed lands across R-10 as
alienable or disposable hence open to disposition or concession, to wit:

(1) MO 415 issued by President Aquino, of which Sec. 4 states that "[t]he land covered by
the Smokey Mountain Dumpsite is hereby conveyed to the National Housing Authority as
well as the area to be reclaimed across R-10."

The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the
declaration that said lands are alienable and disposable. Otherwise, the NHA cannot
effectively use them in its housing and resettlement project.

(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands were
conveyed to NHA for subdivision and disposition to qualified beneficiaries and for
development into a mixed land use (commercial/industrial) to provide employment
opportunities to on-site families and additional areas for port-related activities. Said directive
carries with it the pronouncement that said lands have been transformed to alienable and
disposable lands. Otherwise, there is no legal way to convey it to the beneficiaries.

(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed area
to 79 hectares to be developed and disposed of in the implementation of the SMDRP. The
authority put into the hands of the NHA to dispose of the reclaimed lands tacitly sustains the
conversion to alienable and disposable lands.

Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on
Proclamations Nos. 39 and 465 issued by President Ramos, without doubt, classified the reclaimed
areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations
that the lands to be reclaimed are classified as alienable and disposable. We find however that such
conclusion is derived and implicit from the authority given to the NHA to transfer the reclaimed lands
to qualified beneficiaries.

The query is, when did the declaration take effect? It did so only after the special patents covering
the reclaimed areas were issued. It is only on such date that the reclaimed lands became alienable
and disposable lands of the public domain. This is in line with the ruling in PEA where said issue was
clarified and stressed:

PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as
alienable or disposable lands of the public domain. PD No. 1085 and President Aquinos issuance of
a land patent also constitute a declaration that the Freedom Islands are no longer needed for public
service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to
disposition or concession to qualified parties.73 (Emphasis supplied.)

Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with
Special Patent Nos. 3591, 3592, and 3598 more than satisfy the requirement in PEA that "[t]here
must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or
disposable and open to disposition or concession (emphasis supplied)."74

Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find that RA
6957 as amended by RA 7718 provides ample authority for the classification of reclaimed land in the
SMDRP for the repayment scheme of the BOT project as alienable and disposable lands of public
domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:

For the financing, construction, operation and maintenance of any infrastructure projects undertaken
through the build-operate-and transfer arrangement or any of its variations pursuant to the provisions
of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue
of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or
percentage of the reclaimed land, subject to the constitutional requirements with respect to the
ownership of the land. (Emphasis supplied.)

While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands that
shall serve as payment to the project proponent have become alienable and disposable lands and
opened for disposition; nonetheless, this conclusion is necessarily implied, for how else can the land
be used as the enabling component for the Project if such classification is not deemed made?

It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not convert
alienable lands of public domain into private or patrimonial lands. We ruled in PEA that "alienable
lands of public domain must be transferred to qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands can become private or patrimonial lands
(emphasis supplied)."75 To lands reclaimed by PEA or through a contract with a private person or
entity, such reclaimed lands still remain alienable lands of public domain which can be transferred
only to Filipino citizens but not to a private corporation. This is because PEA under PD 1084 and EO
525 is tasked to hold and dispose of alienable lands of public domain and it is only when it is
transferred to Filipino citizens that it becomes patrimonial property. On the other hand, the NHA is a
government agency not tasked to dispose of public lands under its charterThe Revised
Administrative Code of 1987. The NHA is an "end-user agency" authorized by law to administer and
dispose of reclaimed lands. The moment titles over reclaimed lands based on the special patents
are transferred to the NHA by the Register of Deeds, they are automatically converted to patrimonial
properties of the State which can be sold to Filipino citizens and private corporations, 60% of which
are owned by Filipinos. The reason is obvious: if the reclaimed land is not converted to patrimonial
land once transferred to NHA, then it would be useless to transfer it to the NHA since it cannot
legally transfer or alienate lands of public domain. More importantly, it cannot attain its avowed
purposes and goals since it can only transfer patrimonial lands to qualified beneficiaries and
prospective buyers to raise funds for the SMDRP.

From the foregoing considerations, we find that the 79-hectare reclaimed land has been declared
alienable and disposable land of the public domain; and in the hands of NHA, it has been
reclassified as patrimonial property.

Petitioner, however, contends that the reclaimed lands were inexistent prior to the three (3)
Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the declaration that such
areas are alienable and disposable land of the public domain, citing PEA, has no legal basis.

Petitioners contention is not well-taken.

Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into consideration the
special patents issued by the DENR demonstrates the inherent weakness of his proposition. As was
ruled in PEA cited by petitioner himself, "PD No. 1085, coupled with President Aquinos actual
issuance of a special patent covering the Freedom Islands is equivalent to an official proclamation
classifying the Freedom islands as alienable or disposable lands of public domain." In a similar vein,
the combined and collective effect of Proclamations Nos. 39 and 465 with Special Patents Nos. 3592
and 3598 is tantamount to and can be considered to be an official declaration that the reclaimed lots
are alienable or disposable lands of the public domain.

The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which evidence
transfer of ownership of reclaimed lands to the NHA, are official acts of the DENR Secretary in the
exercise of his power of supervision and control over alienable and disposable public lands and his
exclusive jurisdiction over the management and disposition of all lands of public domain under the
Revised Administrative Code of 1987. Special Patent No. 3592 speaks of the transfer of Lots 1 and
2, and RI-003901-000012-D with an area of 401,485 square meters based on the survey and
technical description approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued
in favor of the NHA transferring to said agency a tract of land described in Plan RL-00-000013 with
an area of 390,000 square meters based on the survey and technical descriptions approved by the
Bureau of Lands.

The conduct of the survey, the preparation of the survey plan, the computation of the technical
description, and the processing and preparation of the special patent are matters within the technical
area of expertise of administrative agencies like the DENR and the Land Management Bureau and
are generally accorded not only respect but at times even finality.76 Preparation of special patents
calls for technical examination and a specialized review of calculations and specific details which the
courts are ill-equipped to undertake; hence, the latter defer to the administrative agency which is
trained and knowledgeable on such matters.77

Subsequently, the special patents in the name of the NHA were submitted to the Register of Deeds
of the City of Manila for registration, and corresponding certificates of titles over the reclaimed lots
were issued based on said special patents. The issuance of certificates of titles in NHAs name
automatically converts the reclaimed lands to patrimonial properties of the NHA. Otherwise, the lots
would not be of use to the NHAs housing projects or as payment to the BOT contractor as the
enabling component of the BOT contract. The laws of the land have to be applied and interpreted
depending on the changing conditions and times. Tempora mutantur et legis mutantur in illis (time
changes and laws change with it). One such law that should be treated differently is the BOT Law
(RA 6957) which brought about a novel way of implementing government contracts by allowing
reclaimed land as part or full payment to the contractor of a government project to satisfy the huge
financial requirements of the undertaking. The NHA holds the lands covered by Special Patents Nos.
3592 and 3598 solely for the purpose of the SMDRP undertaken by authority of the BOT Law and for
disposition in accordance with said special law. The lands become alienable and disposable lands of
public domain upon issuance of the special patents and become patrimonial properties of the
Government from the time the titles are issued to the NHA.

As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:

It is true that, once a patent is registered and the corresponding certificate of title is issued, the land
covered by them ceases to be part of the public domain and becomes private property, and the
Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of one year
from the date of issuance of such patent.78

The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,79 Heirs of Carlos Alcaraz v.
Republic,80 and the more recent case of Doris Chiongbian-Oliva v. Republic of the
Philippines.81 Thus, the 79-hectare reclaimed land became patrimonial property after the issuance of
certificates of titles to the NHA based on Special Patents Nos. 3592 and 3598.

One last point. The ruling in PEA cannot even be applied retroactively to the lots covered by Special
Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-hectare reclaimed land). The
reclamation of the land under SMDRP was completed in August 1996 while the PEA decision was
rendered on July 9, 2002. In the meantime, subdivided lots forming parts of the reclaimed land were
already sold to private corporations for value and separate titles issued to the buyers. The Project
was terminated through a Memorandum of Agreement signed on August 27, 2003. The PEA
decision became final through the November 11, 2003 Resolution. It is a settled precept that
decisions of the Supreme Court can only be applied prospectively as they may prejudice vested
rights if applied retroactively.

In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective application of its
decisions based on considerations of equity and fair play, thus:

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that
enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the
DBP are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions
applying or interpreting the laws of the Constitution shall form a part of the legal system of the
Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4
of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is
provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks
forward not backward. The rationale against retroactivity is easy to perceive. The retroactive
application of a law usually divests rights that have already become vested or impairs the obligations
of contract and hence, is unconstitutional.

The same consideration underlies our rulings giving only prospective effect to decisions enunciating
new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a
doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied
prospectively and should not apply to parties who had relied on the old doctrine and acted on the
faith thereof.82

Fourth Issue: Whether respondent RBI can acquire reclaimed

lands when there was no declaration that said lands are no

longer needed for public use

Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable lands of
the public domain, still, the reclamation is flawed for there was never any declaration that said lands
are no longer needed for public use.

We are not moved by petitioners submission.

Even if it is conceded that there was no explicit declaration that the lands are no longer needed for
public use or public service, there was however an implicit executive declaration that the reclaimed
areas R-10 are not necessary anymore for public use or public service when President Aquino
through MO 415 conveyed the same to the NHA partly for housing project and related
commercial/industrial development intended for disposition to and enjoyment of certain beneficiaries
and not the public in general and partly as enabling component to finance the project.

President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed
lands of the Smokey Mountain project are no longer required for public use or service, thus:

These parcels of land of public domain are hereby placed under the administration and disposition of
the National Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well
as its development for mix land use (commercial/industrial) to provide employment opportunities to
on-site families and additional areas for port related activities. (Emphasis supplied.)

While numerical count of the persons to be benefited is not the determinant whether the property is
to be devoted to public use, the declaration in Proclamation No. 39 undeniably identifies only
particular individuals as beneficiaries to whom the reclaimed lands can be sold, namelythe
Smokey Mountain dwellers. The rest of the Filipinos are not qualified; hence, said lands are no
longer essential for the use of the public in general.

In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing the area
to be reclaimed from forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are
undoubtedly set aside for the beneficiaries of SMDRP and not the publicdeclaring the power of
NHA to dispose of land to be reclaimed, thus: "The authority to administer, develop, or dispose lands
identified and reserved by this Proclamation and Proclamation No. 39 (s.1992), in accordance with
the SMDRP, as enhance, is vested with the NHA, subject to the provisions of existing laws."
(Emphasis supplied.)

MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the
reclaimed areas for public use or service as the Project cannot be successfully implemented without
the withdrawal of said lands from public use or service. Certainly, the devotion of the reclaimed land
to public use or service conflicts with the intended use of the Smokey Mountain areas for housing
and employment of the Smokey Mountain scavengers and for financing the Project because the
latter cannot be accomplished without abandoning the public use of the subject land. Without doubt,
the presidential proclamations on SMDRP together with the issuance of the special patents had
effectively removed the reclaimed lands from public use.

More decisive and not in so many words is the ruling in PEA which we earlier cited, that "PD No.
1085 and President Aquinos issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service." Consequently, we ruled in that case that
the reclaimed lands are "open to disposition or concession to qualified parties."83
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have
classified the reclaimed lands as alienable and disposable and open to disposition or concession as
they would be devoted to units for Smokey Mountain beneficiaries. Hence, said lands are no longer
intended for public use or service and shall form part of the patrimonial properties of the State under
Art. 422 of the Civil Code.84 As discussed a priori, the lands were classified as patrimonial properties
of the NHA ready for disposition when the titles were registered in its name by the Register of
Deeds.

Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure project
are necessarily reclassified as alienable and disposable lands under the BOT Law; otherwise,
absurd and illogical consequences would naturally result. Undoubtedly, the BOT contract will not be
accepted by the BOT contractor since there will be no consideration for its contractual obligations.
Since reclaimed land will be conveyed to the contractor pursuant to the BOT Law, then there is an
implied declaration that such land is no longer intended for public use or public service and, hence,
considered patrimonial property of the State.

Fifth Issue: Whether there is a law authorizing sale of

reclaimed lands

Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no law
authorizing their sale. He argues that unlike PEA, no legislative authority was granted to the NHA to
sell reclaimed land.

This position is misplaced.

Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the NHA is not
empowered by any law to sell reclaimed land, thus:

Section 60. Any tract of land comprised under this title may be leased or sold, as the case may be,
to any person, corporation or association authorized to purchase or lease public lands for agricultural
purposes. The area of the land so leased or sold shall be such as shall, in the judgment of the
Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which
such sale or lease if requested and shall in no case exceed one hundred and forty-four hectares:
Provided, however, That this limitation shall not apply to grants, donations, transfers, made to a
province, municipality or branch or subdivision of the Government for the purposes deemed by said
entities conducive to the public interest; but the land so granted donated or transferred to a province,
municipality, or branch or subdivision of the Government shall not be alienated, encumbered, or
otherwise disposed of in a manner affecting its title, except when authorized by Congress; Provided,
further, That any person, corporation, association or partnership disqualified from purchasing public
land for agricultural purposes under the provisions of this Act, may lease land included under this
title suitable for industrial or residential purposes, but the lease granted shall only be valid while such
land is used for the purposes referred to. (Emphasis supplied.)

Reliance on said provision is incorrect as the same applies only to "a province, municipality or
branch or subdivision of the Government." The NHA is not a government unit but a government
corporation performing governmental and proprietary functions.

In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it
under the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the following powers and
functions to be exercised by the Boards in accordance with the established national human
settlements plan prepared by the Human Settlements Commission:

xxxx

(k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper
and reasonable;

(l) Acquire property rights and interests, and encumber or otherwise dispose the same as it may
deem appropriate (Emphasis supplied.)

Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber or
otherwise dispose of them as it may deem appropriate. The transfer of the reclaimed lands by the
National Government to the NHA for housing, commercial, and industrial purposes transformed them
into patrimonial lands which are of course owned by the State in its private or proprietary capacity.
Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or qualified corporation.

Sixth Issue: Whether the transfer of reclaimed lands to RBI

was done by public bidding

Petitioner also contends that there was no public bidding but an awarding of ownership of said
reclaimed lands to RBI. Public bidding, he says, is required under Secs. 63 and 67 of CA 141 which
read:

Section 63. Whenever it is decided that lands covered by this chapter are not needed for public
purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce for authority to
dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public
advertisement in the same manner as in the case of leases or sales of agricultural public land, that
the Government will lease or sell, as the case may be, the lots or blocks specified in the
advertisement, for the purpose stated in the notice and subject to the conditions specified in this
chapter.

xxxx

Section 67. The lease or sale shall be made through oral bidding; and adjudication shall be made to
the highest bidder. However, where an applicant has made improvements on the land by virtue of a
permit issued to him by competent authority, the sale or lease shall be made by sealed bidding as
prescribed in section twenty-six of this Act, the provisions of which shall be applied whenever
applicable. If all or part of the lots remain unleased or unsold, the Director of Lands shall from time to
time announce in the Official Gazette or in any other newspapers of general circulation, the lease of
sale of those lots, if necessary.

He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands were
conveyed to RBI by negotiated contract and not by public bidding as required by law.

This stand is devoid of merit.

There is no doubt that respondent NHA conducted a public bidding of the right to become its joint
venture partner in the Smokey Mountain Project. Notices or Invitations to Bid were published in the
national dailies on January 23 and 26, 1992 and February 1, 14, 16, and 23, 1992. The bidding
proper was done by the Bids and Awards Committee (BAC) on May 18, 1992. On August 31, 1992,
the Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and DENR opened the
bids and evaluated them, resulting in the award of the contract to respondent RBI on October 7,
1992.

On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said JVA
was amended and restated into the ARJVA. On August 11, 1994, the ARJVA was again amended.
On September 7, 1994, the OP approved the ARJVA and the amendments to the ARJVA. From
these factual settings, it cannot be gainsaid that there was full compliance with the laws and
regulations governing public biddings involving a right, concession, or property of the government.

Petitioner concedes that he does not question the public bidding on the right to be a joint venture
partner of the NHA, but the absence of bidding in the sale of alienable and disposable lands of public
domain pursuant to CA 141 as amended.

Petitioners theory is incorrect.

Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by the
Director of Lands of alienable and disposable lands of public domain. This is not present in the case
at bar. The lands reclaimed by and conveyed to the NHA are no longer lands of public domain.
These lands became proprietary lands or patrimonial properties of the State upon transfer of the
titles over the reclaimed lands to the NHA and hence outside the ambit of CA 141. The NHA can
therefore legally transfer patrimonial land to RBI or to any other interested qualified buyer without
any bidding conducted by the Director of Lands because the NHA, unlike PEA, is a government
agency not tasked to sell lands of public domain. Hence, it can only hold patrimonial lands and can
dispose of such lands by sale without need of public bidding.

Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding "when government
property has become unserviceable for any cause or is no longer needed." It appears from the
Handbook on Property and Supply Management System, Chapter 6, that reclaimed lands which
have become patrimonial properties of the State, whose titles are conveyed to government agencies
like the NHA, which it will use for its projects or programs, are not within the ambit of Sec. 79. We
quote the determining factors in the Disposal of Unserviceable Property, thus:

Determining Factors in the Disposal of Unserviceable Property

Property, which can no longer be repaired or reconditioned;

Property whose maintenance costs of repair more than outweigh the benefits and services
that will be derived from its continued use;
Property that has become obsolete or outmoded because of changes in technology;
Serviceable property that has been rendered unnecessary due to change in the agencys
function or mandate;
Unused supplies, materials and spare parts that were procured in excess of requirements;
and
Unused supplies and materials that [have] become dangerous to use because of long
storage or use of which is determined to be hazardous.85

Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in question
are very much needed by the NHA for the Smokey Mountain Project because without it, then the
projects will not be successfully implemented. Since the reclaimed lands are not unserviceable
properties and are very much needed by NHA, then Sec. 79 of PD 1445 does not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed
lands transferred to a government agency like the NHA which has entered into a BOT contract with a
private firm. The reason is obvious. If the patrimonial property will be subject to public bidding as the
only way of disposing of said property, then Sec. 6 of RA 6957 on the repayment scheme is almost
impossible or extremely difficult to implement considering the uncertainty of a winning bid during
public auction. Moreover, the repayment scheme of a BOT contract may be in the form of non-
monetary payment like the grant of a portion or percentage of reclaimed land. Even if the BOT
partner participates in the public bidding, there is no assurance that he will win the bid and therefore
the payment in kind as agreed to by the parties cannot be performed or the winning bid prize might
be below the estimated valuation of the land. The only way to harmonize Sec. 79 of PD 1445 with
Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT contracts involving
patrimonial lands. The law does not intend anything impossible (lex non intendit aliquid impossibile).

Seventh Issue: Whether RBI, being a private corporation,

is barred by the Constitution to acquire lands of public domain

Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the 1987
Constitution from acquiring lands of public domain.

Petitioners proposition has no legal mooring for the following reasons:

1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid "a portion
as percentage of the reclaimed land" subject to the constitutional requirement that only
Filipino citizens or corporations with at least 60% Filipino equity can acquire the same. It
cannot be denied that RBI is a private corporation, where Filipino citizens own at least 60%
of the stocks. Thus, the transfer to RBI is valid and constitutional.

2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said
proclamations were converted to alienable and disposable lands of public domain. When the
titles to the reclaimed lands were transferred to the NHA, said alienable and disposable
lands of public domain were automatically classified as lands of the private domain or
patrimonial properties of the State because the NHA is an agency NOT tasked to dispose of
alienable or disposable lands of public domain. The only way it can transfer the reclaimed
land in conjunction with its projects and to attain its goals is when it is automatically
converted to patrimonial properties of the State. Being patrimonial or private properties of the
State, then it has the power to sell the same to any qualified personunder the Constitution,
Filipino citizens as private corporations, 60% of which is owned by Filipino citizens like RBI.

3. The NHA is an end-user entity such that when alienable lands of public domain are
transferred to said agency, they are automatically classified as patrimonial properties. The
NHA is similarly situated as BCDA which was granted the authority to dispose of patrimonial
lands of the government under RA 7227. The nature of the property holdings conveyed to
BCDA is elucidated and stressed in the May 6, 2003 Resolution in Chavez v. PEA, thus:

BCDA is an entirely different government entity. BCDA is authorized by law to sell specific
government lands that have long been declared by presidential proclamations as military
reservations for use by the different services of the armed forces under the Department of National
Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is general and
national. BCDA holds government lands that have been granted to end-user government entities
the military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the
reclaimed public lands, not as an end-user entity, but as the government agency "primarily
responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of
the National Government."

x x x Well-settled is the doctrine that public land granted to an end-user government agency for a
specific public use may subsequently be withdrawn by Congress from public use and declared
patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that
declares specific military reservations no longer needed for defense or military purposes and
reclassifies such lands as patrimonial property for sale to private parties.

