ART.

415
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

June 30, 1952

G.R. No. L-4637

JOSE A. LUNA, petitioner,
vs.
DEMETRIO B. ENCARNACION, Judge of First Instance of Rizal, TRINIDAD REYES and THE
PROVINCIAL SHERIFF OF RIZAL, respondents.
Jose S. Fineza for petitioner.
BAUTISTA ANGELO, J.:
On September 25, 1948, a deed designated as chattel mortgage was executed by Jose A. Luna in
favor of Trinidad Reyes whereby the former conveyed by way of first mortgage to the latter a certain
house of mixed materials stated in barrio San Nicolas, municipality of Pasig, Province of Rizal, to
secure the payment of a promissory note in the amount of P1,500, with interest at 12 per cent per
annum. The document was registered in the office of the register of deeds for the Province of Rizal.
The mortgagor having filed to pay the promissory note when it fell due, the mortgage requested the
sheriff of said province to sell the house at public auction so that with its proceeds the amount
indebted may be paid notifying the mortgagor in writing of the time and place of the sale as required
by law. The sheriff acceded to the request and sold the property to the mortgagee for the amount
covering the whole indebtedness with interest and costs. The certificate of sale was issued by the
sheriff on May 28, 1949. After the period for the redemption of the property had expired without the
mortgagor having exercised his right to repurchase, the mortgagee demanded from the mortgagor
the surrender of the possession of the property, but the later refused and so on October 13, 1950,
she filed a petition in the Court of First Instance of Rizal praying that the provincial sheriff be
authorized to place her in possession of the property invoking in her favor the provisions of Act No.
3135, as amended by Act No. 4118.
When the petition came up for hearing before the court on October 25, 1950, Jose A. Luna, the
mortgagor, opposed the petition on the following grounds: (1) that Act No. 3135 as amended by Act
No. 4118 is applicable only to a real estate mortgage; (2) that the mortgage involved herein is a
chattel mortgage; and (3) that even if the mortgage executed by the parties herein be considered as
real estate mortgage, the extra-judicial sale made by the sheriff of the property in question was valid
because the mortgage does not contain an express stipulation authorizing the extra-judicial sale of
the property. After hearing, at which both parties have expressed their views in support of their
respective contentions, respondent judge, then presiding the court, overruled the opposition and
granted the petition ordering the provincial sheriff of Rizal, or any of this disputives, to immediately
place petitioner in possession of the property in question while at the same time directing the
mortgagor Jose A. Luna to vacate it and relinquish it in favor of petitioner. It is from this order that
Jose A. Luna desires now to obtain relief by filing this petition for certiorari contending that the
respondent judge has acted in excess of his jurisdiction.
The first question which petitioner poses in his petition for certiorari is that which relates to the
validity of the extra-judicial sale made by the provincial sheriff of Rizal of the property in question in
line with the request of the mortgagee Trinidad Reyes. It is contended that said extra-judicial sale
having been conducted under the provisions of Act No. 3135, as amended by Act No. 4118, is
invalid because the mortgage in question is not a real estate mortgage and, besides, it does not
contain an express stipulation authorizing the mortgagee to foreclose the mortgage extra-judicially.
There is merit in this claim. As may be gleaned from a perusal of the deed signed by the parties
(Annex "C"), the understanding executed by them is a chattel mortgage, as the parties have so
expressly designated, and not a real estate mortgage, specially when it is considered that the
property given as security is a house of mixed materials which by its very nature is considered as
personal property. Such being the case, it is indeed a mistake for the mortgagee to consider this
transaction in the light of Act No. 3135, as amended by Act No. 4118, as was so considered by her
when she requested to provincial sheriff to sell it extra-judicially in order to secure full satisfaction of
the indebtedness still owed her by the mortgagor. It is clear that Act No. 3135, as amended, only
covers real estate mortgages and is intended merely to regulate the extra-judicial sale of the
property mortgaged if and when the mortgagee is given a special power or express authority to do
so in the deed itself, or in a document annexed thereto. These conditions do not here obtain. The
mortgage before us is not a real estate mortgage nor does it contain an express authority or power
to sell the property extra-judicially.
But regardless of what we have heretofore stated, we find that the validity of the sale in question
may be maintained, it appearing that the mortgage in question is a chattel mortgage and as such it is
covered and regulated by the Chattel Mortgage Law, Act No. 1508. Section 14 of this Act allows the
mortgagee through a public officer in almost the same manner as that allowed by Act No. 3135, as
amended by Act No. 4118, provided that the requirements of the law relative to notice and
registration are complied with. We are not prepared to state if these requirements of the law had
been complied with in the case for the record before us is not complete and there is no showing to
that effect. At any rate, this issue is not how important because the same can be treshed out when
the opportunity comes for its determination, nor is it necessary for us to consider it in reaching a
decision in the present case. Suffice it to state that for the present we are not expressing any opinion
on this matter which concerns the validity of the sale in question for the reason that this opinion will
only be limited to a matter of procedure relative to the step taken by the mortgagee in securing the
possession of the property involved.
In the supposition that the sale of the property made by the sheriff has been made in accordance
with law, and the question he is confronted is how to deliver the possession of the property to the
purchaser in case of refusal to surrender its possession on the part of the debtor or mortgagor, the
remedy of the purchaser according to the authorities, is to bring an ordinary action for recovery of
possession (Continental Gin Co. vs. Pannell, 160 P., 598; 61 Okl., 102; 14 C.J.S., pp. 1027, 1028).
The purchaser cannot take possession of the property by force either directly or through the sheriff.
And the reason for this is "that the creditor's right of possession is conditioned upon the fact of
default, and the existence of this fact may naturally be the subject of controversy" (Bachrah Motor
Co. vs. Summers, 42 Phil., 3, 6). The creditor cannot merely file a petition for a writ of possession as
was done by Trinidad Reyes in this case. Her remedy is to file an ordinary action for recovery of
possession in ordered that the debtor may be given an opportunity to be heard not only in regarding
possession but also regarding the obligation covered by the mortgage. The petition she has filed in
the lower court, which was not even docketed, is therefore improper and should be regarded.
Wherefore, the order subject of the present petition for certiorari is hereby set aside, with costs
against respondent Trinidad Reyes.
Bengzon, Tuason, Padilla and Pablo, JJ., concur in the result.