Government owned lands, as long as they are patrimonial property, can be sold to private parties,
whether Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired
by the government under Act No. 1120 are patrimonial property which even private corporations can
acquire by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred
to a public or municipal corporation for a monetary consideration become patrimonial property in the
hands of the public or municipal corporation. Once converted to patrimonial property, the land may
be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified
private corporations.86 (Emphasis supplied.)

The foregoing Resolution makes it clear that the SMDRP was a program adopted by the
Government under Republic Act No. 6957 (An Act Authorizing the Financing, Construction,
Operation and Maintenance of Infrastructure Projects by the Private Sector, and For Other
Purposes), as amended by RA 7718, which is a special law similar to RA 7227. Moreover, since the
implementation was assigned to the NHA, an end-user agency under PD 757 and RA 7279, the
reclaimed lands registered under the NHA are automatically classified as patrimonial lands ready for
disposition to qualified beneficiaries.

The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private
corporation, is disqualified from being a transferee of public land. What was transferred to HCPTI is
a 10-hectare lot which is already classified as patrimonial property in the hands of the NHA. HCPTI,
being a qualified corporation under the 1987 Constitution, the transfer of the subject lot to it is valid
and constitutional.

Eighth Issue: Whether respondents can be compelled to disclose

all information related to the SMDRP

Petitioner asserts his right to information on all documents such as contracts, reports, memoranda,
and the like relative to SMDRP.

Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public like the
current stage of the Project, the present financial capacity of RBI, the complete list of investors in the
asset pool, the exact amount of investments in the asset pool and other similar important information
regarding the Project.

He prays that respondents be compelled to disclose all information regarding the SMDRP and
furnish him with originals or at least certified true copies of all relevant documents relating to the said
project including, but not limited to, the original JVA, ARJVA, AARJVA, and the Asset Pool
Agreement.

This relief must be granted.

The right of the Filipino people to information on matters of public concern is enshrined in the 1987
Constitution, thus:

ARTICLE II

xxxx

SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a
policy of full public disclosure of all its transactions involving public interest.

ARTICLE III

SEC. 7. The right of the people to information on matters of public concern shall be recognized.
Access to official records, and to documents, and papers pertaining to official acts, transactions, or
decisions, as well as to government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law.

In Valmonte v. Belmonte, Jr., this Court explicated this way:

[A]n essential element of these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that the government may perceive
and be responsive to the peoples will. Yet, this open dialogue can be effective only to the extent that
the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in
the discussion are aware of the issues and have access to information relating thereto can such
bear fruit.87

In PEA, this Court elucidated the rationale behind the right to information:

These twin provisions of the Constitution seek to promote transparency in policy-making and in the
operations of the government, as well as provide the people sufficient information to exercise
effectively other constitutional rights. These twin provisions are essential to the exercise of freedom
of expression. If the government does not disclose its official acts, transactions and decisions to
citizens, whatever citizens say, even if expressed without any restraint, will be speculative and
amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x
accountable to the people," for unless citizens have the proper information, they cannot hold public
officials accountable for anything. Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their effective implementation. An
informed citizenry is essential to the existence and proper functioning of any democracy.88

Sec. 28, Art. II compels the State and its agencies to fully disclose "all of its transactions involving
public interest." Thus, the government agencies, without need of demand from anyone, must bring
into public view all the steps and negotiations leading to the consummation of the transaction and
the contents of the perfected contract.89Such information must pertain to "definite propositions of the
government," meaning official recommendations or final positions reached on the different matters
subject of negotiation. The government agency, however, need not disclose "intra-agency or inter-
agency recommendations or communications during the stage when common assertions are still in
the process of being formulated or are in the exploratory stage." The limitation also covers privileged
communication like information on military and diplomatic secrets; information affecting national
security; information on investigations of crimes by law enforcement agencies before the prosecution
of the accused; information on foreign relations, intelligence, and other classified information.
It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution,
there is still no enabling law that provides the mechanics for the compulsory duty of government
agencies to disclose information on government transactions. Hopefully, the desired enabling law
will finally see the light of day if and when Congress decides to approve the proposed "Freedom of
Access to Information Act." In the meantime, it would suffice that government agencies post on their
bulletin boards the documents incorporating the information on the steps and negotiations that
produced the agreements and the agreements themselves, and if finances permit, to upload said
information on their respective websites for easy access by interested parties. Without any law or
regulation governing the right to disclose information, the NHA or any of the respondents cannot be
faulted if they were not able to disclose information relative to the SMDRP to the public in general.

The other aspect of the peoples right to know apart from the duty to disclose is the duty to allow
access to information on matters of public concern under Sec. 7, Art. III of the Constitution. The
gateway to information opens to the public the following: (1) official records; (2) documents and
papers pertaining to official acts, transactions, or decisions; and (3) government research data used
as a basis for policy development.

Thus, the duty to disclose information should be differentiated from the duty to permit access to
information. There is no need to demand from the government agency disclosure of information as
this is mandatory under the Constitution; failing that, legal remedies are available. On the other
hand, the interested party must first request or even demand that he be allowed access to
documents and papers in the particular agency. A request or demand is required; otherwise, the
government office or agency will not know of the desire of the interested party to gain access to such
papers and what papers are needed. The duty to disclose covers only transactions involving public
interest, while the duty to allow access has a broader scope of information which embraces not only
transactions involving public interest, but any matter contained in official communications and public
documents of the government agency.

We find that although petitioner did not make any demand on the NHA to allow access to
information, we treat the petition as a written request or demand. We order the NHA to allow
petitioner access to its official records, documents, and papers relating to official acts, transactions,
and decisions that are relevant to the said JVA and subsequent agreements relative to the SMDRP.

Ninth Issue: Whether the operative fact doctrine applies to the instant petition

Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it
is an equitable doctrine which could not be used to countenance an inequitable result that is contrary
to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the various
agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply
ignored, citing Rieta v. People of the Philippines.90

The argument of the Solicitor General is meritorious.

The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated
that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid
and must be complied with, thus:

As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern. Administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the laws of the Constitution."
It is understandable why it should be so, the Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is so as until
after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and
respect. Parties may have acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done while such legislative
or executive act was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely
to reflect awareness that precisely because the judiciary is the governmental organ which has the
final say on whether or not a legislative or executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It
would be to deprive the law of its quality of fairness and justice then, if there be no recognition of
what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to
such a determination [of unconstitutionality], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect
of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect
to particular relations, individual and corporate, and particular conduct, private and official." This
language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila
Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking
for the Court in Fernandez v. Cuerva and Co.91 (Emphasis supplied.)

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission,
wherein we ruled that:

Moreover, we certainly cannot nullify the City Governments order of suspension, as we have no
reason to do so, much less retroactively apply such nullification to deprive private respondent of a
compelling and valid reason for not filing the leave application. For as we have held, a void act
though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions
done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached. It would indeed be
ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a
formal leave application.92 (Emphasis supplied.)

The principle was further explicated in the case of Rieta v. People of the Philippines, thus:

In similar situations in the past this Court had taken the pragmatic and realistic course set forth in
Chicot County Drainage District vs. Baxter Bank to wit:

The courts below have proceeded on the theory that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties,
and hence affording no basis for the challenged decree. x x x It is quite clear, however, that such
broad statements as to the effect of a determination of unconstitutionality must be taken with
qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an
operative fact and may have consequences which cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have
to be considered in various aspects with respect to particular conduct, private and official.
Questions of rights claimed to have become vested, of status, of prior determinations deemed to
have finality and acted upon accordingly, of public policy in the light of the nature both of the statute
and of its previous application, demand examination. These questions are among the most difficult
of those which have engaged the attention of courts, state and federal, and it is manifest from
numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified.

In the May 6, 2003 Resolution in Chavez v. PEA,93 we ruled that De Agbayani94 is not applicable to
the case considering that the prevailing law did not authorize private corporations from owning land.
The prevailing law at the time was the 1935 Constitution as no statute dealt with the same issue.

In the instant case, RA 6957 was the prevailing law at the time that the joint venture agreement was
signed. RA 6957, entitled "An Act Authorizing The Financing, Construction, Operation And
Maintenance Of Infrastructure Projects By The Private Sector And For Other Purposes," which was
passed by Congress on July 24, 1989, allows repayment to the private contractor of reclaimed
lands.95 Such law was relied upon by respondents, along with the above-mentioned executive
issuances in pushing through with the Project. The existence of such law and issuances is an
"operative fact" to which legal consequences have attached. This Court is constrained to give legal
effect to the acts done in consonance with such executive and legislative acts; to do otherwise would
work patent injustice on respondents.

Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the transfer
of land, although illegal or unconstitutional, will not be invalidated on considerations of equity and
social justice. However, in that case, we did not apply the same considering that PEA, respondent in
said case, was not entitled to equity principles there being bad faith on its part, thus:

There are, moreover, special circumstances that disqualify Amari from invoking equity principles.
Amari cannot claim good faith because even before Amari signed the Amended JVA on March 30,
1999, petitioner had already filed the instant case on April 27, 1998 questioning precisely the
qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition, two
Senate Committees had already approved on September 16, 1997 Senate Committee Report No.
560. This Report concluded, after a well-publicized investigation into PEAs sale of the Freedom
Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari
signed the Amended JVA knowing and assuming all the attendant risks, including the annulment of
the Amended JVA.96

Such indicia of bad faith are not present in the instant case. When the ruling in PEA was rendered by
this Court on July 9, 2002, the JVAs were all executed. Furthermore, when petitioner filed the instant
case against respondents on August 5, 2004, the JVAs were already terminated by virtue of the
MOA between the NHA and RBI. The respondents had no reason to think that their agreements
were unconstitutional or even questionable, as in fact, the concurrent acts of the executive
department lent validity to the implementation of the Project. The SMDRP agreements have
produced vested rights in favor of the slum dwellers, the buyers of reclaimed land who were issued
titles over said land, and the agencies and investors who made investments in the project or who
bought SMPPCs. These properties and rights cannot be disturbed or questioned after the passage
of around ten (10) years from the start of the SMDRP implementation. Evidently, the "operative fact"
principle has set in. The titles to the lands in the hands of the buyers can no longer be invalidated.

The Courts Dispositions

Based on the issues raised in this petition, we find that the March 19, 1993 JVA between NHA and
RBI and the SMDRP embodied in the JVA, the subsequent amendments to the JVA and all other
agreements signed and executed in relation to it, including, but not limited to, the September 26,
1994 Smokey Mountain Asset Pool Agreement and the agreement on Phase I of the Project as well
as all other transactions which emanated from the Project, have been shown to be valid, legal, and
constitutional. Phase II has been struck down by the Clean Air Act.

With regard to the prayer for prohibition, enjoining respondents particularly respondent NHA from
further implementing and/or enforcing the said Project and other agreements related to it, and from
further deriving and/or enjoying any rights, privileges and interest from the Project, we find the same
prayer meritless.

Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:

Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board, officer or
person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the respondent to desist from further
proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as
law and justice may require.

It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation to the
SMDRP and the agreements relative to it. Likewise, it has not been shown what ministerial functions
the NHA has with regard to the SMDRP.

A ministerial duty is one which is so clear and specific as to leave no room for the exercise of
discretion in its performance. It is a duty which an officer performs in a given state of facts in a
prescribed manner in obedience to the mandate of legal authority, without regard to the exercise of
his/her own judgment upon the propriety of the act done.97

Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA and other
related agreements, certainly does not involve ministerial functions of the NHA but instead requires
exercise of judgment. In fact, Item No. 4 of the MOA terminating the JVAs provides for validation of
the developers (RBIs) claims arising from the termination of the SMDRP through the various
government agencies.98 Such validation requires the exercise of discretion.

In addition, prohibition does not lie against the NHA in view of petitioners failure to avail and exhaust
all administrative remedies. Clear is the rule that prohibition is only available when there is no
adequate remedy in the ordinary course of law.

More importantly, prohibition does not lie to restrain an act which is already a fait accompli. The
"operative fact" doctrine protecting vested rights bars the grant of the writ of prohibition to the case at
bar. It should be remembered that petitioner was the Solicitor General at the time SMDRP was
formulated and implemented. He had the opportunity to question the SMDRP and the agreements
on it, but he did not. The moment to challenge the Project had passed.

On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to disclose
all documents and information relating to the project, including, but not limited to, any subsequent
agreements with respect to the different phases of the Project, the revisions of the original plan, the
additional works incurred on the Project, the current financial condition of respondent RBI, and the
transactions made with respect to the project. We earlier ruled that petitioner will be allowed access
to official records relative to the SMDRP. That would be adequate relief to satisfy petitioners right to
the information gateway.
WHEREFORE, the petition is partially granted.

The prayer for a writ of prohibition is DENIED for lack of merit.

The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to
petitioner to all public documents and official records relative to the SMDRPincluding, but not
limited to, the March 19, 1993 JVA between the NHA and RBI and subsequent agreements related
to the JVA, the revisions over the original plan, and the additional works incurred on and the
transactions made with respect to the Project.

No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-49623 June 29, 1982

MANILA ELECTRIC COMPANY, petitioner-appellant,
vs.
JUDGE FLORENLIANA CASTRO-BARTOLOME of the Court of First Instance of Rizal, Makati
Branch XV, and REPUBLIC OF THE PHILIPPINES,
respondent-appellees.

AQUINO, J.:p

This case involves the prohibition in section 11, Article XIV of the Constitution that "no private
coporation or associaiton may hold alienable lands of the public domain except by lease not to
exceed on ethousand hectares in area". * That prohibition is not found in the 1935 Constitution.

The Manila Electric Company, a domestic corporation organized under Philippine laws, more than
sixty percent of whose capital stock is owned by Filipino citizens, in its application filed on December
1, 1976 in the Makati branch of the Court of First Instance of Rizal, prayed for the confirmation of its
title to two lots with a total area of one hundred sixty-five square meters, located at Tanay, Rizal with
an assessed value of P3,270 (LRC Case No. N-9485, LRC No. N-50801).

The Republic of the Philippines opposed theh application on the grounds that the applicant, as a
private corporation,is disqualified to hold alienable public lands and that the applicant and its
prredecessors-in-interest have not been in the open, continuous, exclusive and notorious
possession and occupation of the land for at least thirty years immediately preceding the filing of the
application (pp. 65-66, Rollo).

After the trial had commenced, the Province of rizal and the Municipality of Tanay filed a joint
opposition to the application on the ground that one of the lots, Lot No. 1165 of the Tanay cadastre,
would be needed for the widening and improvement of Jose Abad Santos and E.Quirino Streetsin
the town of Tanay.

The land was possessed by Olimpia ramos before the Pacific war which broke out in 1941. On July
3, 1947, Ramos sold the land to the spouses Rafael Piguing and MInerva Inocencio (Exh. K). The
Piguing sapouses constructed a house therereon. Because the Meralco had installed the "anchor
guy" of its steel post on the land, the Piguing spouses sold the lot to the Meralco on August 13,
1976.

The said land was included in the1968 cadastral survey made in Tanacy by the Bureau of Lands,
Plan AP-04-000902 (Exh. F and H) and was divided into two lots, Lots Nos. 1164 and 1165, so as to
segregate Lot No. 1165 which would be used to widen the two street serving as the land's eastern
and southern boundaries.
The land was declared for realty tax purposes since 1945 and taxes had been paid thereon up to
1977. It is residential in character as distinguished from a strictly agricultural land. It is not included in
any military reservation. Since 1927, it has formed part of the alienable portion of the public domain.

After trial, the lowre court rendered a decision dismissing the application because in its opinion the
Meralco is not qualified to apply for the registration of the said land since under section 48(b) of the
Public Land Law only Filipino citizens or natural persons can apply for judicial confirmationof their
imperfect titles to public land. The Meralco is a juridical person. The trial court assumed that the land
which it seeks to register is public land.

From that decision, the Meralco appealed to this Court under Republic Act No. 5440.

In contends that the said land, after having been possessed in the concept of owner by Olimpia
Ramos and the Piguing spouses for more than thirty years, had become private land in the hands of
the latter, and, therefore, the constitutional prohibition, banning a private corporation from acquiring
alienable public land, is not applicable to the said land.

The Meralco further contends that it has invoke section 48(b) of the Public Land Law, not for itself,
but for the Piguing spouses who, as Filipino citizens, could secure a judicial confirmation of their
imperfect title to the land.

In reply to these contentions, the Solicitor General counters that the said land is not private land
because the Meralco and its predecessors-in-interest have no composition title from the Spanish
government nor possessory information title or any other means for the acquisition of public lands
such as grants or patents (Republic vs. Court of Appeals and De Jesus, L-40912, September 30,
1976, 73 SCRA 146, 157; Director of Lands vs. Reyes, L-27594, November 28, 1975, and
Alinsunurin vs. Director of Lands, L-28144, November 28, 1975; 68 SCRA 177; 195; Lee Hong Hok
vs. David, L-30389, December 27, 1972, 48 SCRA 372, 378-9; Director of Lands vs. Court of
Appeals and Raymundo, L-29575, April 30, 1971, 38 SCRA 634, 639; Padilla vs. Reyes and Director
of Lands, 60 Phil. 967, 969; Heirs of Datu Pendatun vs. Director of Lands, 59 Phil. 600, 603).

The Public Land Law provides:

CHAPTER VIII. Judicial confirmation of imperfect or incomplete titles.

xxx xxx xxx

SEC. 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 therefor, under the Land Registration Act, to wit:

xxx xxx xxx

(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, for at
least thirty years 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. (As
amended by Republic Act No. 1942, approved on June 22, 1957.)

xxx xxx xxx

SEC. 49. No person claiming title to lands of the public domain not in possession of
the qualifications specified in the last preceding section may apply for the benefits of
this chapter.

We hold that, as between the State and the Meralco, the said land is still public land. It would cease
to be public land only upon the issuance of the certificate of title to any Filipino citizen claiming it
under section 48(b). Because it is still public land and the Meralco, as a juridical person, is
disqualified to apply for its registration under section 48(b), Meralco's application cannot be given
due course or has to be dismissed.

This conclusion is supported by the rule announced in Oh Cho vs. Director of Lands, 75 Phil. 890,
892, which rule is a compendious or quintessential precis of a pervasive principle of public land law
and land registration law, that"all lands that were not acquired from the Government, either by
purchase or by grant, belong to the public domain. An exception to the rule would be any land that
should have been in the possession of an occupant and of his predecessors-in-interest since time
immemorial, for such possession would justify the presumption that the land had never been part of
the public domain or that it had been a private property even before the Spanish conquest." (Cario
vs. Insular Government, 212 U. S. 449, 53 L. ed. 594, 41 Phil. 935 and 7 Phil. 132).

The Meralco relies on the ruling in Susi vs. Razon and Director of Lands, 48 Phil. 424, that "an open,
continuous, adverse and public possession of a land of the public domain from time immemorial by a
private individual personally and through his predecessors confers an effective title on said
possessor, whereby the land ceases to be public" and becomes private property.

That ruling is based on the Cario case which is about the possession of land by an Igorot and his
ancestors since time immemorial or even before the Spanish conquest. The land involved in
the Susi case was possessed before 1880 or since a period of time "beyond the reach of memory".
That is not the situation in this case. The Meralco does not pretend that the Piguing spouses and
their predecessor had been in possession of the land since time immemorial.

In the Susi case, this Court applied section 45(b) of Act No. 2874 which corresponds to what is now
section 48(b). It was held that the long possession of the land under a bona fide claim of ownership
since July 26, 1894 gave rise to the conclusive presumption that the occupant had complied with all
the conditions essential to a Government grant and was thus entitled to a certificate of title.

On the other hand, in Uy Un vs. Perez, 71 Phil. 508, 510-11, it was held that while occupants of
public land, who have applied for the confirmation of their title, "teian asimismo a su favor la
presuncion juris et de jure de que habian cumplido con todas las condiciones necesarias para la
concesion del titulo; pero hasta que el titulo se expida no tenian el concepto juridico de ser los
verdaderos dueos del terreno in este dejo de pertenecer a los terrenos publico del Estado
susceptibles de enajenacion."

That means that until the certificate of title is issued, a pice of land, over which an imperfect title is
sought to be confirmed, remains public land. For that reason in the Uy Un case, it was held that if
that land was attached by a judgment creditor of the applicant, while his application for confirmation
of his imperfect title was pending in the Bureau of Lands, the levy and execution sald of the land
were void.
For that same reason, lands over which an imperfect title is sought to be confirmed are governed by
the Public Land Law. Such lands would not be covered by the Public Land Law if they were already
private lands. The occupants' right to the said lands is characterized in the Uy Un case, not as
ownership in fee simple, but asderecho dominical incoativo.

The Meralco in its concluding argument contends that if the Piguing spouses could ask for the
confirmation of their imperfect title to the said lands, then why should the Meralco, as their
transferee, be denied the same right to register the said land in its name, there being no legal
prohibition for the Piguing spouses from selling the land to the Meralco? This Court is disposing of
that same contention in the Oh Cho case said:

The benefits provided in the Public Land Act (meaning the confirmation of an
imperfect title under section 48[b]) for applicant's immediate predecessors-in-interest
are or constitute a grant or concession by the State; and before they could acquire
any right under such benefits, the applicant's immediate predecessors-in-interest
should comply with the condition precedent for the grant of such benefits.

The condition precedent is to apply for the registration of the land of which they had
been in possession at least since July 26, 1894. This the applicant's immediate
predecessors-in-interest (meaning the Piguing spouses in the instant case) failed to
do.

They did not have any vested right in the lot amounting to title which was
transmissible to the applicant. The only right, if it may thus be called, is their
possession of the lot which, tacked to that of their predecessors-in-interest, may be
availed of by a qualified person to apply for its registration but not by a person as the
applicant who is disqualified. (75 Phil. 890, 893.)

Finally, it may be observed that the constitutional prohibition makes no distinction between (on one
hand) alienable agricultural public lands as to which no occupant has an imperfect title and (on the
other hand) alienable lands of the public domain as to which an occupant has an imperfect title
subject to judicial confirmation.

Since section 11 of Article XIV does not distinguish, we should not make any distinction or
qualification. The prohibition applies to alienable public lands as to which a Torrens title may be
secured under section 48(b). The proceeding under section 48(b) "presupposes that the land is
public" (Mindanao vs. Director of Lands, L-19535, July 30, 1967, 20 SCRA 641, 644).

The lower court;s judgment dismissing Meralco's application is affirmed. Costs against the petitioner-
appellant.

SO ORDERED.

Barredo, Makasiar, Guerrero, Melencio-Herrera, Plana, Escolin, Vasquez, Relova and Gutierrez, Jr.,
JJ., concur.

Concepcion, Jr., J., is on leave.

Separate Opinions

ABAD SANTOS, J.: concurring:

I concur in the result. I am of the opinion that the lots which are sought to be registered have ceased
to be lands of the public domain at the time they were acquired by the petitioner corporation. They
are already private lands because of acquisitive prescription by the predecessors of the petitioner
and all that is needed is the confirmation of the title. Accordingly, the constitutional provision that no
private corporation or association may hold alienable lands of the public domain is inapplicable.
However, the petitioner is relying on Sec. 48 of the Public Land Act for the confirmation of its title
and Mr. Justice Aquino is correct in holding that said provision cannot be availed by juridical entities.

FERNANDO, C.J., concurring and dissenting:

I concur in the ruling of the Court that Meralco "as a juridical person" is disqualified to apply for its
registration under Section 48(b).. 1 I dissent insofar as the opinion of the Court would characterize such jurisdictional defect,
under the particular circumstances of this case, as an insurmountable obstacle to the relief sought. I would apply by analogy, although the
facts could be distinguished, the approach followed by us in Francisco v. City of Davao, 2 where the legal question raised,
instead of being deferred and possibly taken up in another case, was resolved. By legal fiction 3 and in the
exercise of our equitable jurisdiction, I feel that the realistic solutionwould be to decide the matter as if the
application under Section 48(b) were filed by the Piguing spouses, who I assume suffer from no such
disability.

DE CASTRO, J., dissenting:

Justice Teehankee cites in his dissenting opinion the case of herico vs. Dar, 1 the decision in which I
am the ponente, as reiterating a supposedly well-established doctrine that lands of the public domain
which, by reason of possession and cultivation for such a length of time, a grant by the State to the
occupant is presumed, and the land thereby ceases to form part of the public domain, but is segregated
therefrom as to be no longer subject to the authority of the Director of Lands to dispose under the public
lands laws or statutes. He would thus consider said land as no longer public land but "private" lands and
therefore, not within the prohibition of the New Constitution against corporations from acquiring public
lands which provides that "no private corporation or association may hold alienable lands of the public
domain except by lease not to exceed one thousand hectares." 2

I cannot subscribe to the view that the land as above described has become private land, even
before title thereto, which is, as of this stage, said to be still "an incomplete or imperfect title," has
been fully vested on the occupant, through the prescribed procedure known as judicial confirmation
of incomplete or imperfect title. 3 This is the only legal method by which full and absolute title to the land
may be granted, to convert the land into a truly private land. To secure such judicial title, only the courts
can be resorted to. The Director of Lands has lost authority over the land, insofar as its disposition is
concerned. His authority is limited to another form of disposition of public land, referred to as
administrative legalization, resulting in the issuance of free patents, also based on possession, in which
case, as in the issuance of homestead and sales patents, the land involved is undoubtedly public land.
The possessor of a piece of public land would have the option to acquire title thereto through judicial
confirmation or administrative legalization. The difference is that in the latter case, the area disposable to
a citizen-applicant by the Director of Lands is limited to 24 hectares. There is no limit to the area subject
to judicial confirmation of incomplete or imperfect title, except possibly the limit fixed for a State grant
under old Spanish laws and decrees, which certainly is much larger than that set for free patents.
It is because of the divestiture of authority of the Director of Lands to dispose of the land subject to
judicial confirmation of incomplete and imperfect title that some statements are found in many cases,
such as those cited by Justice Teehankee, to the effect that such land has ceased to be a public
land. What these statements, however, really mean is that the land referred to no longer forms part
of the mass of public domain still disposable by the Director of Lands, under the authority granted
him by the public land statutes. It, however, would not follow that the land covered by Section 48 of
the Public Land Act has itself become private land. The fact that its disposition is provided for in the
aforecited Act which deals with "public land" gives rise to the very strong implication, if not a positive
conclusion, that the land referred to is still public land. Only when the court adjudicates the land to
the applicant for confirmation of title would the land become privately owned land, for in the same
proceeding, the court may declare it public land, depending on the evidence.

The discussion of the question of whether the land involved is still public or already private land is,
however, entirely pointless, or an idle exercise, if We consider the provision of Section 14, Article
XIV of the Constitution which appears to have been lost sight of, which provides that '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." As previously
stated, by express provisions of the Constitution, no corporation or association may hold alienable
lands of the public domain except by lease, not to exceed, 1,000 hectares in area.4 Hence, even if the
land involved in the present case is considered private land, the cited section prohibits its acquisition by
the Meralco or Iglesia which admittedly are "corporations or association" within the meaning of the
aforecited provision of the New Constitution. This observation should end all arguments on the issue of
whether the land in question is public or private land. Although it may further be observed that supposing
a corporation has been in possession of a piece of public land from the very beginning, may it apply for
judicial confirmation of the land in question to acquire title to its owner after possessing the land for the
requisite length of time? The answer is believed obvious it may not. If its possession is not from the
beginning but has commenced only upon the transfer to it by the prior possessor, may the corporation
apply? The answer is just as obvious with more reason, it may not.

This separate opinion should have had no need to be written because the majority opinion written by
Justice Aquino is already well-reasoned out and supported by applicable authorities. I was impelled
to write it only because in the dissenting opinion of Justice Teehankee, the case of Herico vs.
Dar (supra) which is my ponenciawas cited in support of his position. This separate opinion then is
more to show and explain that whatever has been stated by me in the Dar case should be
interpreted in the light of what I have said in this separate opinion, which I believe, does not
strengthen Justice Teehankee's position a bit.

TEEHANKEE, J., dissenting:

Involved in these two cases are the applications of petitioner Meralco, a nationalized domestic
corporation, in the first case and respondent Iglesia in Cristo, a religious corporation sole, in the
second case (both admittedly Filipino corporations qualified to hold and own private lands), for
judicial confirmation of their titles to small parcels of land, residential in character as distinguished
from strictly agricultural land, acquired by them by purchase or exchange from private
persons publicly recognized as the private owners (who have been in the open, continuous,
exclusive and notorious possession and occupation of the lands under a bona fide claim of
ownership for at least thirty [30] years immediately preceding the filing of the applications).

This dissent is based on the failure of the majority to adhere to established doctrine since the 1909
case of Carioand the 1925 case of Susi down to the 1980 case of Herico, infra, pursuant to the
Public Land Act, as amended, that where a possessor has held the open, exclusive and
unchallenged possession of alienable public land for the statutory period provided by law (30 years
now under amendatory Rep. Act No. 1942 approved on June 22, 1957), the law itself mandates that
the possessor "shall be conclusively presumed to have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of title" and "by legal fiction [the land] has
already ceased to be of the public domain and has become private property." Accordingly, the
prohibition of the 1973 Constitution and of the Public Land Act against private corporation holding
lands of the public domain has no applicability in the present cases. What Meralco and Iglesia have
acquired from their predecessors-in-interest had already ceased to be of the public domain and had
become private property at the time of the sale to them and therefore their applicatins for
confirmation of title by virtue of their predecessors-in-interest' vested right and title may be duly
granted.

The land covered by the Meralco application of November 26, 1976 consists of two (1) small lots
with a total area of 165 square meters located at Tanay, Rizal with an assessed value of P3,270.00.
This land was possessed by Olimpia Ramos before World Warr II which broke out in the Pacific in
1941. Olimpia Ramos sold the land on July 3, 1947 to the spouses Rafael Piguing and Minerva
Inocencio who constructed a house thereon. But because the Meralco had instealled the "anchor
guy" of its stell posts on the land, the Piguing spouses sold the land to the Meralco on August 13,
1976. The land had been declared for realty tax purposes since 1945 and realty taxes were regularly
paid thereon. It is residential in character as distinguished from strictly agricultural land. It is likewise
established that it is not included in any military reservation and that since 1927 it had been certified
as part of the alienable or disposable portion of the public domain.

The land covered by the Iglesia application of September 3, 1977 likewise consists of two (2) small
lots located in Barrio Dampol, Plaridel, Bulacan with a total area of 313 square meters and with an
assessed value of P1,350.00. The land was acquired by the Iglesia on January 9, 1953 from Andres
Perez in exchange for a lot owned by the Iglesia with an area of 247 square meters. The land was
already possessed by Perez in 1933. Admittedly also it is not included in any military reservation and
is inside an area which was certified since 1927 as part of the alienable or disposable portion of the
public domain. A chapel of the Iglesia stands on the said land. It had beenduly declared for realty tax
purposes in the name of the Iglesia and realty taxes were regularly paid thereon.

Respondent judge in the Meralco case sustained the Republic's opposition and dismissed the
application, holding that under both the provisions of the new Constitution and the Public Land Act,
Meralco, being a corporation and not a natural person, is not qualified to apply for the registration of
title over the public land.

On the other hand, in the Iglesia case, the Republic presented no evidence in support of its
opposition but expressly "submitted the case for decision on the basis of the evidence submitted by
the applicant." Respondent judge in the case accordingly granted the application for registration of
the land in the name of the Iglesia, holding that it had been "satisfactorily established that applicant
]Iglesia] and its predecessors-in-interest have been in open, continuous, public and adverse
possession of the land . . . under a bona fide claim of ownership for more than thirty (30) years prior
to the filing of the application" and is therefore entitled to the registration applied for under the Public
Land Act, as amended.

Both decisions are now with the Court for review. I hold that both applications for registration should
be granted by virtue of the prevailing principle as enunciated since the 1925 case of Susi vs. Razon
and Director of Lands 1and reaffirmed in a long line of cases down to the 1980 case of Herico vs.
Dar 2 that the lands in question ceased, ipso jure, or by operation of law, to be lands of the public domain
upon completion of the statutory period of open, continuous, exclusive, notorious and unchallenged
possession thereof by the applicants' predecessors-in-interest who were qualified natural persons and
entitled to registration by right of acquisitive prescription under the provisions of the Public Land Act, and
that accordingly the judgment in the Meralco case should be reversed and a new judgment entered
granting Meralco's application, while the judgment in the Iglesia case should stand affirmed.
The principal issue at bar may thus be stated:

It is expressly provided in section 48, par. (b) of the Public Land Act (Commonwealth Act No. 141, as
amended by Rep. Act No. 1942, approved on June 22, 1957) that citizens of the Philippines who are
natural persons who have occupied lands of the public domain but whose titles have not been
perfected or completed may apply to the corresponding court of first instance for confirmation of their
claims and the issuance of the certificate of title therefor under the Land Registration Act in cases
where they "by themselves or through their predecessors-in-interest have been in the open,
continuous, exclusive, and notorious possession and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition of ownership, for at least thirty years 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." 3 In such cases, is the land ipso jure or by operation of law converted into private land upon
completion of the 30th year of continuous and unchallenged occupation of the land such that thereafter as
such private land, it may be duly transferred to and owned by private corporations or does such land, as
held by respondent judge in the Meralco case, remain part of the public domain and does not become
private land until after actual judicial confirmation proceedings and the formal court order for the issuance
of the certificate of title?

1. This issue has been squarely resolved by this Court since the 1925 case of Susi vs. Razon (and a
long line of cases, infra). It is established doctrine as first held therein that an open, continuous,
adverse and public possession of a land of the public domain for the period provided in the Public
Land Act provision in force at the time (from July 26, 1894 in Susi under the old law) by a private
individual personally and through his predecessors confers an effective title on said possessor,
whereby the land ceases to be land of the public domain and becomes private property.

(At that time in 1925 in the Susi case, such possession was required "from July 26, 1894" as then
provided for in section 45(b) of the old Public Land Act No. 2874, amending Act No. 926; whereas at
present, as provided for in the corresponding section 48, par.(b) of the later and subsisting Public
Land Act, Commonwealth Act No. 141, as amended by Rep. Act No. 1942 approved on June 22,
1957, in force since 1957, the period of open and unchallenged possession was reduced to "at least
thirty years immediately preceding the filing of the application for confirmation of title, equivalent to
the period of acquisitive prescription. This is admitted in the main opinion of Mr. Justice Aquino,
wherein it is stated that "(I)n the Susi case, this Court applied section 45 (b) of Act No. 2874 which
corresponds to what is now section 48(b). It was held that the long possession of the land under a
bona fide claim of ownership since July 26, 1894 gave rise to the conclusive presumption that the
occupant hadcomplied with all the conditions essential to a Government grant and was thus entitled
to a certificate of title." 4The text of the corresponding section 48(b), as amended by Rep. Act 1942
referred to is reproduced verbatim in Mr. Justice Aquino's opinion 5 and quotes the reduced statutory
period of open and unchallenged possession of "at least thirty yearsimmediately preceding the filing of the
application.")

Accordingly, the Court held that Susi, as the rightful possessor of the public land for the statutory
period, acquired the same by operation of law as a grant from the Government, "not only a right to a
grant," and the land thereby "already ceased to be of the public domain and had become private
property at least by presumption" as expressly provided in the Act. Therefore, any supposed sale by
the Director of Lands of the same land to another person was void and of no effect and Susi as the
rightful possessor could recover the land as his private propertyfrom the supposed vendee who did
not acquire any right thereto since it had ceased to be land of the public domain. The Court thus
specifically held therein, as applied to the specific facts of the case, that:
. . . In favor of Valentin Susi, there is, moreover, the presumption juris et de jure, established in
paragraph (b) of section 45 of Act No. 2874, amending Act No. 926, that all the necessary
requirements for a grant by the Government were complied with for he has been in actual and
physical possession, personally and through his predecessors, of an agricultural land of the public
domain, openly continuously, exclusively and publicly since July 26, 1894, with a right to a certificate
of title to said land under the provisions of Chapter VIII of said Act. So that when Angela Razon
applied for the grant in her favor, Valentin Susi had already acquired, by operation of law, not only a
right to a grant, but a grant of the Government, for it is not necessary that certificate of title should be
issued in order that said grant may be sanctioned by the courts, an application therefor is sufficient,
under the provisions of section 47 of Act No. 2874. If by a legal function, Valentin Susi had acquired
the land in question by a grant of the State, it had already ceased to be of the public domain and had
become private property, at least by presumption, of Valentin Susi, beyond the control of the Director
of Lands. Consequently, in selling the land in question to Angela Razon, the Director of Lands
disposed of a land over which he had no longer any title or control, and the sake thus made was void
and of no effect, and Angela Razon did not thereby acquire any right." 6

2. The above-quoted ruling in Susi has been affirmed and reaffirmed by this Court in a long
unbroken line of cases, as follows:

In Mesina vs. Vda. de Sonza, 7 the Court held that "(I)n the case of Susi vs. Razon, et al., 48 Phil. 424, it
was observed that where all the necessary requirements for a grant by the Government are complied with
through actual physical possession openly, continuously, and publicly, with a right to a certificate of title to
said land under the provisions of Chapter VIII of Act No. 2874, amending Act No. 926 (carried over as
Chapter VIII of Commonwealth Act No. 141), the possessor is deemed to have already acquired by
operation of law not only a right to a grant, but a grant of the Government, for it is not necessary that a
certificate of title be issued in order that said grant may be sanctioned by the courts an application
therefor being sufficient under the provisions of Section 47 of Act No. 2874 (reproduced as Section 50,
Commonwealth Act No. 141)." and "(C)onsidering that this case was dismissed by the trial court merely
on a motion to dismiss on the ground that plaintiff's action is already barred by the statute of limitations,
which apparently is predicated on the theory that a decree of registration can no longer be impugned on
the ground of fraud one year after the issuance and entry of the decree, which theory does not apply
here because the property involved is allegedly private in natural and has ceased to be part of the public
domain, we are of the opinion that the trial court erred in dismissing the case outright without giving
plaintiff a chance to prove his claim."

In Lacaste vs. Director of Lands, 8 the Court stressed that by force of possession, the land in question
became private property on the strength of the Susi doctrine.

In Manarpaac vs. Cabanatan, 9 the Court quoted with favor the text of the above-quoted ruling of Susi,
and its ratio decidendi thus:

The Director of Lands contends that the land in question being of the public domain,
the plaintiff-appellee cannot maintain an action to recover possession thereof.

If, as above stated, that land, the possession of which is in dispute, had already
become, operation of law, private property, there is lacking only the judicial sanction
of his title, Valentin Susi has the right to bring an action to recover the possession
thereof and hold it.

In Miguel vs. Court of Appeals, 10 the Court again held that where possession has been continuous,
uninterrupted, open, adverse and in the concept of an owner, there is a presumption juris et de jure that
all necessary conditions for a grant by the State have been complied with and he would have been by
force of law entitled to the registration of his title to the land (citing Pamintuan vs. Insular Government, 8
Phil. 485 and Susi vs. Razon, 48 Phil. 424).

In the latest 1980 case of Herico vs. Dar, 11 the Court once more reiterated the Susi doctrine that
"(A)nother obvious error of the respondent Court is in holding that after one year from the issuance of the
Torrens Title, the same can no longer be reopened to be declared and void, and has become absolute
and indefeasible. . . . Secondly, under the provisions of Republic Act No. 1942, which the respondent
court held to be inapplicable to the petitioner's case, with the latter's proven occupation and cultivation for
more than 30 years since 1914, by himself and by his predecessors-in-interest, title over the land
has vested on petitioner as to segregate the land from the mass of public land. Thereafter, it is no longer
disposable under the Public Land Act as by free patent. This is as provided in Republic Act No. 1942,
which took effect on June 22, 1957, amending Section 48-b of Commonwealth Act No. 141 which
provides: . . . As interpreted in several cases when the conditions as specified in the foregoing provision
are complied with, the possessor is deemed to have acquired, by operation of law, a right to a grant, a
government grant, without the necessity of a certificate of title being issued. The land, therefore, ceases
to be of the public domain, and beyond the authority of the Director of Lands to dispose of. The
application for confirmation is a mere formality, the lack of which does not affect the legal sufficiency of
the title as would be evidenced by the patent and the Torrens title to be issued upon the strength of said
patent."