Republic of the Philippines

SUPREME COURT
Manila
 EN BANC

G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.

Booram and Mahoney for appellant.

Williams, Ferrier and SyCip for appellees.

CARSON, J.:

The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery

company from the defendant machinery company, and executed a chattel mortgage thereon to
secure payment of the purchase price. It included in the mortgage deed the building of strong
materials in which the machinery was installed, without any reference to the land on which it stood.
The indebtedness secured by this instrument not having been paid when it fell due, the mortgaged
property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was
bought in by the machinery company. The mortgage was registered in the chattel mortgage registry,
and the sale of the property to the machinery company in satisfaction of the mortgage was
annotated in the same registry on December 29, 1913.

A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina"
executed a deed of sale of the land upon which the building stood to the machinery company, but
this deed of sale, although executed in a public document, was not registered. This deed makes no
reference to the building erected on the land and would appear to have been executed for the
purpose of curing any defects which might be found to exist in the machinery company's title to the
building under the sheriff's certificate of sale. The machinery company went into possession of the
building at or about the time when this sale took place, that is to say, the month of December, 1913,
and it has continued in possession ever since.

At or about the time when the chattel mortgage was executed in favor of the machinery company,
the mortgagor, the "Compaia Agricola Filipina" executed another mortgage to the plaintiff upon the
building, separate and apart from the land on which it stood, to secure payment of the balance of its
indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of
the mortgagor to pay the amount of the indebtedness secured by the mortgage, the plaintiff secured
judgment for that amount, levied execution upon the building, bought it in at the sheriff's sale on or
about the 18th of December, 1914, and had the sheriff's certificate of the sale duly registered in the
land registry of the Province of Cavite.

At the time when the execution was levied upon the building, the defendant machinery company,
which was in possession, filed with the sheriff a sworn statement setting up its claim of title and
demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the
plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon
which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the
sheriff's sale.

This action was instituted by the plaintiff to recover possession of the building from the machinery
company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the
machinery company, on the ground that the company had its title to the building registered prior to
the date of registry of the plaintiff's certificate.

Article 1473 of the Civil Code is as follows:

If the same thing should have been sold to different vendees, the ownership shall be transfer
to the person who may have the first taken possession thereof in good faith, if it should be
personal property.

Should it be real property, it shall belong to the person acquiring it who first recorded it in the
registry.

Should there be no entry, the property shall belong to the person who first took possession of
it in good faith, and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.