3. In fine, since under the Court's settled doctrine, the acquisitive prescription of alienable or
disposable public lands provided for now in section 48, par. (b) of the Public Land Act takes place by
operation of law and the public land is converted to and becomes private property upon a showing of
open and unchallenged possession underbona fide claim of ownership by the applicants'
predecessors-in-interest for the statutory period of thirty yearsimmediately preceding the filing of the
application and "it is not necessary that a certificate of title should be issued in order that said grant
may be sanctioned by the court" which right is expressly backed up by theconclusive presumption or
presumption juris et de jure of the statute that the possessor has "performed all the conditions
essential to a Government grant," the applicant Meralco cannot be said to be barred as a corporation
from filing the application for registration of the private property duly acquired by it.

4. It should be noted that respondent judge's decision in the Meralco case expressly finds as
established factsthat the Meralco's predecessors-in-interest had possessed and occupied as owners
the land in question for at least over 35 years; Olimpia Ramos having possessed the same since the
last world war in 1941 and then having sold the same on July 3, 1947 to the Piguing spouses who
built a house thereon and continuously possessed the same until they sold the same in turn to the
Meralco on August 13, 1976, 12 Meralco's predecessors-in-interest had therefore acquired by operation
of the Public Land Act a Government grant to the property, as well as acquired ownership thereof by right
of acquisitive prescription over the land which thereby became private property. The very definition of
prescription as a mode of acquiring ownership as set forth in Art. 1106 of the Civil Code provides that "By
prescription one acquires ownership and other real rights through lapse of time in the manner and under
the conditions laid down by law." The law does not provide that one acquires ownership of a land by
prescription only after his title thereto is judicially confirmed. To this same effect is the ruling in Cario vs.
Insular Government 13, wherein the U.S. Supreme Court speaking through Justice Holmes held that

It is true that the language of Articles 4 and 5 attributes title to those 'who may prove'
possession for the necessary time and we do not overlook the argument that this
means may prove in registration proceedings. It may be that an English conveyancer
would have recommended an application under the foregoing decree, but certainly it
was not calculated to convey to the mind of an Igorot chief the notion that ancient
family possessions were in danger, if he had read every word of it. The words"may
prove" (acrediten), as well, or better, in view of the other provisions, might be taken
to mean when called upon to do so in any litigation. There are indications that
registration was expected from all, but none sufficient to show that, for want of it,
 ownership actually gained would be lost. The effect of the proof, whenever made,
was not to confer title, but simply to establish it, as already conferred by the decree, if
not by earlier law.

To the same effect is the Court's ruling in Legarda and Prieto vs. Saleeby, 31 Phil. 590, that "an
owner does not obtain title by virtue of certificate but rather obtains his certificate by virtue of the fact
that he has a fee simple title."

5. Since the public land because private property upon completion of the 30th year of continuous,
exclusive, and unchallenged possession of the applicant Meralco's predecessors-in-interest,
particularly the Piguing spouses who sold the private land to the Meralco, there is no justification for
denying the Meralco's application for registration of its duly acquired title to the land. Meralco's
predecessors-in-interest had acquired ownership of the land by acquisitive prescription as provided
by the Public Land Act and by the Civil Code. The land became private property and Meralco duly
acquired it by right of purchase. To deny Meralco's application to register the property because it is
not a natural person is unjustified because neither the new constitutional ban under the 1973
Constitution against private corporations owning lands of the public domain or the Public Land Act's
limitation on the right of application for confirmation of imperfect title to lands of the public domain
can be invoked any longer as the land had long ceased to be public land but had become private
property. Meralco's application in effect seeks confirmation of the acquisition of ownership of the
land which had become private property of its predecessors-in-interest, the Piguing spouses who
thru their open and unchallenged possession of the land for over thirty years acquired title thereto by
acquisitive prescription and by conclusive presumption of the Public Land Act itself. There is no legal
nor constitutional obstacle to such title being transferred to the Meralco by right of purchase
and traditio for it is not claimed that there is any legal prohibition against the Piguing spouses
transferring the ownership of the land to others (whether natural persons or corporations) such as
the applicant Meralco, even before the formal issuance of the certificate of title to them.

6. To uphold respondent judge's denial of Meralco's application on the technicality that the Public
Land Act allows only citizens of the Philippines who are natural persons to apply for confirmation of
their title would be impractical and would just give rise to multiplicity of court actions. Assuming that
there was a technical error in not having filed the application for registration in the name of the
Piguing spouses as the original owners and vendors, still it is conceded that there is no
prohibition against their sale of the land to the applicant Meralco and neither is there any prohibition
against the application being refiled with retroactive effect in the name of the original owners and
vendors (as such natural persons) with the end result of their application being granted, because of
their indisputable acquisition of ownership by operation of law and the conclusive presumption
therein provided in their favor. It should not be necessary to go through all the rituals as the great
cost of refiling of all such applications in their names and adding to the overcrowded court dockets
when the Court can after all these years dispose of it here and now. (See Francisco vs. City of
Davao 14)

The ends of justice would best be served, therefore, by considering the applications for confirmation
as amended to conform to the evidence, i.e. as filed in the names of the original persons who as
natural persons are duly qualified to apply for formal confirmation of the title that they had acquired
by conclusive presumption and mandate of the Public Land Act and who thereafter duly sold to the
herein corporations (both admittedly Filipino corporations duly qualified to hold and own private
lands) and granting the application for confirmation of title to the private lands so acquired and sold
or exchanged.

7. All that has been said here applies of course with equal force to the Iglesia case, save that as
already stated at the beginning hereof, the Iglesia application was granted because the Republic
presented no evidence in support of its opposition and respondent judge held in effect that the
property had ceased to be land of the public domain and had become private property, the title to
which could be duly issued in the name of the Iglesia as the transferee of its predecessors-in-
interest.

8. It should bear emphasis that what are involved here are small parcels of land, of 165 square
meters in the Meralco case used for installation of an "anchor guy" for its steel posts in connection
with its tasks as a nationalized domestic corporation to furnish electrical service to the consumer
public, and of 313 square meters in the Iglesia case used as the site of its church built thereon to
minister to the religious needs of its members. In no way, may the letter, intent and spirit of the
prohibition of the 1973 Constitution against corporations "holding alienable lands of the public
domain except by lease not to exceed one thousand hectares in area" (which is beamed against the
undue control and exploitation of our public lands and natural resources by corporations, Filipino and
foreign-controlled) be deemed violated or disregarded by the granting of the applications at bar. The
two corporations in truth and in fact do not hold the small parcels of land at bar for their own use or
benefit but for the sole use and benefit of the public.

9. With reference to the separate concurring opinion of Mr. Justice De Castro wherein he would blunt
the "supposedly (sic) well-established doctrine" (at page 1) from the 1909 case of Cario and the
1925 case of Susidown to the 1980 case of Herico (supra, at pages 5 to 11) and support the
contrary pronouncement in Mr. Justice Aquino's main opinion that "as between the State and the
Meralco, the said land is still public land. It would cease to be public land only upon the issuance of
the certificate of title to any Filipino citizen claiming it under section 48(b) [of the Public Land Act]" (at
page 5), suffice it to cite his own pronouncement in Herico (reiterating the well-established and
prevailing doctrine which this Court has not overturned, as it cannot overturn the mandate of the
statute that the unchallenged possessor for at least 30 years is "conclusively presumed to have
performed all the conditions essential to a government grant") wherein Mr. Justice De Castro
categorically reiterated for the Court that "As interpretated in several cases . . . the possessor is
deemed to have acquired, by operation of law, a right to a grant, a government grant, without the
necessity of a certificate of title being issued. The and, therefore, ceases to be of the public domain,
and beyond the authority of the Director of Lands to dispose of. The application for confirmation is a
mere formality, the lack of which does not affect the legal sufficiency of the title as would be
evidenced by the patent and the Torrens title to be issued upon the strength of said patent."

In only remains to point out, in order to avoid misapprehension or confusion, that Mr. Justice De
Castro's seemingly querulous statement that "the discussion of the question of whether the land
involved is still public oralready private land, is, however, entirely pointless or an idle exercise, if We
consider the provision of Section 14, Article XIV of the Constitution which appears to have been lost
sight of, which provides that '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'" (at page 2) that "hence, even if the land involved in the present
case is considered private land, the cited section prohibits its acquisition by the Meralco or Iglesia
which admittedly are 'corporations or associations' within the meaning of the aforecited provisions of
the New Constitution. This observation should end all arguments of the issue of whether the land in
question is public or private land" (idem) might mislead one to the wrong conclusion that
corporations with 60% Filipino ownership may not own private lands when the express provisions of
Art. XIV, section 9 15 and section 14 as quoted by himself as well as the counterpart provisions of the
1935 Constitution have always expressly permitted Filipino-owned corporations to own private lands, and
the only change effected in the 1973 Constitution is section 11 which now prohibits even such Filipino
corporations to own or hold lands of the public domain except by lease not to exceed 1,000 hectares in
area.
ACCORDINGLY, I vote for reversal of respondent court's judgment in the Meralco case and for the
entry of a new judgment granting Meralco's application and for affirmance of judgment in the second
case granting the Iglesia application.

Separate Opinions

ABAD SANTOS, J.: concurring:

I concur in the result. I am of the opinion that the lots which are sought to be registered have ceased
to be lands of the public domain at the time they were acquired by the petitioner corporation. They
are already private lands because of acquisitive prescription by the predecessors of the petitioner
and all that is needed is the confirmation of the title. Accordingly, the constitutional provision that no
private corporation or association may hold alienable lands of the public domain is inapplicable.
However, the petitioner is relying on Sec. 48 of the Public Land Act for the confirmation of its title
and Mr. Justice Aquino is correct in holding that said provision cannot be availed by juridical entities.

FERNANDO, C.J., concurring and dissenting:

I concur in the ruling of the Court that Meralco "as a juridical person" is disqualified to apply for its
registration under Section 48(b).. 1 I dissent insofar as the opinion of the Court would characterize such jurisdictional defect,
under the particular circumstances of this case, as an insurmountable obstacle to the relief sought. I would apply by analogy, although the
facts could be distinguished, the approach followed by us in Francisco v. City of Davao, 2 where the legal question raised,
instead of being deferred and possibly taken up in another case, was resolved. By legal fiction 3 and in the
exercise of our equitable jurisdiction, I feel that the realistic solutionwould be to decide the matter as if the
application under Section 48(b) were filed by the Piguing spouses, who I assume suffer from no such
disability.

DE CASTRO, J., dissenting:

Justice Teehankee cites in his dissenting opinion the case of herico vs. Dar, 1 the decision in which I
am the ponente, as reiterating a supposedly well-established doctrine that lands of the public domain
which, by reason of possession and cultivation for such a length of time, a grant by the State to the
occupant is presumed, and the land thereby ceases to form part of the public domain, but is segregated
therefrom as to be no longer subject to the authority of the Director of Lands to dispose under the public
lands laws or statutes. He would thus consider said land as no longer public land but "private" lands and
therefore, not within the prohibition of the New Constitution against corporations from acquiring public
lands which provides that "no private corporation or association may hold alienable lands of the public
domain except by lease not to exceed one thousand hectares." 2

I cannot subscribe to the view that the land as above described has become private land, even
before title thereto, which is, as of this stage, said to be still "an incomplete or imperfect title," has
been fully vested on the occupant, through the prescribed procedure known as judicial confirmation
of incomplete or imperfect title. 3 This is the only legal method by which full and absolute title to the land
may be granted, to convert the land into a truly private land. To secure such judicial title, only the courts
can be resorted to. The Director of Lands has lost authority over the land, insofar as its disposition is
concerned. His authority is limited to another form of disposition of public land, referred to as
administrative legalization, resulting in the issuance of free patents, also based on possession, in which
case, as in the issuance of homestead and sales patents, the land involved is undoubtedly public land.
The possessor of a piece of public land would have the option to acquire title thereto through judicial
confirmation or administrative legalization. The difference is that in the latter case, the area disposable to
a citizen-applicant by the Director of Lands is limited to 24 hectares. There is no limit to the area subject
to judicial confirmation of incomplete or imperfect title, except possibly the limit fixed for a State grant
under old Spanish laws and decrees, which certainly is much larger than that set for free patents.

It is because of the divestiture of authority of the Director of Lands to dispose of the land subject to
judicial confirmation of incomplete and imperfect title that some statements are found in many cases,
such as those cited by Justice Teehankee, to the effect that such land has ceased to be a public
land. What these statements, however, really mean is that the land referred to no longer forms part
of the mass of public domain still disposable by the Director of Lands, under the authority granted
him by the public land statutes. It, however, would not follow that the land covered by Section 48 of
the Public Land Act has itself become private land. The fact that its disposition is provided for in the
aforecited Act which deals with "public land" gives rise to the very strong implication, if not a positive
conclusion, that the land referred to is still public land. Only when the court adjudicates the land to
the applicant for confirmation of title would the land become privately owned land, for in the same
proceeding, the court may declare it public land, depending on the evidence.

The discussion of the question of whether the land involved is still public or already private land is,
however, entirely pointless, or an idle exercise, if We consider the provision of Section 14, Article
XIV of the Constitution which appears to have been lost sight of, which provides that '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." As previously
stated, by express provisions of the Constitution, no corporation or association may hold alienable
lands of the public domain except by lease, not to exceed, 1,000 hectares in area.4 Hence, even if the
land involved in the present case is considered private land, the cited section prohibits its acquisition by
the Meralco or Iglesia which admittedly are "corporations or association" within the meaning of the
aforecited provision of the New Constitution. This observation should end all arguments on the issue of
whether the land in question is public or private land. Although it may further be observed that supposing
a corporation has been in possession of a piece of public land from the very beginning, may it apply for
judicial confirmation of the land in question to acquire title to its owner after possessing the land for the
requisite length of time? The answer is believed obvious it may not. If its possession is not from the
beginning but has commenced only upon the transfer to it by the prior possessor, may the corporation
apply? The answer is just as obvious with more reason, it may not.

This separate opinion should have had no need to be written because the majority opinion written by
Justice Aquino is already well-reasoned out and supported by applicable authorities. I was impelled
to write it only because in the dissenting opinion of Justice Teehankee, the case of Herico vs.
Dar (supra) which is my ponenciawas cited in support of his position. This separate opinion then is
more to show and explain that whatever has been stated by me in the Dar case should be
interpreted in the light of what I have said in this separate opinion, which I believe, does not
strengthen Justice Teehankee's position a bit.

TEEHANKEE, J., dissenting:

Involved in these two cases are the applications of petitioner Meralco, a nationalized domestic
corporation, in the first case and respondent Iglesia in Cristo, a religious corporation sole, in the
second case (both admittedly Filipino corporations qualified to hold and own private lands), for
judicial confirmation of their titles to small parcels of land, residential in character as distinguished
from strictly agricultural land, acquired by them by purchase or exchange from private
persons publicly recognized as the private owners (who have been in the open, continuous,
exclusive and notorious possession and occupation of the lands under a bona fide claim of
ownership for at least thirty [30] years immediately preceding the filing of the applications).
This dissent is based on the failure of the majority to adhere to established doctrine since the 1909
case of Carioand the 1925 case of Susi down to the 1980 case of Herico, infra, pursuant to the
Public Land Act, as amended, that where a possessor has held the open, exclusive and
unchallenged possession of alienable public land for the statutory period provided by law (30 years
now under amendatory Rep. Act No. 1942 approved on June 22, 1957), the law itself mandates that
the possessor "shall be conclusively presumed to have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of title" and "by legal fiction [the land] has
already ceased to be of the public domain and has become private property." Accordingly, the
prohibition of the 1973 Constitution and of the Public Land Act against private corporation holding
lands of the public domain has no applicability in the present cases. What Meralco and Iglesia have
acquired from their predecessors-in-interest had already ceased to be of the public domain and had
become private property at the time of the sale to them and therefore their applicatins for
confirmation of title by virtue of their predecessors-in-interest' vested right and title may be duly
granted.

The land covered by the Meralco application of November 26, 1976 consists of two (1) small lots
with a total area of 165 square meters located at Tanay, Rizal with an assessed value of P3,270.00.
This land was possessed by Olimpia Ramos before World Warr II which broke out in the Pacific in
1941. Olimpia Ramos sold the land on July 3, 1947 to the spouses Rafael Piguing and Minerva
Inocencio who constructed a house thereon. But because the Meralco had instealled the "anchor
guy" of its stell posts on the land, the Piguing spouses sold the land to the Meralco on August 13,
1976. The land had been declared for realty tax purposes since 1945 and realty taxes were regularly
paid thereon. It is residential in character as distinguished from strictly agricultural land. It is likewise
established that it is not included in any military reservation and that since 1927 it had been certified
as part of the alienable or disposable portion of the public domain.

The land covered by the Iglesia application of September 3, 1977 likewise consists of two (2) small
lots located in Barrio Dampol, Plaridel, Bulacan with a total area of 313 square meters and with an
assessed value of P1,350.00. The land was acquired by the Iglesia on January 9, 1953 from Andres
Perez in exchange for a lot owned by the Iglesia with an area of 247 square meters. The land was
already possessed by Perez in 1933. Admittedly also it is not included in any military reservation and
is inside an area which was certified since 1927 as part of the alienable or disposable portion of the
public domain. A chapel of the Iglesia stands on the said land. It had beenduly declared for realty tax
purposes in the name of the Iglesia and realty taxes were regularly paid thereon.

Respondent judge in the Meralco case sustained the Republic's opposition and dismissed the
application, holding that under both the provisions of the new Constitution and the Public Land Act,
Meralco, being a corporation and not a natural person, is not qualified to apply for the registration of
title over the public land.

On the other hand, in the Iglesia case, the Republic presented no evidence in support of its
opposition but expressly "submitted the case for decision on the basis of the evidence submitted by
the applicant." Respondent judge in the case accordingly granted the application for registration of
the land in the name of the Iglesia, holding that it had been "satisfactorily established that applicant
]Iglesia] and its predecessors-in-interest have been in open, continuous, public and adverse
possession of the land . . . under a bona fide claim of ownership for more than thirty (30) years prior
to the filing of the application" and is therefore entitled to the registration applied for under the Public
Land Act, as amended.

Both decisions are now with the Court for review. I hold that both applications for registration should
be granted by virtue of the prevailing principle as enunciated since the 1925 case of Susi vs. Razon
and Director of Lands 1and reaffirmed in a long line of cases down to the 1980 case of Herico vs.
Dar 2 that the lands in question ceased, ipso jure, or by operation of law, to be lands of the public domain
upon completion of the statutory period of open, continuous, exclusive, notorious and unchallenged
possession thereof by the applicants' predecessors-in-interest who were qualified natural persons and
entitled to registration by right of acquisitive prescription under the provisions of the Public Land Act, and
that accordingly the judgment in the Meralco case should be reversed and a new judgment entered
granting Meralco's application, while the judgment in the Iglesia case should stand affirmed.

The principal issue at bar may thus be stated:

It is expressly provided in section 48, par. (b) of the Public Land Act (Commonwealth Act No. 141, as
amended by Rep. Act No. 1942, approved on June 22, 1957) that citizens of the Philippines who are
natural persons who have occupied lands of the public domain but whose titles have not been
perfected or completed may apply to the corresponding court of first instance for confirmation of their
claims and the issuance of the certificate of title therefor under the Land Registration Act in cases
where they "by themselves or through their predecessors-in-interest have been in the open,
continuous, exclusive, and notorious possession and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition of ownership, for at least thirty years 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." 3 In such cases, is the land ipso jure or by operation of law converted into private land upon
completion of the 30th year of continuous and unchallenged occupation of the land such that thereafter as
such private land, it may be duly transferred to and owned by private corporations or does such land, as
held by respondent judge in the Meralco case, remain part of the public domain and does not become
private land until after actual judicial confirmation proceedings and the formal court order for the issuance
of the certificate of title?

1. This issue has been squarely resolved by this Court since the 1925 case of Susi vs. Razon (and a
long line of cases, infra). It is established doctrine as first held therein that an open, continuous,
adverse and public possession of a land of the public domain for the period provided in the Public
Land Act provision in force at the time (from July 26, 1894 in Susi under the old law) by a private
individual personally and through his predecessors confers an effective title on said possessor,
whereby the land ceases to be land of the public domain and becomes private property.

(At that time in 1925 in the Susi case, such possession was required "from July 26, 1894" as then
provided for in section 45(b) of the old Public Land Act No. 2874, amending Act No. 926; whereas at
present, as provided for in the corresponding section 48, par.(b) of the later and subsisting Public
Land Act, Commonwealth Act No. 141, as amended by Rep. Act No. 1942 approved on June 22,
1957, in force since 1957, the period of open and unchallenged possession was reduced to "at least
thirty years immediately preceding the filing of the application for confirmation of title, equivalent to
the period of acquisitive prescription. This is admitted in the main opinion of Mr. Justice Aquino,
wherein it is stated that "(I)n the Susi case, this Court applied section 45 (b) of Act No. 2874 which
corresponds to what is now section 48(b). It was held that the long possession of the land under a
bona fide claim of ownership since July 26, 1894 gave rise to the conclusive presumption that the
occupant hadcomplied with all the conditions essential to a Government grant and was thus entitled
to a certificate of title." 4The text of the corresponding section 48(b), as amended by Rep. Act 1942
referred to is reproduced verbatim in Mr. Justice Aquino's opinion 5 and quotes the reduced statutory
period of open and unchallenged possession of "at least thirty yearsimmediately preceding the filing of the
application.")

Accordingly, the Court held that Susi, as the rightful possessor of the public land for the statutory
period, acquired the same by operation of law as a grant from the Government, "not only a right to a
grant," and the land thereby "already ceased to be of the public domain and had become private
property at least by presumption" as expressly provided in the Act. Therefore, any supposed sale by
the Director of Lands of the same land to another person was void and of no effect and Susi as the
rightful possessor could recover the land as his private propertyfrom the supposed vendee who did
not acquire any right thereto since it had ceased to be land of the public domain. The Court thus
specifically held therein, as applied to the specific facts of the case, that:

. . . In favor of Valentin Susi, there is, moreover, the presumption juris et de jure, established in
paragraph (b) of section 45 of Act No. 2874, amending Act No. 926, that all the necessary
requirements for a grant by the Government were complied with for he has been in actual and
physical possession, personally and through his predecessors, of an agricultural land of the public
domain, openly continuously, exclusively and publicly since July 26, 1894, with a right to a certificate
of title to said land under the provisions of Chapter VIII of said Act. So that when Angela Razon
applied for the grant in her favor, Valentin Susi had already acquired, by operation of law, not only a
right to a grant, but a grant of the Government, for it is not necessary that certificate of title should be
issued in order that said grant may be sanctioned by the courts, an application therefor is sufficient,
under the provisions of section 47 of Act No. 2874. If by a legal function, Valentin Susi had acquired
the land in question by a grant of the State, it had already ceased to be of the public domain and had
become private property, at least by presumption, of Valentin Susi, beyond the control of the Director
of Lands. Consequently, in selling the land in question to Angela Razon, the Director of Lands
disposed of a land over which he had no longer any title or control, and the sake thus made was void
and of no effect, and Angela Razon did not thereby acquire any right." 6

2. The above-quoted ruling in Susi has been affirmed and reaffirmed by this Court in a long
unbroken line of cases, as follows:

In Mesina vs. Vda. de Sonza, 7 the Court held that "(I)n the case of Susi vs. Razon, et al., 48 Phil. 424, it
was observed that where all the necessary requirements for a grant by the Government are complied with
through actual physical possession openly, continuously, and publicly, with a right to a certificate of title to
said land under the provisions of Chapter VIII of Act No. 2874, amending Act No. 926 (carried over as
Chapter VIII of Commonwealth Act No. 141), the possessor is deemed to have already acquired by
operation of law not only a right to a grant, but a grant of the Government, for it is not necessary that a
certificate of title be issued in order that said grant may be sanctioned by the courts an application
therefor being sufficient under the provisions of Section 47 of Act No. 2874 (reproduced as Section 50,
Commonwealth Act No. 141)." and "(C)onsidering that this case was dismissed by the trial court merely
on a motion to dismiss on the ground that plaintiff's action is already barred by the statute of limitations,
which apparently is predicated on the theory that a decree of registration can no longer be impugned on
the ground of fraud one year after the issuance and entry of the decree, which theory does not apply
here because the property involved is allegedly private in natural and has ceased to be part of the public
domain, we are of the opinion that the trial court erred in dismissing the case outright without giving
plaintiff a chance to prove his claim."

In Lacaste vs. Director of Lands, 8 the Court stressed that by force of possession, the land in question
became private property on the strength of the Susi doctrine.

In Manarpaac vs. Cabanatan, 9 the Court quoted with favor the text of the above-quoted ruling of Susi,
and its ratio decidendi thus:

The Director of Lands contends that the land in question being of the public domain,
the plaintiff-appellee cannot maintain an action to recover possession thereof.

If, as above stated, that land, the possession of which is in dispute, had already
become, operation of law, private property, there is lacking only the judicial sanction
 of his title, Valentin Susi has the right to bring an action to recover the possession
thereof and hold it.

In Miguel vs. Court of Appeals, 10 the Court again held that where possession has been continuous,
uninterrupted, open, adverse and in the concept of an owner, there is a presumption juris et de jure that
all necessary conditions for a grant by the State have been complied with and he would have been by
force of law entitled to the registration of his title to the land (citing Pamintuan vs. Insular Government, 8
Phil. 485 and Susi vs. Razon, 48 Phil. 424).

In the latest 1980 case of Herico vs. Dar, 11 the Court once more reiterated the Susi doctrine that
"(A)nother obvious error of the respondent Court is in holding that after one year from the issuance of the
Torrens Title, the same can no longer be reopened to be declared and void, and has become absolute
and indefeasible. . . . Secondly, under the provisions of Republic Act No. 1942, which the respondent
court held to be inapplicable to the petitioner's case, with the latter's proven occupation and cultivation for
more than 30 years since 1914, by himself and by his predecessors-in-interest, title over the land
has vested on petitioner as to segregate the land from the mass of public land. Thereafter, it is no longer
disposable under the Public Land Act as by free patent. This is as provided in Republic Act No. 1942,
which took effect on June 22, 1957, amending Section 48-b of Commonwealth Act No. 141 which
provides: . . . As interpreted in several cases when the conditions as specified in the foregoing provision
are complied with, the possessor is deemed to have acquired, by operation of law, a right to a grant, a
government grant, without the necessity of a certificate of title being issued. The land, therefore, ceases
to be of the public domain, and beyond the authority of the Director of Lands to dispose of. The
application for confirmation is a mere formality, the lack of which does not affect the legal sufficiency of
the title as would be evidenced by the patent and the Torrens title to be issued upon the strength of said
patent."

3. In fine, since under the Court's settled doctrine, the acquisitive prescription of alienable or
disposable public lands provided for now in section 48, par. (b) of the Public Land Act takes place by
operation of law and the public land is converted to and becomes private property upon a showing of
open and unchallenged possession underbona fide claim of ownership by the applicants'
predecessors-in-interest for the statutory period of thirty yearsimmediately preceding the filing of the
application and "it is not necessary that a certificate of title should be issued in order that said grant
may be sanctioned by the court" which right is expressly backed up by theconclusive presumption or
presumption juris et de jure of the statute that the possessor has "performed all the conditions
essential to a Government grant," the applicant Meralco cannot be said to be barred as a corporation
from filing the application for registration of the private property duly acquired by it.

4. It should be noted that respondent judge's decision in the Meralco case expressly finds as
established factsthat the Meralco's predecessors-in-interest had possessed and occupied as owners
the land in question for at least over 35 years; Olimpia Ramos having possessed the same since the
last world war in 1941 and then having sold the same on July 3, 1947 to the Piguing spouses who
built a house thereon and continuously possessed the same until they sold the same in turn to the
Meralco on August 13, 1976, 12 Meralco's predecessors-in-interest had therefore acquired by operation
of the Public Land Act a Government grant to the property, as well as acquired ownership thereof by right
of acquisitive prescription over the land which thereby became private property. The very definition of
prescription as a mode of acquiring ownership as set forth in Art. 1106 of the Civil Code provides that "By
prescription one acquires ownership and other real rights through lapse of time in the manner and under
the conditions laid down by law." The law does not provide that one acquires ownership of a land by
prescription only after his title thereto is judicially confirmed. To this same effect is the ruling in Cario vs.
Insular Government 13, wherein the U.S. Supreme Court speaking through Justice Holmes held that

It is true that the language of Articles 4 and 5 attributes title to those 'who may prove'
possession for the necessary time and we do not overlook the argument that this
means may prove in registration proceedings. It may be that an English conveyancer
 would have recommended an application under the foregoing decree, but certainly it
was not calculated to convey to the mind of an Igorot chief the notion that ancient
family possessions were in danger, if he had read every word of it. The words"may
prove" (acrediten), as well, or better, in view of the other provisions, might be taken
to mean when called upon to do so in any litigation. There are indications that
registration was expected from all, but none sufficient to show that, for want of it,
ownership actually gained would be lost. The effect of the proof, whenever made,
was not to confer title, but simply to establish it, as already conferred by the decree, if
not by earlier law.

To the same effect is the Court's ruling in Legarda and Prieto vs. Saleeby, 31 Phil. 590, that "an
owner does not obtain title by virtue of certificate but rather obtains his certificate by virtue of the fact
that he has a fee simple title."

5. Since the public land because private property upon completion of the 30th year of continuous,
exclusive, and unchallenged possession of the applicant Meralco's predecessors-in-interest,
particularly the Piguing spouses who sold the private land to the Meralco, there is no justification for
denying the Meralco's application for registration of its duly acquired title to the land. Meralco's
predecessors-in-interest had acquired ownership of the land by acquisitive prescription as provided
by the Public Land Act and by the Civil Code. The land became private property and Meralco duly
acquired it by right of purchase. To deny Meralco's application to register the property because it is
not a natural person is unjustified because neither the new constitutional ban under the 1973
Constitution against private corporations owning lands of the public domain or the Public Land Act's
limitation on the right of application for confirmation of imperfect title to lands of the public domain
can be invoked any longer as the land had long ceased to be public land but had become private
property. Meralco's application in effect seeks confirmation of the acquisition of ownership of the
land which had become private property of its predecessors-in-interest, the Piguing spouses who
thru their open and unchallenged possession of the land for over thirty years acquired title thereto by
acquisitive prescription and by conclusive presumption of the Public Land Act itself. There is no legal
nor constitutional obstacle to such title being transferred to the Meralco by right of purchase
and traditio for it is not claimed that there is any legal prohibition against the Piguing spouses
transferring the ownership of the land to others (whether natural persons or corporations) such as
the applicant Meralco, even before the formal issuance of the certificate of title to them.

6. To uphold respondent judge's denial of Meralco's application on the technicality that the Public
Land Act allows only citizens of the Philippines who are natural persons to apply for confirmation of
their title would be impractical and would just give rise to multiplicity of court actions. Assuming that
there was a technical error in not having filed the application for registration in the name of the
Piguing spouses as the original owners and vendors, still it is conceded that there is no
prohibition against their sale of the land to the applicant Meralco and neither is there any prohibition
against the application being refiled with retroactive effect in the name of the original owners and
vendors (as such natural persons) with the end result of their application being granted, because of
their indisputable acquisition of ownership by operation of law and the conclusive presumption
therein provided in their favor. It should not be necessary to go through all the rituals as the great
cost of refiling of all such applications in their names and adding to the overcrowded court dockets
when the Court can after all these years dispose of it here and now. (See Francisco vs. City of
Davao 14)

The ends of justice would best be served, therefore, by considering the applications for confirmation
as amended to conform to the evidence, i.e. as filed in the names of the original persons who as
natural persons are duly qualified to apply for formal confirmation of the title that they had acquired
by conclusive presumption and mandate of the Public Land Act and who thereafter duly sold to the
herein corporations (both admittedly Filipino corporations duly qualified to hold and own private
lands) and granting the application for confirmation of title to the private lands so acquired and sold
or exchanged.

7. All that has been said here applies of course with equal force to the Iglesia case, save that as
already stated at the beginning hereof, the Iglesia application was granted because the Republic
presented no evidence in support of its opposition and respondent judge held in effect that the
property had ceased to be land of the public domain and had become private property, the title to
which could be duly issued in the name of the Iglesia as the transferee of its predecessors-in-
interest.

8. It should bear emphasis that what are involved here are small parcels of land, of 165 square
meters in the Meralco case used for installation of an "anchor guy" for its steel posts in connection
with its tasks as a nationalized domestic corporation to furnish electrical service to the consumer
public, and of 313 square meters in the Iglesia case used as the site of its church built thereon to
minister to the religious needs of its members. In no way, may the letter, intent and spirit of the
prohibition of the 1973 Constitution against corporations "holding alienable lands of the public
domain except by lease not to exceed one thousand hectares in area" (which is beamed against the
undue control and exploitation of our public lands and natural resources by corporations, Filipino and
foreign-controlled) be deemed violated or disregarded by the granting of the applications at bar. The
two corporations in truth and in fact do not hold the small parcels of land at bar for their own use or
benefit but for the sole use and benefit of the public.

9. With reference to the separate concurring opinion of Mr. Justice De Castro wherein he would blunt
the "supposedly (sic) well-established doctrine" (at page 1) from the 1909 case of Cario and the
1925 case of Susidown to the 1980 case of Herico (supra, at pages 5 to 11) and support the
contrary pronouncement in Mr. Justice Aquino's main opinion that "as between the State and the
Meralco, the said land is still public land. It would cease to be public land only upon the issuance of
the certificate of title to any Filipino citizen claiming it under section 48(b) [of the Public Land Act]" (at
page 5), suffice it to cite his own pronouncement in Herico (reiterating the well-established and
prevailing doctrine which this Court has not overturned, as it cannot overturn the mandate of the
statute that the unchallenged possessor for at least 30 years is "conclusively presumed to have
performed all the conditions essential to a government grant") wherein Mr. Justice De Castro
categorically reiterated for the Court that "As interpretated in several cases . . . the possessor is
deemed to have acquired, by operation of law, a right to a grant, a government grant, without the
necessity of a certificate of title being issued. The and, therefore, ceases to be of the public domain,
and beyond the authority of the Director of Lands to dispose of. The application for confirmation is a
mere formality, the lack of which does not affect the legal sufficiency of the title as would be
evidenced by the patent and the Torrens title to be issued upon the strength of said patent."

In only remains to point out, in order to avoid misapprehension or confusion, that Mr. Justice De
Castro's seemingly querulous statement that "the discussion of the question of whether the land
involved is still public oralready private land, is, however, entirely pointless or an idle exercise, if We
consider the provision of Section 14, Article XIV of the Constitution which appears to have been lost
sight of, which provides that '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'" (at page 2) that "hence, even if the land involved in the present
case is considered private land, the cited section prohibits its acquisition by the Meralco or Iglesia
which admittedly are 'corporations or associations' within the meaning of the aforecited provisions of
the New Constitution. This observation should end all arguments of the issue of whether the land in
question is public or private land" (idem) might mislead one to the wrong conclusion that
corporations with 60% Filipino ownership may not own private lands when the express provisions of
Art. XIV, section 9 15 and section 14 as quoted by himself as well as the counterpart provisions of the
1935 Constitution have always expressly permitted Filipino-owned corporations to own private lands, and
the only change effected in the 1973 Constitution is section 11 which now prohibits even such Filipino
corporations to own or hold lands of the public domain except by lease not to exceed 1,000 hectares in
area.

ACCORDINGLY, I vote for reversal of respondent court's judgment in the Meralco case and for the
entry of a new judgment granting Meralco's application and for affirmance of judgment in the second
case granting the Iglesia application.

EN BANC

SEVERINO M. MANOTOK IV, G.R. Nos. 162335 & 162605

FROILAN M. MANOTOK,
FERNANDO M. MANOTOK Present:
III, MA. MAMERTA M.
MANOTOK, PATRICIA L. CORONA, C.J.,
TIONGSON, PACITA L. GO, CARPIO,
ROBERTO LAPERAL III, VELASCO, JR.,
MICHAEL MARSHALL V. LEONARDO-DE CASTRO,
MANOTOK, MARYANN BRION,
MANOTOK, FELISA PERALTA,
MYLENE V. MANOTOK, BERSAMIN,
IGNACIO V. MANOTOK, JR., DEL CASTILLO,
MILAGROS V. MANOTOK, ABAD,
SEVERINOMANOTOK III, VILLARAMA, JR.,
ROSA R.MANOTOK, PEREZ,
MIGUEL A.B.SISON, MENDOZA,
GEORGE M.BOCANEGRA, SERENO,
MA. CRISTINA E. SISON, REYES, and
PHILIPP L. MANOTOK, JOSE PERLAS-BERNABE, JJ.
CLEMENTE L. MANOTOK,
RAMON SEVERINO L.
MANOTOK, THELMA R.
MANOTOK, JOSE MARIA
MANOTOK, JESUS JUDE
MANOTOK, JR. and MA.
THERESA L. MANOTOK,
represented by their Attorney-
in-fact, Rosa R. Manotok,
Petitioners,
 - versus -

HEIRS OF HOMER L. Promulgated:

BARQUE,represented by
TERESITA BARQUE March 6, 2012
HERNANDEZ,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

RESOLUTION
VILLARAMA, JR., J.:

At bar are the motions for reconsideration separately filed by the Manotoks, Barques
and Manahans of our Decision promulgated on August 24, 2010, the dispositive
portion of which reads:
WHEREFORE, the petitions filed by the Manotoks under Rule 45 of
the 1997 Rules of Civil Procedure, as amended, as well as the petition-in-
intervention of the Manahans, are DENIED. The petition for reconstitution of title
filed by the Barques is likewise DENIED. TCT No. RT-22481 (372302) in the
name of Severino Manotok IV, et al., TCT No. 210177 in the name of Homer L.
Barque and Deed of Conveyance No. V-200022 issued to Felicitas B. Manahan, are
all hereby declared NULL and VOID. The Register of Deeds of Caloocan City
and/or Quezon City are hereby ordered to CANCEL the said titles. The Court
hereby DECLARES that Lot 823 of the Piedad Estate, Quezon City legally belongs
to the NATIONAL GOVERNMENT OF THE REPUBLIC OF THE
PHILIPPINES, without prejudice to the institution of REVERSION proceedings
by the State through the Office of the Solicitor General.

With costs against the petitioners.

SO ORDERED.

The Manotoks raised the following grounds in their motion for reconsideration with
motion for oral arguments:
1. It is unjust and oppressive to deprive the Manotoks of property they have
long held and acquired from the State, on consideration fully paid and received, and
under registered title issued by the State itself, on nothing more than the assumed
failure of the States agents to inscribe a ministerial approval on the transaction
deeds.
 2. The annulment of Friar Land sales, simply because physical evidence of
the Secretarys ministerial approval can no longer be found, may void transactions
involving thousands of hectares of land, and affect possibly millions of people to
whom the lands may have since been parceled out, sold and resold.

3. The Manotoks were given no due notice of the issue of reversion, which
this case on appeal did not include, and which was thrust upon the Manotoks only
in the final resolution disposing of the appeal.

It would be error for the Honorable Court to let this matter go without a
serious and full re-examination. This can be accomplished, among others, by
allowing this motion for reconsideration to be heard on oral argument, to try to
permit all pertinent considerations to be aired before the Court and taken into
account.

4. These G.R. Nos. 162335 and 162605 were an appeal from administrative
reconstitution proceedings before LRA Reconstitution officer Benjamin
Bustos. But the Resolution dated 18 December 2008 which finally reversed the
CAs rulings, affirmed the denial by Bustos of the application for administrative
reconstitution of the Barques purported transfer certificate of title,
and terminated the appeal introduced a new case on the Manotok property. It
ordered evidence-taking at the CA, on which the Supreme Court proposed itself to
decide, in the first instance, an alleged ownership controversy over the Manotok
property.

5. The Manotoks objected to the remand on jurisdictional and due process

grounds. The original and exclusive jurisdiction over the subject matter of the case
is vested by law on the regional trial courts.

6. The Honorable Court erred in proceeding to judgment divesting the

Manotoks of their title to Lot 823 of the Piedad Estate, without a trial in the courts
of original and exclusive jurisdiction, and in disregard of process which the law
accords to all owners-in-possession.

7. The Honorable Court erred in concluding that the Manotoks, despite

being owners in possession under a registered title, may be compelled to produce
the deeds by which the Government had transferred the property to them, and
failing which can be divested of their ownership in favor of the Government, even
if the latter has not demanded a reversion or brought suit for that purpose.

8. The Honorable Court erred in imposing on the Manotoks, contrary to Art.

541 of the Civil Code, the obligation to prove their ownership of the subject
property, and in awarding their title to the Government who has not even sued to
contest that ownership.

9. The Honorable Court erred in finding that Sale Certificate No. 1054,
which Severino Manotok acquired by assignment in 1923, was not approved by the
 Director of Lands and the Secretary of Agriculture and Natural Resources, and in
finding that a Sale Certificate without the Secretarys approval is void.