The registry her referred to is of course the registry of real property, and it must be apparent that the
annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be
given the legal effect of an inscription in the registry of real property. By its express terms, the
Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and
the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel
mortgages," that is to say, mortgages of personal property executed in the manner and form
prescribed in the statute. The building of strong materials in which the rice-cleaning machinery was
installed by the "Compaia Agricola Filipina" was real property, and the mere fact that the parties
seem to have dealt with it separate and apart from the land on which it stood in no wise changed its
character as real property. It follows that neither the original registry in the chattel mortgage of the
building and the machinery installed therein, not the annotation in that registry of the sale of the
mortgaged property, had any effect whatever so far as the building was concerned.

We conclude that the ruling in favor of the machinery company cannot be sustained on the ground
assigned by the trial judge. We are of opinion, however, that the judgment must be sustained on the
ground that the agreed statement of facts in the court below discloses that neither the purchase of
the building by the plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made
in good faith, and that the machinery company must be held to be the owner of the property under
the third paragraph of the above cited article of the code, it appearing that the company first took
possession of the property; and further, that the building and the land were sold to the machinery
company long prior to the date of the sheriff's sale to the plaintiff.

It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith,"
in express terms, in relation to "possession" and "title," but contain no express requirement as to
"good faith" in relation to the "inscription" of the property on the registry, it must be presumed that
good faith is not an essential requisite of registration in order that it may have the effect
contemplated in this article. We cannot agree with this contention. It could not have been the
intention of the legislator to base the preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon the language of this section would
open wide the door to fraud and collusion. The public records cannot be converted into instruments
of fraud and oppression by one who secures an inscription therein in bad faith. The force and effect
given by law to an inscription in a public record presupposes the good faith of him who enters such
inscription; and rights created by statute, which are predicated upon an inscription in a public
registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who
thus makes the inscription.
Construing the second paragraph of this article of the code, the supreme court of Spain held in its
sentencia of the 13th of May, 1908, that:

This rule is always to be understood on the basis of the good faith mentioned in the first
paragraph; therefore, it having been found that the second purchasers who record their
purchase had knowledge of the previous sale, the question is to be decided in accordance
with the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911]
edition.)

Although article 1473, in its second paragraph, provides that the title of conveyance of
ownership of the real property that is first recorded in the registry shall have preference, this
provision must always be understood on the basis of the good faith mentioned in the first
paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just
to comply with a mere formality which, in given cases, does not obtain even in real disputes
between third persons. (Note 2, art. 1473, Civ. Code, issued by the publishers of the La
Revista de los Tribunales, 13th edition.)

The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the
sheriff's sale and inscribed his title in the land registry, was duly notified that the machinery company
had bought the building from plaintiff's judgment debtor; that it had gone into possession long prior to
the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The
execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company
had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having bought in the
building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had
already been sold to the machinery company by the judgment debtor, the plaintiff cannot be said to
have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's
certificate of title must be held to have been tainted with the same defect.

Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale
to the plaintiff was not made in good faith, we should not be understood as questioning, in any way,
the good faith and genuineness of the plaintiff's claim against the "Compaia Agricola Filipina." The
truth is that both the plaintiff and the defendant company appear to have had just and righteous
claims against their common debtor. No criticism can properly be made of the exercise of the utmost
diligence by the plaintiff in asserting and exercising his right to recover the amount of his claim from
the estate of the common debtor. We are strongly inclined to believe that in procuring the levy of
execution upon the factory building and in buying it at the sheriff's sale, he considered that he was
doing no more than he had a right to do under all the circumstances, and it is highly possible and
even probable that he thought at that time that he would be able to maintain his position in a contest
with the machinery company. There was no collusion on his part with the common debtor, and no
thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the word.
He may have hoped, and doubtless he did hope, that the title of the machinery company would not
stand the test of an action in a court of law; and if later developments had confirmed his unfounded
hopes, no one could question the legality of the propriety of the course he adopted.

But it appearing that he had full knowledge of the machinery company's claim of ownership when he
executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further
that the machinery company's claim of ownership was well founded, he cannot be said to have been
an innocent purchaser for value. He took the risk and must stand by the consequences; and it is in
this sense that we find that he was not a purchaser in good faith.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim
that he has acquired title thereto in good faith as against the true owner of the land or of an interest
therein; and the same rule must be applied to one who has knowledge of facts which should have
put him upon such inquiry and investigation as might be necessary to acquaint him with the defects
in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable
man upon his guard, and then claim that he acted in good faith under the belief that there was no
defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him
an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it
appears that he had such notice of the defects as would have led to its discovery had he acted with
that measure of precaution which may reasonably be acquired of a prudent man in a like situation.
Good faith, or lack of it, is in its analysis a question of intention; but in ascertaining the intention by
which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is
that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a
"freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is
that proof of such knowledge overcomes the presumption of good faith in which the courts always
indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible
fact that can be seen or touched, but rather a state or condition of mind which can only be judged of
by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber
Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

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

Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur.