10. The Honorable Court erred in concluding that the Manotoks had no
valid Deed of Conveyance of Lot 823 from the Government The original of Deed
of Conveyance No. 29204 gave the register of deeds the authority to issue the
transfer certificate of title in the name of the buyer Severino Manotok, which is
required by law to be filed with and retained in the custody of the register of
deeds.We presume that the copy thereof actually transmitted to and received by the
register of deeds did contain the Secretarys signature because he in fact issued the
TCT. And we rely on this presumption because the document itself can no longer
be found.

11. Assuming arguendo that the original Deed of Conveyance No. 29204
the register of deeds received did not bear the Department Secretarys signature,
DENR Memorandum Order No. 16-05 dated October 27, 2005 cured the defect. To
deny the Manotoks the benefit of ratification under said MO, on the erroneous
interpretation that it covered only those found in the records of the field offices of
the DENR and LMB, would be discriminatory. The Department Secretarys
(assumed) failure to affix his signature on the deed of conveyance could not defeat
the Manotoks right to the lot after they had fully paid for it.

Republic Act No. 9443 must be applied, mutatis mutandis, to the Manotoks
and the Piedad Estate.

12. The Honorable Court erred in denying their right to be informed of the
CAs report and be heard thereon prior to judgment, as basic requirements of due
process.

The Barques anchor their motion for reconsideration on the following:

I

THE HONORABLE SUPREME COURT GRAVELY ERRED IN DENYING

THE PETITION FOR RECONSTITUTION FILED BY RESPONDENTS HEIRS
OF BARQUE WITHOUT STATING THE GROUNDS FOR SUCH DENIAL.

II

THE HONORABLE SUPREME COURT GRAVELY ERRED IN INSTANTLY

DECLARING IN THE DISPOSITIVE PORTION OF THE DECISION THAT
ALONG WITH FELICITAS B. MANAHANS TITLE, RESPONDENTS HEIRS
OF BARQUES TITLE TCT NO. 210177 IS LIKEWISE NULL AND VOID,
WITHOUT STATING A CLEAR AND DEFINITE BASIS THEREFOR.

III
 THE HONORABLE SUPREME COURT GRAVELY ERRED IN DECLARING
TRANSFER CERTIFICATE OF TITLE NO. 210177 IN THE NAME OF HOMER
L. BARQUE NULL AND VOID.

IV

THE HONORABLE COURT OF APPEALS FACTUAL FINDINGS, ADOPTED

BY THE HONORABLE SUPREME COURT IN THE DECISION DATED 24
AUGUST 2010, ARE CONTRARY TO THE EVIDENCE PRESENTED.

THE HONORABLE SUPREME COURTS FINDINGS IN THE DECISION

DATED 24 AUGUST 2010 ARE CONTRARY TO LAW.

As to the Manahans, they seek a partial reconsideration and to allow further

reception of evidence, stating the following grounds:
I. As the original of Sale Certificate No. 511 could not be found in the files of the
LMB or the DENR-NCR at the time of the hearings before the
Commissioners, the existence of the certificate was proven by secondary
evidence. The Commissioners erred in ignoring secondary evidence of the
contents of Sale Certificate No. 511 because of mere doubt and suspicion as
to its authenticity and in the absence of contradicting evidence.

II. The OSG which has been tasked by the Honorable Court to obtain documents
from the LMB and DENR-NCR relative to the conveyance of Lot 823, Piedad
Estate, furnished intevenors with a certified true copy of Sale Certificate No.
511 which it obtained from the DENR-NCR on September 11, 2010, together
with the explanation of DENR-NCR why the document is available only
now. (Certified true copy of Sale Certificate No. 511 and Sworn Explanation
of Evelyn G. Celzo attached as Annexes I and II.

III. When Valentin Manahan offered to purchase Lot 823, Piedad Estate, being the
actual settler and occupant who under the law enjoyed preference to buy the
lot, his status as actual settler and occupant must have been verified by the
Bureau of Public Lands because the presumption is that official duty has been
regularly performed. The administrative determination of the status of
Valentin Manahan as actual settler and occupant can not now be reviewed
after the lapse of about eight (8) decades when parties, witnesses, documents
and other evidence are hardly or no longer available.

IV. Abundant evidence was submitted by intervenors that they and their
predecessors-in-interest occupied and possessed Lot 823 up to 1948 when
they were dispossessed by armed men. It was error for the Commissioners to
ignore the evidence of the intervenors, there being no contradicting proof.
 V. The Commissioners committed palpable error in not according evidentiary value
to the Investigation Report of Evelyn dela Rosa because it is allegedly
practically a replica or summation of Felicitas B. Manahans allegations
embodied in her petition. Examination of the dates of the documents will
show that the Investigation Report preceded the Petition. The Petition,
therefore, is based on the Investigation Report, and not the other way around.

VI. The pronouncement of the Commissioners that Sale Certificate No. 511 is stale
is incorrect. Intervenors made continuing efforts to secure a deed of
conveyance based on Sale Certificate No. 511. Defense of staleness or laches
belongs to the party against whom the claim is asserted; it is only that party
who can raise it. It can also be waived, as in this case when the LMB which
had the sole authority under Act No. 1120 to convey friar lands, issued to
intervenor Felicitas B. Manahan Deed of Conveyance No. V-2000-22.

VII. The requirement of Act No. 1120 that a deed of conveyance of friar land must
be signed by the Secretary of Interior was dispensed with pursuant to law and
Presidential issuances which have the force of law.

VIII. Deeds of conveyance lacking the signature of the Department Secretary were
ratified by President Joseph Estrada and DENR Secretary Michael T.
Defensor.
The motions are bereft of merit.

Upon the theory that this Court had no power to cancel their certificate of title over
Lot 823, Piedad Estate in the resolution of the present controversy, the Manotoks
contend that our Resolution of December 18, 2008 terminated the appeal from the
Land Registration Authority (LRA) administrative reconstitution proceedings by
reversing the CAs rulings and affirming the denial by LRA Reconstitution Officer
Benjamin M. Bustos of the application for administrative reconstitution of the
Barques Transfer Certificate of Title (TCT) No. 210177. The appeal having been
terminated, the Manotoks argued that the remand to the CA for evidence-taking had
introduced a new case in which this Court will decide, in the first instance, an alleged
ownership issue over the property. Such action is legally infirm since the law has
vested exclusive original jurisdiction over civil actions involving title to real
property on the trial courts.

The argument is untenable.

In our December 18, 2008 Resolution, we set aside the December 12, 2005
Decision rendered by the First Division and recalled the entry of judgment. We ruled
that neither the CA nor the LRA had jurisdiction to cancel the Manotok title, a relief
sought by the Barques in the administrative reconstitution proceedings. The
Court En Bancproceeded with the reevaluation of the cases on a pro hac
vice basis. During the oral arguments, there were controversial factual matters which
emerged as the parties fully ventilated their respective claims, in the course of which
the Barques claim of ownership was found to be exceedingly weak. Indeed, both the
LRA and CA erred in ruling that the Barques had the right to seek reconstitution of
their purported title. Reevaluation of the evidence on record likewise indicated that
the Manotoks claim to title is just as flawed as that of the Barques. Following the
approach in Alonso v. Cebu Country Club, Inc.[1] also involving a Friar
Land, Republic v. Court of Appeals[2] and Manotok Realty Inc. v. CLT Realty
Development Corporation,[3] the majority resolved to remand this case for reception
of evidence on the parties competing claims of ownership over Lot 823 of the Piedad
Estate. Given the contentious factual issues, it was necessary for this Court to resolve
the same for the complete determination of the present controversy involving a huge
tract of friar land. It was thus not the first time the Court had actually resorted to
referring a factual matter pending before it to the CA.

Maintaining their objection to the order for reception of evidence on remand, the
Manotoks argue that as owners in possession, they had no further duty to defend
their title pursuant to Article 541 of the Civil Code which states that: [a] possessor
in the concept of 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. But such presumption
is prima facie, and therefore it prevails until the contrary is proved.[4]In the light of
serious flaws in the title of Severino Manotok which were brought to light during
the reconstitution proceedings, the Court deemed it proper to give all the parties full
opportunity to adduce further evidence, and in particular, for the Manotoks to prove
their presumed just title over the property also claimed by the Barques and the
Manahans. As it turned out, none of the parties were able to establish by clear and
convincing evidence a valid alienation from the Government of the subject friar
land. The declaration of ownership in favor of the Government was but the logical
consequence of such finding.

We have ruled that the existence of Sale Certificate No. 1054 in the records
of the DENR-LMB was not duly established. No officer of the DENR-NCR or LMB
having official custody of sale certificates covering friar lands testified as to the
issuance and authenticity of Exh. 10 submitted by the Manotoks. And even assuming
that Exh. 10 was actually sourced from the DENR-LMB, there was no showing that
it was duly issued by the Director of Lands and approved by the Secretary of
Agriculture and Natural Resources (DENR). On this point, the Manotoks hinted that
the LMBs certifying the document (Exh. 10) at the Manotoks request was a
deliberate fraud in order to give them either a false document, the usual unsigned
copy of the signed original, or a fake copy.

The Manotoks further assert that this would imply that the LMB either did not
produce the genuine article, or could not produce it. This could only mean that the
document which the NBI found to be fake or spurious, if this Court accepts that
finding, was planted evidenceor evidence inserted in the LMB files to discredit the
Manotok title. Nonetheless, the Manotoks insist there were independent evidence
which supposedly established the prior existence of Sale Certificate No. 1054. These
documents are: (a) photocopy of Assignment of Sale Certificate No. 1054 dated
1929; (b) official receipt of payment for said certified copy; (c) photocopies of the
other assignment deeds dated 1923; (d) official receipts of installment payments on
Lot 823 issued to Severino Manotok; (e) file copies in the National Archives of the
Deed of Conveyance No. 29204; and (f) the notarial registers in which the said Deed
of Conveyance, as well as the assignment documents, were entered.

The contentions have no merit, and at best speculative. As this Court

categorically ruled in Alonso v. Cebu Country Club, Inc.,[5] approval by the
Secretary of Agriculture and Commerce of the sale of friar lands is indispensable for
its validity, hence, the absence of such approval made the sale null and void ab initio.
In that case, the majority declared that no valid titles can be issued on the basis of
the sale or assignment made in favor of petitioners father due to the absence of
signature of the Director of Lands and the Secretary of the Interior, and the approval
of the Secretary of Natural Resources in the Sale Certificate and Assignment of Sale
Certificate. Applying the Alonso ruling to these cases, we thus held that no legal
right over the subject friar land can be recognized in favor of the Manotoks under
the assignment documents in the absence of the certificate of sale duly signed by the
Director of Lands and approved by the Secretary of Agriculture and Natural
Resources.

That a valid certificate of sale was issued to Severino Manotoks assignors

cannot simply be presumed from the execution of assignment documents in his
favor. Neither can it be deduced from the alleged issuance of the half-torn TCT No.
22813, itself a doubtful document as its authenticity was not established, much less
the veracity of its recitals because the name of the registered owner and date of
issuance do not appear at all. The Manotoks until now has not
offered any explanation as to such condition of the alleged title of Severino
Manotok; they assert that it is the Register of Deeds himself who should be in a
position to explain that condition of the TCT in his custody. But then, no Register of
Deeds had testified and attested to the fact that the original of TCT No. 22813 was
under his/her custody, nor that said certificate of title in the name of Severino
Manotok existed in the files of the Registry of Deeds of Caloocan or Quezon
City. The Manotoks consistently evaded having to explain the circumstances as to
how and where TCT No. 22813 came about. Instead, they urge this Court to validate
their alleged title on the basis of the disputable presumption of regularity in the
performance of official duty.Such stance hardly satisfies the standard of clear and
convincing evidence in these cases. Even the existence of the official receipts
showing payment of the price to the land by Severino Manotok does not prove that
the land was legally conveyed to him without any contract of sale having been
executed by the government in his favor. Neither did the alleged issuance of TCT
No. 22183 in his favor vest ownership upon him over the land nor did it validate the
alleged purchase of Lot 283, which is null and void. The absence of the Secretarys
approval in Certificate of Sale No. 1054 made the supposed sale null and void ab
initio.[6]

In the light of the foregoing, the claim of the Barques who, just like the
Manahans, were unable to produce an authentic and genuine sale certificate, must
likewise fail. The Decision discussed extensively the findings of the CA that the
Barques documentary evidence were either spurious or irregularly procured, which
even buttressed the earlier findings mentioned in the December 18, 2008
Resolution. The CAs findings and recommendations with respect to the claims of all
parties, have been fully adopted by this Court, as evident in our disquisitions on the
indispensable requirement of a validly issued Certificate of Sale over Lot 823,
Piedad Estate.

As to the motion of the Manahans to admit an alleged certified true copy of

Sale Certificate No. 511 dated June 23, 1913 in the name of Valentin Manahan
which, as alleged in the attached Sworn Explanation of Evelyn G. Celzo, the
latter hadinadvertently failed to attach to her Investigation Report forwarded to the
CENRO, this Court cannot grant said motion.

This belatedly submitted copy of Sale Certificate No. 511 was not among
those official documents which the Office of the Solicitor General (OSG) offered as
evidence, as in fact no copy thereof can be found in the records of either the DENR-
NCR or LMB. Moreover, the sudden emergence of this unauthenticated document
is suspicious, considering that Celzo who testified, as witness for both the OSG and
the Manahans, categorically admitted that she never actually saw the application to
purchase and alleged Sale Certificate No. 511 of the Manahans. The relevant
portions of the transcript of stenographic notes of the cross- examination of said
witness during the hearing before the CA are herein quoted:
ATTY. SAN JUAN:

How about this part concerning Valentin Manahan having applied for the purchase
of the land? Did you get this from the neighbors or from Felicitas Manahan?

xxxx

WITNESS:

No, sir. Only the Records Section, sir, that Valentin Manahan applied, sir.

ATTY. SAN JUAN:

You did not see Valentin Manahans application but only the Records Section saw
it?

WITNESS:

Yes, sir.

ATTY. SAN JUAN:

Did they tell you that they saw the application?

WITNESS:

I did not go further, sir.

xxxx

ATTY. SAN JUAN:

And this report of yours says that Valentin Manahan was issued Sale Certificate
No. 511 after completing the payment of the price of P2,140?

WITNESS:

Yes, sir.

ATTY. SAN JUAN:

You also got this from the records of the LMB, is that correct?

WITNESS:
Yes, sir.

ATTY. SAN JUAN:

You actually saw the sale certificate that was issued to Valentin Manahan after
he paid the price of P2,140?

WITNESS:

No, sir. I did not go further.

ATTY. SAN JUAN:

You did not see the sale certificate?

WITNESS:

Yes, Sir, but I asked only.

ATTY. SAN JUAN:

Who did you ask?

WITNESS:

The records officer, sir.

ATTY. SAN JUAN:

Whose name you can no longer recall, correct?

WITNESS:

I can no longer recall, sir.

ATTY. SAN JUAN:

And the information to you was the Sale Certificate No. 511 was issued after the
price was fully paid?

WITNESS:

Yes, sir.

ATTY. SAN JUAN:

And it was only after he applied for the purchase of the lot sometime after the survey
of 1939 that he was issued sale certificate No. 511?
 WITNESS:

I am not aware of the issuance of sale certificate. I am aware only of the deed
of assignment, Sir.

x x x x[7] (Emphasis supplied.)

In view of the above admission, Celzos explanation that the copy of Sale Certificate
No. 511 signed by the Director of Lands and Secretary of the Interior was originally
attached to her Investigation Report, cannot be given credence. Even her testimony
regarding the conduct of her investigation of Lot 823, Piedad Estate and the
Investigation Report she submitted thereafter, failed to impress the CA on the
validity of the Manahans claim. Indeed, records showed that Celzos findings in her
report were merely based on what Felicitas Manahan told her about the alleged
occupation and possession by Valentin Manahan of the subject land.

In their Offer of Additional Evidence, the Manahans submitted a photocopy of a

letter dated December 21, 2010 allegedly sent by Atty. Allan V. Barcena (OIC,
Director) to their counsel, Atty. Romeo C. dela Cruz, which reads:

This has reference to your letter dated August 20, 2010 addressed to the
Secretary of the Department of Environment and Natural Resources (DENR)
requesting that Deed of Conveyance No. V-200022 issued on October 30, 2000
over Lot 823 of the Piedad Estate in favor of Felicitas B. Manahan be ratified or
confirmed for reasons stated therein. The Office of the DENR Secretary in turn
referred the letter to us for appropriate action.

Records of this Office on Lot 823 of the Piedad Estate, show that the Deed
of Conveyance No. V-200022 covering said lot in favor of Felicitas Manahan
was issued by then Director of the Land Management Bureau (LMB), now
Undersecretary Ernesto D. Adobo, Jr., on October 30, 2000. The Deed was
issued based on General Memorandum Order (GMO) No. 1 issued by then
Secretary Jose J. Leido, Jr. of the Department of Natural Resources on January 17,
1977, which authorized the Director of Lands, now Director of LMB, to approve
contracts of sale and deeds of conveyance affecting Friar Lands.

It is stressed that the confirmation of the Deed by this office is only as to the
execution and issuance based on the authority of LMB Director under GMO No.
1. This is without prejudice to the final decision of the Supreme Court as to its
validity in the case of Severino Manotok IV, et al. versus Heirs of Homer L, Barque
(G.R. No. 162335 & 162605).

Please be guided accordingly.[8] (Emphasis supplied.)

 However, in the absence of a valid certificate of sale duly signed by the
Secretary of Interior or Agriculture and Natural Resources, such alleged
confirmation of the execution and issuance by the DENR-LMB of Deed of
Conveyance No V-00022 in favor of Felicitas Manahan on October 30, 2000 is still
insufficient to prove the Manahans claim over the subject land.

In a Supplemental Manifestation dated November 18, 2010, the Manotoks

submitted an affidavit supposedlyexecuted on November 11, 2010 by former DENR
Secretary Michael T. Defensor(Defensor Affidavit) clarifying that MO 16-05
applies to all Deeds of Conveyance that do not bear the signature of the Secretary of
Natural Resources, contrary to the CA and this Courts statement that said issuance
refers only to those deeds of conveyance on file with the records of the DENR field
offices.

By its express terms, however, MO 16-05 covered only deeds of conveyances

and not unsigned certificates of sale. The explanation of Secretary Defensor stated
theavowed purpose behind the issuance, which is to remove doubts or dispel
objections as to the validity of all Torrens transfer certificates of title issued over
friar lands thereby ratifying the deeds of conveyance to the friar land buyers who
have fully paid the purchase price, and are otherwise not shown to have committed
any wrong or illegality in acquiring such lands.

The Manahans propounded the same theory that contracts of sale over friar lands
without the approval of the Secretary of Natural Resources may be subsequently
ratified, but pointed out that unlike the Manotoks Deed of Conveyance No. 29204
(1932), their Deed of Conveyance No. V-2000-22 (2000) was issued and approved
by the Director of Lands upon prior authority granted by the Secretary.

In their Consolidated Memorandum dated December 19, 2010, the Manahans

reiterated their earlier argument that the LMB Director himself had the authority
to approvecontracts of sale and deeds of conveyance over friar lands on the basis of
General Memorandum Order No. 1 issued in 1977 by then Secretary of Natural
Resources Jose J. Leido, Jr. delegating such function to the Director of Lands. This
delegated power can also be gleaned from Sec. 15, Chapter 1, Title XIV of the
Administrative Code of 1987 which provides that the Director of Lands shall
perform such other functions as may be provided by law or assigned by the
Secretary. Moreover, former President Corazon C. Aquino issued Executive Order
No. 131 dated January 20, 1987 reorganizing the LMB and providing that the LMB
Director shall, among others, perform other functions as may be assigned by the
Minister of Natural Resources.

On the basis of Art. 1317[9] of the Civil Code, the Manahans contend that deeds of
conveyance not bearing the signature of the Secretary can also be ratified. Further,
they cite Proclamation No. 172 issued by former President Joseph Ejercito Estrada
which declared that there should be no legal impediment for the LMB to issue such
deeds of conveyance since the applicants/purchasers have already paid the purchase
price of the lot, and as sellers in good faith, it is the obligation of the Government to
deliver to said applicants/purchasers the friar lands sold free of any lien or
encumbrance whatsoever. Eventually, when MO 16-05 was issued by Secretary
Defensor, all these deeds of conveyance lacking the signature of the Secretary of
Natural Resources are thus deemed signed or otherwise ratified. The CA accordingly
erred in holding that MO 16-05 cannot override Act No. 1120 which requires that a
deed of conveyance must be signed by the Secretary, considering that MO 16-05 is
based on law and presidential issuances, particularly EO 131, which have the force
of law.