Torres, Avancea and Fisher, JJ., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-26278 August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.

J. E. Blanco for appellant.

Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J.:

The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day
of December 1924. The facts are about as conflicting as it is possible for facts to be, in the trial
causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of
the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of
Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the
plaintiff and his tenants on seven parcels of land described in the complaint in the third paragraph of
the first cause of action; that within one year from the date of the attachment and sale the plaintiff
offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to
cover the price paid by the latter, the interest thereon and any assessments or taxes which he may
have paid thereon after the purchase, and the interest corresponding thereto and that Valdez
refused to accept the money and to return the sugar cane to the plaintiff.

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was
attempting to harvest the palay planted in four of the seven parcels mentioned in the first cause of
action; that he had harvested and taken possession of the palay in one of said seven parcels and in
another parcel described in the second cause of action, amounting to 300 cavans; and that all of
said palay belonged to the plaintiff.

Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J.
Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of the
parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar
cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land.
Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering
them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be
condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two
parcels above-mentioned ,with interest and costs.

On December 27, 1924, the court, after hearing both parties and upon approval of the bond for
P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in the complaint.

The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each
and every allegation of the complaint and step up the following defenses:

(a) That the sugar cane in question had the nature of personal property and was not,
therefore, subject to redemption;

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the
complaint;

(c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5.

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the preliminary
injunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana dulce) palay
in said parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, he
suffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving him from all
liability under the complaint; (2) declaring him to be the absolute owner of the sugar cane in question
and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of
P11,833.76, representing the value of the sugar cane and palay in question, including damages.

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing
the evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment
against the plaintiff and in favor of the defendants
 (1) Holding that the sugar cane in question was personal property and, as such, was not
subject to redemption;

(2) Absolving the defendants from all liability under the complaint; and

(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos
Sibal to jointly and severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08
as follows:

(a) P6,757.40, the value of the sugar cane;

(b) 1,435.68, the value of the sugar-cane shoots;

(c) 646.00, the value of palay harvested by plaintiff;

(d) 600.00, the value of 150 cavans of palay which the defendant was not able to
raise by reason of the injunction, at P4 cavan. 9,439.08 From that judgment the
plaintiff appealed and in his assignments of error contends that the lower court erred:
(1) In holding that the sugar cane in question was personal property and, therefore,
not subject to redemption;

(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7
and 8, and that the palay therein was planted by Valdez;

(3) In holding that Valdez, by reason of the preliminary injunction failed to realized P6,757.40
from the sugar cane and P1,435.68 from sugar-cane shoots (puntas de cana dulce);

(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was
unable to raise palay on the land, which would have netted him the sum of P600; and.

(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.

It appears from the record:

(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ of
execution in civil case No. 20203 of the Court of First Instance of Manila (Macondray & Co.,
Inc. vs. Leon Sibal),levied an attachment on eight parcels of land belonging to said Leon
Sibal, situated in the Province of Tarlac, designated in the second of attachment as parcels
1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).

(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the
auction held by the sheriff of the Province of Tarlac, for the sum to P4,273.93, having paid for
the said parcels separately as follows (Exhibit C, and 2-A):

Parcel

1 ..................................................................... P1.00
2 ..................................................................... 2,000.00
 3 ..................................................................... 120.93
4 ..................................................................... 1,000.00
5 ..................................................................... 1.00
6 ..................................................................... 1.00

7 with the house thereon .......................... 150.00

8 ..................................................................... 1,000.00
==========
4,273.93

(3) That within one year from the sale of said parcel of land, and on the 24th day of
September, 1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co., Inc.,
for the account of the redemption price of said parcels of land, without specifying the
particular parcels to which said amount was to applied. The redemption price said eight
parcels was reduced, by virtue of said transaction, to P2,579.97 including interest (Exhibit C
and 2).

The record further shows:

(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province
of Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province of Pampanga
(Emiliano J. Valdez vs. Leon Sibal 1. the same parties in the present case), attached the
personal property of said Leon Sibal located in Tarlac, among which was included the sugar
cane now in question in the seven parcels of land described in the complaint (Exhibit A).