Meanwhile, in compliance with our directive, the Solicitor General filed his
Comment on the Defensor Affidavit submitted by the Manotoks. The Solicitor
General contends that said document is hearsay evidence, hence inadmissible and
without probative value. He points out that former DENR Secretary Defensor was
not presented as a witness during the hearings at the CA, thus depriving the parties
including the government of the right to cross-examine him regarding his allegations
therein. And even assuming arguendo that such affidavit is admissible as evidence,
the Solicitor General is of the view that the Manotoks, Barques and Manahans still
cannot benefit from the remedial effect of MO 16-05in view of the decision rendered
by this Court which ruled that none of the parties in this case has established a valid
alienation from the Government of Lot 823 of the Piedad Estate, and also because
the curative effect of MO 16-05 is intended only for friar land buyers whose deeds
of conveyance lack the signature of the Secretary of the Interior or Agriculture and
Natural Resources, have fully paid the purchase price and are otherwise not shown
to have committed any wrong or illegality in acquiring the friar lands. He then
emphasizes that this Court has ruled that it is not only the deed of conveyance which
must be signed by the Secretary but also the certificate of sale itself. Since none of
the parties has shown a valid disposition to any of them of Lot 823 of the Piedad
Estate, this Court therefore correctly held that said friar land is still part of the
patrimonial property of the national government.
The Court is not persuaded by the ratification theory espoused by the Manotoks and
Manahans.

The argument that the Director of Lands had delegated authority to approve
contracts of sale and deeds of conveyances over friar landsignores the consistent
ruling of this Court in controversies involving friar lands. The aforementioned
presidential/executive issuances notwithstanding, this Court held in Solid State
Multi-Products Corporation v. CA,[10] Liao v. Court of Appeals,[11]and Alonso v.
Cebu Country Club[12] that approval of the Secretary of Agriculture and Commerce
(later the Natural Resources) is indispensable to the validity of sale of friar land
pursuant to Sec. 18 of Act No. 1120 and that the procedure laid down by said law
must be strictly complied with.

As to the applicability of Art. 1317 of the Civil Code, we maintain that contracts of
sale lacking the approval of the Secretary fall under the class of void and inexistent
contracts enumerated in Art. 1409[13] which cannot be ratified. Section 18 of Act No.
1120 mandated the approval by the Secretary for a sale of friar land to be valid.

In his dissenting opinion, Justice Antonio T. Carpio disagreed with the majoritys
interpretation of Section 18 of Act No. 1120, and proposed that based on Section 12
of the same Act, it is the Deed of Conveyance that must bear the signature of the
Secretary of Interior/Agriculture and Natural Resources because it is only when the
final installment is paid that the Secretary can approve the sale, the purchase price
having been fully paid. It was pointed out that the majority itself expressly admit
that it is only a ministerial duty on the part of the Secretary to sign the Deed of
Conveyance once the applicant had made full payment on the purchase price of the
land, citing jurisprudence to the effect that notwithstanding the failure of the
government to issue the proper instrument of conveyance when the purchaser finally
pays the final installment of the purchase price, the purchase of the friar land still
acquired ownership.

We are unable to agree with the view that it is only the Director of Lands who signs
the Certificate of Sale.

The official document denominated as Sale Certificate clearly required both the
signatures of the Director of Lands who issued such sale certificate to an applicant
settler/occupant and the Secretary of the Interior/Agriculture and Natural Resources
indicating his approval of the sale. These forms had been prepared and issued by the
Chief of the Bureau of Public Lands under the supervision of the Secretary of the
Interior, consistent with Act No. 1120 as may be necessary x x x to carry into effect
all the provisions [thereof] that are to be administered by or under [his] direction,
and for the conduct of all proceedings arising under such provisions.[14]

We reiterate that Section 18 of Act No. 1120, as amended, is plain and

categorical in stating that:
SECTION 18. No lease or sale made by the Chief of the Bureau of Public
Lands under the provisions of this Act shall be valid until approved by the
Secretary of the Interior.

Section 12 did not mention the requirement of signature or approval of the Secretary
in the sale certificate and deed of conveyance.
SECTION 12. It shall be the duty of the Chief of the Bureau of Public
Lands by proper investigation to ascertain what is the actual value of the parcel of
land held by each settler and occupant, taking into consideration the location and
quality of each holding of land, and any other circumstances giving [it] value. The
basis of valuation shall likewise be, so far as practicable, such [as] the aggregate of
the values of all the holdings included in each particular tract shall be equal to the
cost to the Government to the entire tract, including the cost of surveys,
administration and interest upon the purchase money to the time of sale. When the
cost thereof shall have been thus ascertained, the Chief of the Bureau of Public
Lands shall give the said settler and occupant a certificate which shall set forth in
detail that the Government has agreed to sell to such settler and occupant the
amount of land so held by him, at the price so fixed, payable as provided in this Act
at the office of the Chief of Bureau of Public Lands, in gold coin of the United
States or its equivalent in Philippine currency, and that upon the payment of the
final installment together with [the] accrued interest the Government will convey
to such settler and occupant the said land so held by him by proper instrument of
conveyance, which shall be issued and become effective in the manner provided in
section one hundred and twenty-two of the Land Registration Act. The Chief of the
Bureau of Public Lands shall, in each instance where a certificate is given to the
settler and occupant of any holding, take his formal receipt showing the delivery of
such certificate, signed by said settler and occupant.

On the other hand, the first paragraph of Section 15 provides for the
reservation of title in the Government only for the purpose of ensuring payment of
the purchase price, which means that the sale was subject only to the resolutory
condition of non-payment, while the second paragraph states that the purchaser
thereby acquires the right of possession and purchase by virtue of a certificate of
sale signed under the provisions [thereof]. The certificate of sale evidences the
meeting of the minds between the Government and the applicant regarding the price,
the specific parcel of friar land, and terms of payment. In Dela Torre v. Court of
Appeals,[15]we explained that the non-payment of the full purchase price is the only
recognized resolutory condition in the case of sale of friar lands. We have also held
that it is the execution of the contract to sell and delivery of the certificate of sale
that vests title and ownership to the purchaser of friar land. [16] Where there is no
certificate of sale issued, the purchaser does not acquire any right of possession and
purchase, as implied from Section 15. By the mandatory language of Section 18, the
absence of approval of the Secretary of Interior/Agriculture and Natural Resources
in the lease or sale of friar land would invalidate the sale. These provisions read
together indicate that the approval of the Secretary is required in both the certificate
of sale and deed of conveyance, although the lack of signature of the Secretary in
the latter may not defeat the rights of the applicant who had fully paid the purchase
price.

Justice Conchita Carpio Morales dissent asserted that case law

does not categorically state that the required approval must be in the form of
a signature on the Certificate of Sale, and that there is no statutory basis for the
requirement of the Secretarys signature on the Certificate of Sale apart from a
strained deduction of Section 18.

As already stated, the official forms being used by the Government for this purpose
clearly show that the Director of Lands signs every certificate of sale issued covering
a specific parcel of friar land in favor of the applicant/purchaser while the Secretary
of Interior/Natural Resources signs the document indicating that the sale
was approved by him.To approve is to be satisfied with; to confirm, ratify, sanction,
or consent to some act or thing done by another; to sanction officially. [17] The
Secretary of Interior/Natural Resources signs and approves the Certificate of Sale to
confirm and officially sanction the conveyance of friar lands executed by the Chief
of the Bureau of Public Lands (later Director of Lands). It is worth mentioning
thatSale Certificate No. 651 in the name of one Ambrosio Berones dated June 23,
1913,[18]also covering Lot 823 of the Piedad Estate and forming part of the official
documents on file with the DENR-LMB which was formally offered by the OSG as
part of the official records on file with the DENR and LMB pertaining to Lot 823,
contains the signature of both the Director of Lands and Secretary of the Interior. The
Assignment of Sale Certificate No. 651 dated April 19, 1930 was also signed by the
Director of Lands.[19]

Following the dissents interpretation that the Secretary is not required to sign
the certificate of sale while his signature in the Deed of Conveyance may also appear
although merely a ministerial act, it would result in the absurd situation wherein
thecertificate of sale and deed of conveyance both lacked the signature and approval
of the Secretary, and yet the purchasers ownership is ratified, courtesy of DENR
Memorandum Order (MO) No. 16-05. It is also not farfetched that greater chaos will
arise from conflicting claims over friar lands, which could not be definitively settled
until the genuine and official manifestation of the Secretarys approval of the sale is
discerned from the records and documents presented. This state of things is simply
not envisioned under the orderly and proper distribution of friar lands to bona
fide occupants and settlers whom the Chief of the Bureau of Public Lands was tasked
to identify.[20]

The existence of a valid certificate of sale therefore must first be established

with clear and convincing evidence before a purchaser is deemed to have acquired
ownership over a friar land notwithstanding the non-issuance by the Government,
for some reason or another, of a deed of conveyance after completing the installment
payments. In the absence of such certificate of sale duly signed by the Secretary, no
right can be recognized in favor of the applicant. Neither would any assignee or
transferee acquire any right over the subject land.

In Alonso v. Cebu Country Club, Inc.,[21] the Court categorically ruled that the
absence of approval by the Secretary of Agriculture and Commerce in the sale
certificate and assignment of sale certificate made the sale null and void ab
initio. Necessarily, there can be no valid titles issued on the basis of such sale or
assignment.[22]

Justice Carpio, however, opined that the ruling in Alonso was superseded with the
issuance by then Department of [Environment] and Natural Resources (DENR)
Secretary Michael T. Defensor of DENR Memorandum Order No. 16-05. It was
argued that the majority had construed a limited application when it declared that
the Manotoks could not benefit from said memorandum order because the latter
refers only to deeds of conveyance on file with the records of the DENR field offices.

We disagree with the view that Alonso is no longer applicable to this controversy
after the issuance of DENR MO No. 16-05 which supposedly cured the defect in the
Manotoks title.

First, DENR MO No. 16-05 explicitly makes reference only to Deeds of

Conveyances, not to Sale Certificates by which, under the express language of
Section 15, the purchaser of friar land acquires the right of possession and purchase
pending final payment and the issuance of title, such certificate being duly signed
under the provisions of Act No. 1120.Although the whereas clause of MO No. 16-
05 correctly stated that it was only a ministerial duty on the part of the Secretary to
sign the Deed of Conveyance once the applicant had made full payment on the
purchase price of the land, it must be stressed that in those instances where the
formality of the Secretarys approval and signature is dispensed with, there was a
valid certificate of sale issued to the purchaser or transferor. In this case, there is no
indication in the records that a certificate of sale was actually issued to the assignors
of Severino Manotok, allegedly the original claimants of Lot 823, Piedad Estate.

Second, it is basic that an administrative issuance like DENR Memorandum Order

No. 16-05 must conform to and not contravene existing laws. In the interpretation
and construction of the statutes entrusted to them for implementation, administrative
agencies may not make rules and regulations which are inconsistent with the statute
it is administering, or which are in derogation of, or defeat its purpose. In case of
conflict between a statute and an administrative order, the former must
prevail.[23] DENR Memorandum Order No. 16-05 cannot supersede or amend the
clear mandate of Section 18, Act No. 1120 as to dispense with the requirement of
approval by the Secretary of the Interior/Agriculture and Natural Resources of every
lease or sale of friar lands.

But what is worse, as the dissent suggests, is that MO 16-05 would apply even to
those deeds of conveyances not found in the records of DENR or its field offices,
such as the Manotoks Deed of Conveyance No. 29204 sourced from the National
Archives. It would then cover cases of claimants who have not been issued any
certificate of sale but were able to produce a deed of conveyance in their names. The
Bureau of Lands was originally charged with the administration of all laws relative
to friar lands, pursuant to Act No. 2657 and Act No. 2711. Under Executive Order
No. 192,[24] the functions and powers previously held by the Bureau of Lands were
absorbed by the Lands Management Bureau (LMB) of the DENR, while those
functions and powers not absorbed by the LMB were transferred to the regional field
offices.[25] As pointed out by the Solicitor General in theMemorandum submitted to
the CA, since the LMB and DENR-NCR exercise sole authority over friar lands,
they are naturally the sole repository of documents and records relative to Lot No.
823 of the Piedad Estate.[26]

Third, the perceived disquieting effects on titles over friar lands long held by
generations of landowners cannot be invoked as justification for legitimizing any
claim or acquisition of these lands obtained through fraud or without strict
compliance with the procedure laid down in Act No. 1120. This Court, in denying
with finality the motion for reconsideration filed by petitioner in Alonso v. Cebu
Country Club, Inc.[27] reiterated the settled rule that [a]pproval by the Secretary of
the Interior cannot simply be presumed or inferred from certain acts since the law is
explicit in its mandate.[28] Petitioners failed to discharge their burden of proving their
acquisition of title by clear and convincing evidence, considering the nature of the
land involved.

As consistently held by this Court, friar lands can be alienated only upon proper
compliance with the requirements of Act No. 1120. The issuance of a valid
certificate of sale is a condition sine qua non for acquisition of ownership under
the Friar Lands Act. Otherwise, DENR Memorandum Order No. 16-05 would serve
as administrative imprimatur to holders of deeds of conveyance whose acquisition
may have been obtained through irregularity or fraud.

Contrary to the dissent of Justice Maria Lourdes P. A. Sereno that our decision has
created dangers for the system of property rights in the Philippines, the Court simply
adhered strictly to the letter and spirit of the Friar Lands Act and jurisprudence
interpreting its provisions. Such imagined scenario of instability and chaos in the
established property regime, suggesting several other owners of lands formerly
comprising the Piedad Estate who are supposedly similarly situated, remains in the
realm of speculation. Apart from their bare allegations, petitioners (Manotoks) failed
to demonstrate how the awardees or present owners of around more than 2,000
hectares of land in the Piedad Estate can be embroiled in legal disputes arising from
unsigned certificates of sale.

On the other hand, this Court must take on the task of scrutinizing even
certificates of title held for decades involving lands of the public domain and those
lands which form part of the Governments patrimonial property, whenever necessary
in the complete adjudication of the controversy before it or where apparent
irregularities and anomalies are shown by the evidence on record. There is nothing
sacrosanct about the landholdings in the Piedad Estate as even prior to the years
when Lot 823 could have been possibly sold or disposed by the Bureau of Lands,
there were already reported anomalies in the distribution of friar lands in general. [29]

Significantly, subsequent to the promulgation of our decision in Alonso,

Republic Act No. (RA) 9443 was passed by Congress confirming and declaring,
subject to certain exceptions, the validity of existing TCTs and reconstituted
certificates of title covering the Banilad Friar Lands Estate situated in
Cebu. Alonso involved a friar land already titled but without a sale certificate, and
upon that ground we declared the registered owner as not having acquired ownership
of the land. RA 9443 validated the titles notwithstanding the lack of signatures
and/or approval of the then Secretary of Interior (later Secretary of Agriculture and
Natural Resources) and/or the then Chief of the Bureau of Public lands (later
Director of Public Lands) in the copies of the duly executed Sale Certificate and
Assignments of Sale Certificates, as the case may be, now on file with the
Community Environment and Natural Resources Office (CENRO), Cebu City.

The enactment of RA 9443 signifies the legislatures recognition of the statutory basis
of the Alonso ruling to the effect that in the absence of signature and/or approval of
the Secretary of Interior/Natural Resources in the Certificates of Sale on file with
the CENRO, the sale is not valid and the purchaser has not acquired ownership of
the friar land.Indeed, Congress found it imperative to pass a new law in order to
exempt the already titled portions of the Banilad Friar Lands Estate from the
operation of Section 18. This runs counter to the dissents main thesis that a mere
administrative issuance (DENR MO No. 16-05) would be sufficient to cure the lack
of signature and approval by the Secretary in Certificate of Sale No. 1054 covering
Lot 823 of the Piedad Estate.

In any event, the Manotoks now seek the application of RA 9443 to the Piedad
Estate, arguing that for said law to be constitutionally valid, its continued operation
must be interpreted in a manner that does not collide with the equal protection
clause. Considering that the facts in Alonso from which RA 9443 sprung are similar
to those in this case, it is contended that there is no reason to exclude the Piedad
Estate from the ambit of RA 9443.

Justice Carpios dissent concurs with this view, stating that to limit its
application to the Banilad Friar Lands Estate will result in class legislation. RA 9443
supposedly should be extended to lands similarly situated, citing the case of Central
Bank Employees Association, Inc. v. Bangko Sentral ng Pilipinas.[30]

In the aforesaid case, the Court extended the benefits of subsequent laws
exempting all rank-and-file employees of other government financing institutions
(GFIs) from the Salary Standardization Law (SSL) to the rank-and-file employees
of the BSP. We upheld the position of petitioner association that the continued
operation of Section 15 (c), Article II of RA 7653 (the New Central Bank Act), which
provides that the compensation and wage structure of employees whose position fall
under salary grade 19 and below shall be in accordance with the rates prescribed
under RA 6758 (SSL), constitutes invidious discrimination on the 2,994 rank-and-
file employees of the [BSP]. Thus, as regards the exemption from the SSL, we
declared that there were no characteristics peculiar only to the seven GFIs or their
rank-and-file so as to justify the exemption from the SSL which BSP rank-and-file
employees were denied. The distinction made by the law is superficial, arbitrary and
not based on substantial distinctions that make real differences between BSP rank-
and-file and the seven other GFIs.[31]

We are of the opinion that the provisions of RA 9443 may not be applied to the
present case as to cure the lack of signature of the Director of Lands and approval
by the Secretary of Agriculture and Natural Resources in Sale Certificate No. 1054.

The Court has explained the nature of equal protection guarantee in this manner:
The equal protection of the law clause is against undue favor and individual
or class privilege, as well as hostile discrimination or the oppression of
inequality. It is not intended to prohibit legislation which is limited either in the
object to which it is directed or by territory within which it is to operate. It
does not demand absolute equality among residents; it merely requires that all
persons shall be treated alike, under like circumstances and conditions both as
to privileges conferred and liabilities enforced. The equal protection clause is
not infringed by legislation which applies only to those persons falling within a
specified class, if it applies alike to all persons within such class, and reasonable
grounds exist for making a distinction between those who fall within such class and
those who do not.[32] (Emphasis and underscoring supplied.)

Section 1 of RA 9443 provides:

Section 1. All existing Transfer Certificates of Title and Reconstituted
Certificates of Title duly issued by the Register of Deeds of Cebu Province
and/or Cebu City covering any portion of the Banilad Friar Lands Estate,
notwithstanding the lack of signatures and/or approval of the then Secretary of the
Interior (later Secretary of Agriculture and Natural Resources) and/or the then Chief
of the Bureau of Public Lands (later Director of Public Lands) in the copies of the
duly executed Sale Certificates and Assignments of Sales Certificates, as the
case may be, now on file with the Community Environment and Natural
Resources Office (CENRO), Cebu City, are hereby confirmed and declared as
valid titles and the registered owners recognized as absolute owners thereof.

This confirmation and declaration of validity shall in all respects be entitled

to like effect and credit as a decree of registration, binding the land and quieting the
title thereto and shall be conclusive upon and against all persons, including the
national government and al1 branches thereof; except when, in a given case
involving a certificate of title or areconstituted certificate of title, there is clear
 evidence that such certificate of title or reconstituted certificate of title was
obtained through fraud, in which case the solicitor general or his duly designated
representative shall institute the necessary judicial proceeding to cancel the
certificate of title or reconstituted certificate of title as the case may be, obtained
through such fraud.(Emphasis supplied.)

Without ruling on the issue of violation of equal protection guarantee if the curative
effect of RA 9443 is not made applicable to all titled lands of the Piedad Estate, it is
clear that the Manotoks cannot invoke this law to confirm and validate their alleged
title over Lot 823. It must be stressed that the existence and due issuance of TCT
No. 22813 in the name of Severino Manotok was not established by the evidence on
record. There is likewise no copy of a duly executed certificate of sale on file with
the DENR regional office.In the absence of an existing certificate of title in the name
of the predecessor-in-interest of the Manotoks and certificate of sale on file with the
DENR/CENRO, there is nothing to confirm and validate through the application of
RA 9443.