(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal
properties of Leon Sibal, including the sugar cane in question to Emilio J. Valdez, who paid
therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).

(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also
attached the real property of said Leon Sibal in Tarlac, including all of his rights, interest and
participation therein, which real property consisted of eleven parcels of land and a house and
camarin situated in one of said parcels (Exhibit A).

(4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarin,
were bought by Emilio J. Valdez at the auction held by the sheriff for the sum of P12,200.
Said eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and
11. The house and camarin were situated on parcel 7 (Exhibit A).

(5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2, 12,
and 13, were released from the attachment by virtue of claims presented by Agustin
Cuyugan and Domiciano Tizon (Exhibit A).

(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio J.
Valdez for P2,579.97 all of its rights and interest in the eight parcels of land acquired by it at
public auction held by the deputy sheriff of Tarlac in connection with civil case No. 20203 of
the Court of First Instance of Manila, as stated above. Said amount represented the unpaid
 balance of the redemption price of said eight parcels, after payment by Leon Sibal of P2,000
on September 24, 1923, fro the account of the redemption price, as stated above. (Exhibit C
and 2).

The foregoing statement of facts shows:

(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels of
land described in the first cause of action of the complaint at public auction on May 9 and 10,
1924, for P600.

(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land
situated in the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923,
Leon Sibal paid to Macondray & Co. P2,000 for the account of the redemption price of said
parcels.

(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its rights
and interest in the said eight parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest which
Leon Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by the
latter to Macondray.

(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.

The first question raised by the appeal is, whether the sugar cane in question is personal or real
property. It is contended that sugar cane comes under the classification of real property as
"ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334
enumerates as real property the following: Trees, plants, and ungathered products, while they are
annexed to the land or form an integral part of any immovable property." That article, however, has
received in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that,
under certain conditions, growing crops may be considered as personal property. (Decision of March
18, 1904, vol. 97, Civil Jurisprudence of Spain.)

Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil
Code, in view of the recent decisions of the supreme Court of Spain, admits that growing crops are
sometimes considered and treated as personal property. He says:

No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen tocante
a la venta de toda cosecha o de parte de ella cuando aun no esta cogida (cosa frecuente
con la uvay y la naranja), y a la de lenas, considerando ambas como muebles. El Tribunal
Supremo, en sentencia de 18 de marzo de 1904, al entender sobre un contrato de
arrendamiento de un predio rustico, resuelve que su terminacion por desahucio no extingue
los derechos del arrendario, para recolectar o percibir los frutos correspondientes al ao
agricola, dentro del que nacieron aquellos derechos, cuando el arrendor ha percibido a su
vez el importe de la renta integra correspondiente, aun cuando lo haya sido por precepto
legal durante el curso del juicio, fundandose para ello, no solo en que de otra suerte se daria
al desahucio un alcance que no tiene, sino en que, y esto es lo interesante a nuestro
proposito, la consideracion de inmuebles que el articulo 334 del Codigo Civil atribuge a los
frutos pendientes, no les priva del caracter de productos pertenecientes, como tales, a
quienes a ellos tenga derecho, Ilegado el momento de su recoleccion.

xxx xxx xxx

 Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16 de
diciembre de 1909, con las reformas introducidas por la de 21 de abril anterior, la hipoteca,
salvo pacto expreso que disponga lo contrario, y cualquiera que sea la naturaleza y forma
de la obligacion que garantice, no comprende los frutos cualquiera que sea la situacion en
que se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered
products may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a
case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the
products corresponding to the agricultural year, because said fruits did not go with the land but
belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as
amended, the mortgage of a piece of land does not include the fruits and products existing thereon,
unless the contract expressly provides otherwise.

An examination of the decisions of the Supreme Court of Louisiana may give us some light on the
question which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to
paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not
gathered, and trees before they are cut down, are likewise immovable, and are considered as part of
the land to which they are attached."

The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases
"standing crops" may be considered and dealt with as personal property. In the case of Lumber Co.
vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil
Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are
cut down . . . are considered as part of the land to which they are attached, but the immovability
provided for is only one in abstracto and without reference to rights on or to the crop acquired by
others than the owners of the property to which the crop is attached. . . . The existence of a right on
the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the
crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible
mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28
La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.)