Moreover, RA 9443 expressly excludes from its coverage those cases

involving certificates of title which were shown to have been fraudulently or
irregularly issued. As the reconstitution and remand proceedings in these cases
revealed, the Manotoks title to the subject friar land, just like the Barques and
Manahans, is seriously flawed. The Court cannot allow them now to invoke the
benefit of confirmation and validation of ownership of friar lands under duly
executed documents, which they never had in the first place.Strict application by the
courts of the mandatory provisions of the Friar Lands Act is justified by the laudable
policy behind its enactment -- to ensure that the lands acquired by the government
would go to the actual occupants and settlers who were given preference in their
distribution.[33]

The dissent reiterates that the existence of Sale Certificate No. 1054 was
clearly and convincingly established by the original of Assignment of Sale
Certificate No. 1054 dated May 4, 1923 between M. Teodoro and Severino Manotok
as assignors and Severino Manotok as assignee (approved by the Director of Lands
on June 23, 1923), which is on file with the LMB, as well as the Deed of Conveyance
No. 29204 secured from the National Archives which is the repository of
government and official documents, the original of Official Receipt No. 675257
dated 20 February 1920 for certified copy of Assignment of Sale Certificate No.
1054 on Lot 823 and the original of the Provincial Assessors declaration of title in
Severino Manotoks name for tax purposes on August 9, 1933 assessing him
beginning with the year 1933. The dissent further listed some of those alleged sale
certificates, assignment deeds and deeds of conveyance either signed by the Director
of Lands only or unsigned by both Director of Lands and Secretary of
Interior/Natural Resources, gathered by the Manotoks from the LMB. It was stressed
that if MO 16-05 is not applied to these huge tracts of land within and outside Metro
Manila, [H]undreds of thousands, if not millions, of landowners would surely be
dispossessed of their lands in these areas, a blow to the integrity of our Torrens
system and the stability of land titles in this country.

The Court has thoroughly examined the evidence on record and exhaustively
discussed the merits of the Manotoks ownership claim over Lot 823, in the light of
established precedents interpreting the provisions of the Friar Lands Act. The dissent
even accused the majority of mistakenly denigrating the records of the National
Archives which, under R.A. No. 9470 enacted on May 21, 2007, is mandated to store
and preserve any public archive transferred to the National Archives and tasked with
issuing certified true copies or certifications on public archives and for extracts
thereof.

The Friar Lands Act mandated a system of recording all sale contracts to be
implemented by the Director of Lands, which has come to be known as the Friar
Lands Sales Registry.
SEC. 6. The title, deeds and instruments of conveyance pertaining to the
lands in each province, when executed and delivered by said grantors to the
Government and placed in the keeping of the Chief of the Bureau of Public Lands,
as above provided, shall be by him transmitted to the register of deeds of each
province in which any part of said lands lies, for registration in accordance with
law. But before transmitting the title, deeds, and instruments of conveyance in
this section mentioned to the register of deeds of each province for registration,
the Chief of the Bureau of Public Lands shall record all such deeds and
instruments at length in one or more books to be provided by him for that
purpose and retained in the Bureau of Public Lands, when duly certified by him
shall be received in all courts of the Philippine Islands as sufficient evidence of the
contents of the instrument sxo recorded whenever it is not practicable to produce
the originals in court. (Section 1, Act No. 1287).

It is thus the primary duty of the Chief of the Bureau of Public Lands to record
all these deeds and instruments in sales registry books which shall be retained in the
Bureau of Public Lands. Unfortunately, the LMB failed to produce the sales registry
book in court, which could have clearly shown the names of claimants, the particular
lots and areas applied for, the sale certificates issued and other pertinent information
on the sale of friar lands within the Piedad Estate. Witness Teresita J. Reyes, a retired
Assistant Chief of the Records Management Division (RMD), LMB who was
presented by the Manahans, testified that when the LMB was decentralized, the sales
registry books pertaining to friar lands were supposedly turned over to the regional
offices. These consisted of copies of the appropriate pages of the sales registry books
in the LMB RMD main office which has an inventory of lots subject of deeds of
conveyance and sales certificates. However, Reyes said that the sales registry book
itself is no longer with the RMD. On the other hand, the alleged affidavit of Secretary
Defensor dated November 11, 2010 states that MO 16-05 was intended to address
situations when deeds of conveyance lacked the signature of the Secretary of
Agriculture and Commerce, or such deeds or records from which the Secretarys
signature or approval may be verified were lost or unavailable.

Whether the friar lands registry book is still available in the LMB or properly
turned over to the regional offices remains unclear. With the statutorily prescribed
record-keeping of sales of friar lands apparently in disarray, it behooves on the courts
to be more judicious in settling conflicting claims over friar lands. Titles with serious
flaws must still be carefully scrutinized in each case. Thus, we find that the approach
in Alonso remains as the more rational and prudent course than the wholesale
ratification introduced by MO 16-05.

The prospect of litigants losing friar lands they have possessed for years or
decades had never deterred courts from upholding the stringent requirements of the
law for a valid acquisition of these lands. The courts duty is to apply the
law. Petitioners concern for other landowners which may be similarly affected by
our ruling is, without doubt, a legitimate one. The remedy though lies elsewhere --
in the legislature, as what R.A. 9443 sought to rectify.

WHEREFORE, the present motions for reconsideration are all

hereby DENIED withFINALITY.The motions for oral arguments and further
reception of evidence are likewise DENIED.

Let entry of judgment be made in due course.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
WE CONCUR:

RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice
 JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA
Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO BIENVENIDO L. REYES

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the
conclusions in the above Resolution had been reached in consultation before the case
was assigned to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice

[1]
G.R. No. 130876, January 31, 2002, 375 SCRA 390.
[2]
359 Phil. 530 (1998) and G.R. No. 110020, September 25, 1998, 296 SCRA 177.
[3]
G.R. Nos. 123346 & 134385, December 14, 2007, 540 SCRA 304, 351-352, citing Republic v. Court of
Appeals, 359 Phil. 530 (1998).
[4]
Arturo M. Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES, Vol. II, 1992 ed., p. 284.
[5]
Supra note 1 at 404-405, citing Liao v. Court of Appeals, G.R. Nos. 102961-62, 107625 & 108759, January 27,
2000, 323 SCRA 430, 442.
[6]
See Solid State Multi-Products Corporation v. Court of Appeals, G.R. No. 83383, May 6, 1991, 196 SCRA 630,
642.
[7]
TSN, November 18, 2009, pp. 46-48, 51-54, 94.
[8]
Rollo (G.R. No. 162605, Vol. 2), pp. 2831-2837.
[9]
Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by
law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other contracting party.
[10]
Supra note 6.
[11]
Supra note 5.
[12]
Supra note 5.
[13]
Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or
public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of the contract cannot be
ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be
waived. (Emphasis supplied.)
[14]
Sec. 24, Act No. 1120.
[15]
G.R. No. 113095, February 8, 2000, 325 SCRA 11, 16.
[16]
See Jovellanos v. Court of Appeals, G.R. No. 100728, June 18, 1992, 210 SCRA 126, 135.
[17]
BLACKS LAW DICTIONARY, Fifth Ed., p. 94.
[18]
CA rollo, Vol. VIII, p. 4272.
[19]
Id. at 4271.
[20]
Sec. 7, Act No. 1120.
[21]
Supra note 1.
[22]
Id. at 404-405.
[23]
See Ruben E. Agpalo,ADMINISTRATIVE LAW, LAW ON PUBLIC OFFICERS AND ELECTION LAW, 2005
Edition, pp. 59, 62.
[24]
REORGANIZATION ACT OF THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES,
issued on June 10, 1987, Secs. 6 and 14.
[25]
Id., Secs. 20 and 21.
[26]
CA rollo, Vol. XV, pp. 10571-10577.
[27]
462 Phil. 546 (2003).
[28]
Id. at 561.
[29]
See Rene R. Escalante, THE AMERICAN FRIAR LANDS POLICY: ITS FRAMERS, CONTEXT, AND
BENEFICIARIES, 1898-1916 by 2002 (De La Salle University Press, Inc.) Under the Chapter on The Travesty
of the Land-to-the-Tiller Program, the author wrote:
 The acreage limitation and pro-tenant provisions of the policy were not consistently
observed by the implementing agencies. Many buyers and lessees were neither tenants nor
occupants of the friar lands. Moreover, the acreage that they obtained exceeded the ceiling imposed
by the policy. Eighty-two out of the recorded 8,847 buyers in 1910 violated the 16-hectare
limitation.

The anomalies in the redistribution of the friar lands could be attributed to the officials of
the insular government, as most of the beneficiaries of these anomalies were identified with
them. Instead of giving the friar lands to the intended recipients, the officials awarded the friar lands
to themselves, their associates, and their relatives. x x x (pp. 141-142).

xxxx

The Jones Law of 1916 stripped the Americans of powers over the administration of the
friar lands, and all unsold friar lands were placed under the control of the Philippine legislature. x x
x From then on, the fate of the friar lands was in the hands of Filipino politicians and bureaucrats.
(p. 154).
[30]
G.R. No. 148208, December 15, 2004, 446 SCRA 299.
[31]
Id. at 367.
[32]
Farias v. The Executive Secretary,G.R. Nos. 147387 & 152161, December 10, 2003, 417 SCRA 503, 525-526,
citing Ichong, etc., et al. v. Hernandez, etc., and Sarmiento,101 Phil. 1155, 1164 (1957) and 2
Cooley, CONSTITUTIONAL LIMITATIONS, pp. 824-825.
[33]
See R. Escalante, supra note 22 at 83.

[Digest] Manotok vs. Barque (2010)

MANOTOK vs. BARQUE[1] (G.R. Nos. 162335 & 162605; August 24, 2010; VILLARAMA, JR., J.)

FACTS:

Piedad Estate originally owned by Philippine Sugar Estates Development Company, Ltd., La Sociedad
Agricola de Ultramar, the British-Manila Estate Company, Ltd., and the Recoleto Order of the Philippine
Islands. (It is a Friar Land.)

o The subject parcel Lot No. 823 is part of the Piedad Estate and is located in QC.

On 23 December 1903, Piedad Estate was acquired by the Philippine Government pursuant to the Friar
Lands Act. The certificate of title in the name of the government was OCT No. 614. The Estate was placed
under the administration of the Director of Lands.

Controversy arising from conflicting claims over Lot 823 began after a fire gutted portions of the Quezon
City Hall on June 11, 1988 which destroyed records stored in the Office of the Register of Deeds.

In 1990, Manotoks filed a petition with the LRA for administrative reconstitution of TCT No. 372302 covering
Lot No. 823 with an area of 342,945 square meters GRANTED TCT No. RT-22481 (372302) was
issued in 1991.
 In 1996, 8 years after the fire the Barques filed a petition with the LRA for administrative reconstitution of
TCT No. 210177 in the name of Homer Barque also covering Lot 823. In support of their petition, the
Barques submitted copies of the alleged owners duplicate of the TCT, real estate tax receipts, tax
declarations and a Plan Fls 3168-D covering the property.

o MANOTOKs opposed alleging that TCT No. 210177 was spurious.

Although both titles of the Manotoks and the Barques refer to land belonging to Lot No. 823, TCT No.
210177 actually involves 2 parcels with an aggregate area of 342,945 square meters, while TCT No. RT-
22481 (372302) pertains only to a 1 parcel of land, with a similar area of 342,945 square meters.

1997 Barques petition was DENIED. Lot. No. 823 already registered in the name of the
Manotoks. --> Barques MR was denied They appealed to the LRA LRA Reversed.

o LRA found that the reconstitution of the Manotok title was fraudulent. Hence, it ordered the Barque title to be
reconstituted. BUT cancellation must 1st be sought in a court of competent jurisdiction of the 1991 Manotok
TCT.

The LRA denied the Manotoks MR and the Barques prayer for immediate reconstitution. Both the
Manotoks and the Barques appealed the LRA decision to the CA.

In the CA, Felicitas Manahan filed a motion to intervene and sought the dismissal of the cases claiming
ownership of the subject property.

2002 and 2003 2 separate divisions of the CA both directed the RD of QC to cancel the Reconstituted
Manotok Title and to reconstitute the Barques valid, genuine and existing TCT No. 210177.

o Hence, the Manotoks filed the present separate petitions which were ordered consolidated on August 2,
2004.

December 12, 2005, SC First Division affirmed both decisions of the CA. Manotoks filed
MR Denied in April 2006 Resolution.

o Thereafter, the Manotoks filed a Motion for Leave to File a Second MR with their MR attached. Denied in
June 2006 Resolution. Eventually entry of judgment was made in the Book of Entries of Judgment on May
2, 2006. In the meantime, the Barques filed multiple motions with the First Division for execution of the
judgment, while the Manotoks filed an Urgent Motion to Refer Motion for Possession to the SC En Banc
(with prayer to set motion for oral arguments). Case was referred to the En Banc in July 2006.

On September 7, 2006, Felicitas Manahan and Rosendo Manahan filed a motion to intervene, to which
was attached their petition in intervention. They alleged that their predecessor-in-interest, Valentin
Manahan, was issued Sale Certificate No. 511 covering Lot No. 823 and attached the findings of the NBI
that the documents of the Manotoks were not as old as they were purported to be. Consequently, the
Director of the Legal Division of the LMB recommended to the Director of the LMB the reconstituted
Manotok Title should be reverted to the state.

o Oral arguments were held on July 24, 2007.

2008 - En Banc set aside the December 2005 1st division decision and entry of judgment recalled and the
CAs Amended Decisions in CA-G.R. SP Nos. 66642 and 66700 were reversed and set aside. The En Banc
remanded the case to the CA.

o The CA was directed to receive evidence of and focus on the issue of WON the Manotoks can trace their
claim of title to a valid alienation by the Government of Lot No. 823 of the Piedad Estate, which was a Friar
Land. PURPOSE: to decide WON the title of the Maotoks should be annulled.
 CAs findings None of the parties were able to prove a valid alienation of Lot 823 from the government
in accordance with the provisions of Act No. 1120 otherwise known as the Friar Lands Act. Notably lacking
in the deed of conveyance of the Manotoks is the approval of the Secretary of Agriculture and Commerce
as required by Section 18 of the said law. Upon close scrutiny, the factual allegations and voluminous
documentary exhibits relating to the purchase of Lot 823 by the predecessors-in-interest of the claimants
revealed badges of fraud and irregularity.

BASIS FOR THEIR CLAIMS FOR OWNERSHIP:

Manotoks Their grandfather bought Lot 823 from the Government in 1919. They have since occupied
the land, built their houses and buildings on it. The subject land is now known as Manotok Compound.

Barques Teresita claims her father (Homer) bought land from Emiliano Setosta who had a TCT in his
name.

Manahans The lot originally belonged to his parents but was subsequently bought by his wife. They had
a caretaker on the property but she was ousted by armed men in 1950s so they just declared the property
for taxation to protect their rights.

ISSUE: Who has the better right over Lot No. 823? NO ONE! It belongs to the National Government.

RATIO:

From the proceedings in the CA, it was established that while records of the DENR-LMB indicate the original
claimant/applicant of Lot 823 as a certain Valentin Manahan, only the Manotoks were able to produce a
sale certificate in the name of their predecessors-in-interest, certified by the LMB Records Management
Division. In addition, the Manotoks submitted photocopies of original documents entitled Assignment of
Sale Certificate dated 1919, 1920 and 1923.

Sale Certificate No. 1054 was not signed by the Director of Lands nor approved by the Secretary of the
Interior. The Certificates of Assignment of Sale contained only the signature of the Director of Lands. The
Manotoks belatedly secured from the National Archives a certified copy of Deed of Conveyance No. 29204
dated December 7, 1932, which likewise lacks the approval of the Secretary of Agriculture and Natural
Resources as it was signed only by the Director of Lands.

Act No. 1120 SECTION 18. No lease or sale made by Chief of the Bureau of Public Lands under the
provisions of this Act shall be valid until approved by the Secretary of the Interior.

It is clear from the foregoing provision and from jurisprudence that the sale of friar lands shall be valid only
if approved by the Secretary of the Interior (later the Secretary of Agriculture and Commerce).

In their Memorandum, the Manotoks pointed out that their photocopy of the original Deed of Conveyance
No. 29204, sourced from the National Archives, shows on the second page a poorly imprinted typewritten
name over the words Secretary of Agriculture and Natural Resources, which name is illegible, and above
it an even more poorly imprinted impression of what may be a stamp of the Secretarys approval.
 The Manotoks are invoking the presumption of regularity in the performance of the RDs task in issuing the
TCT in the Manotok name. The Manotoks contend that we can assume that the Manotok deed of
conveyance was in fact approved by the Department Secretary because the register of deeds did issue
TCT No. 22813 in the name of the buyer Severino Manotok. FURTHER, the Manotoks assert that even if
we were to ignore the presumption of validity in the performance of official duty, Department Memorandum
Order No. 16-05 issued on October 27, 2005 by then DENR Secretary Michael T. Defensor, supplies the
omission of approval by the Secretary of Agriculture and Natural Resources in deeds of conveyances over
friar lands.

o NO! These arguments fail.

Citing Alonso v. Cebu Country Club which applied the rule in the Solid State and Liao Cases the absence
of approval by the Secretary of Agriculture and Commerce in the sale certificate and assignment of sale
certificate made the sale null and void ab initio. Necessarily, there can be no valid titles issued on the basis
of such sale or assignment.

o SC in the MR of the Alonso case underscored that the approval is a MADATORY requirement. Approval of
the Secretary of the Interior cannot simply be presumed or inferred from certain acts since the law is explicit
in its mandate. Petitioners have not offered any cogent reason that would justify a deviation from this rule.

DENR Memorandum Order No. 16, invoked by both the Manotoks and the Manahans, states that some
Deeds of Conveyance on record in the field offices of the LMB do not bear the Secretarys signature despite
full payment for the Friar Land. They are deemed signed or otherwise ratified by this Memo provided that
the applicant really paid the purchase price and complied with all the requirements under the Friar Lands
Act.

o The CA opined that the Manotoks cannot benefit from the above department issuance because it makes
reference only to those deeds of conveyance on file with the records of the DENR field offices. The
Manotoks copy of the alleged Deed of Conveyance No. 29204 issued in 1932, was sourced from the
National Archives.

Manotoks also point out that the Friar Lands Act itself states that the Government ceases reservation of its
title once the buyer had fully paid the price. (They were claiming that they fully paid!) Their basis is SECTION
15[2] of the Friar Lands Act.

Court found that the old rule would support the Manotoks contention however, the new rule Pugeda v.
Trias, the conveyance executed in favor of a buyer or purchaser, or the so-called certificate of sale, is
a conveyance of the ownership of the property, subject only to the resolutory condition that the sale may
be cancelled if the price agreed upon is not paid for in full.

Clearly, it is the execution of the contract to sell and delivery of the certificate of sale that vests title and
ownership to the purchaser of friar land. Such certificate of sale must, of course, be signed by the Secretary
of Agriculture and Natural Resources, as evident from Sections 11[3], 12[4] and the 2nd paragraph of
Section 15[5], in relation to Section 18.

CONCLUSIONS

Manotoks could not have acquired ownership of the subject lot as they had no valid certificate of sale issued
to them by the Government because their Certificate lacks the signature of the Director of Lands and the
Secretary of Agriculture and Natural Resources
 The decades-long occupation by the Manotoks of Lot 823, their payment of real property taxes and
construction of buildings, are of no moment. It must be noted that the Manotoks miserably failed to prove
the existence of the title allegedly issued in the name of Severino Mantotok after the latter had paid in full
the purchase price. The Manotoks did not offer any explanation as to why the only copy of TCT No. 22813
was torn in half and no record of documents leading to its issuance can be found in the registry of deeds. As
to the certification issued by the Register of Deeds of Caloocan, it simply described the copy presented as
DILAPIDATED without stating if the original copy of TCT No. 22813 actually existed in their records, nor
any information on the year of issuance and name of registered owner.

o As we stressed in Alonso: Prescription can never lie against the Government.

RE: MANAHANS No copy of the alleged Sale Certificate No. 511 can be found in the records of either
the DENR-NCR, LMB or National Archives. Although the OSG submitted a certified copy of Assignment of
Sale Certificate No. 511 allegedly executed by Valentin Manahan in favor of Hilaria de Guzman, there is no
competent evidence to show that the claimant Valentin Manahan or his successors-in-interest actually
occupied Lot 823, declared the land for tax purposes, or paid the taxes due thereon.

Even assuming arguendo the existence and validity of the alleged Sale Certificate No. 511 and Assignment
of Sale Certificate No. 511 presented by the Manahans, the CA correctly observed that the claim had
become stale after the lapse of 86 years from the date of its alleged issuance. Citing Liao v. CA the
certificates of sale x x x became stale after 10 years from its issuance and hence cannot be the source
documents for issuance of title more than 70 years later.