"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761)
that "article 465 of the Revised Code says that standing crops are considered as immovable and as
part of the land to which they are attached, and article 466 declares that the fruits of an immovable
gathered or produced while it is under seizure are considered as making part thereof, and incurred
to the benefit of the person making the seizure. But the evident meaning of these articles, is where
the crops belong to the owner of the plantation they form part of the immovable, and where it is
seized, the fruits gathered or produced inure to the benefit of the seizing creditor.

A crop raised on leased premises in no sense forms part of the immovable. It belongs to the
lessee, and may be sold by him, whether it be gathered or not, and it may be sold by his
judgment creditors. If it necessarily forms part of the leased premises the result would be that
it could not be sold under execution separate and apart from the land. If a lessee obtain
supplies to make his crop, the factor's lien would not attach to the crop as a separate thing
belonging to his debtor, but the land belonging to the lessor would be affected with the
recorded privilege. The law cannot be construed so as to result in such absurd
consequences.

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
 If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be
destructive of the very objects of the act, it would render the pledge of the crop objects of the
act, it would render the pledge of the crop impossible, for if the crop was an inseparable part
of the realty possession of the latter would be necessary to that of the former; but such is not
the case. True, by article 465 C. C. it is provided that "standing crops and the fruits of trees
not gathered and trees before they are cut down are likewise immovable and are considered
as part of the land to which they are attached;" but the immovability provided for is only
one in abstracto and without reference to rights on or to the crop acquired by other than the
owners of the property to which the crop was attached. The immovability of a growing crop is
in the order of things temporary, for the crop passes from the state of a growing to that of a
gathered one, from an immovable to a movable. The existence of a right on the growing crop
is a mobilization by anticipation, a gathering as it were in advance, rendering the crop
movable quoad the right acquired thereon. The provision of our Code is identical with the
Napoleon Code 520, and we may therefore obtain light by an examination of the
jurisprudence of France.

The rule above announced, not only by the Tribunal Supremo de Espaa but by the Supreme Court
of Louisiana, is followed in practically every state of the Union.

From an examination of the reports and codes of the State of California and other states we find that
the settle doctrine followed in said states in connection with the attachment of property and
execution of judgment is, that growing crops raised by yearly labor and cultivation are considered
personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. 329:
Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am.
Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crinevs. Tifts and
Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on
Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in
existence, is reasonably certain to come into existence as the natural increment or usual incident of
something already in existence, and then belonging to the vendor, and then title will vest in the buyer
the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387;
Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a
potential existence. A man may sell property of which he is potentially and not actually possessed.
He may make a valid sale of the wine that a vineyard is expected to produce; or the gain a field may
grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall
thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to
grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold,
however, must be specific and identified. They must be also owned at the time by the vendor.
(Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)

It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been
modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel
Mortgage Law. Said section 450 enumerates the property of a judgment debtor which may be
subjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels,
moneys, and other property, both real and personal, * * * shall be liable to execution. Said section
450 and most of the other sections of the Code of Civil Procedure relating to the execution of
judgment were taken from the Code of Civil Procedure of California. The Supreme Court of
California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held,
without variation, that growing crops were personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property.
Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the
provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel
mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an
agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop
while growing.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that
"growing crops" are personal property. This consideration tends to support the conclusion
hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section
450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in
said article of the Civil Code have the nature of personal property. In other words, the phrase
"personal property" should be understood to include "ungathered products."

At common law, and generally in the United States, all annual crops which are raised by
yearly manurance and labor, and essentially owe their annual existence to cultivation by
man, . may be levied on as personal property." (23 C. J., p. 329.) On this question Freeman,
in his treatise on the Law of Executions, says: "Crops, whether growing or standing in the
field ready to be harvested, are, when produced by annual cultivation, no part of the realty.
They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they
may be seized and sold under execution. (Freeman on Executions, vol. p. 438.)

We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by
section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of
attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products"
have the nature of personal property. The lower court, therefore, committed no error in holding that
the sugar cane in question was personal property and, as such, was not subject to redemption.

All the other assignments of error made by the appellant, as above stated, relate to questions of fact
only. Before entering upon a discussion of said assignments of error, we deem it opportune to take
special notice of the failure of the plaintiff to appear at the trial during the presentation of evidence by
the defendant. His absence from the trial and his failure to cross-examine the defendant have lent
considerable weight to the evidence then presented for the defense.

Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the
complaint, the plaintiff made a futile attempt to show that said two parcels belonged to Agustin
Cuyugan and were the identical parcel 2 which was excluded from the attachment and sale of real
property of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the description of
parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description of parcels 1 and 2 of
the complaint will readily show that they are not the same.

The description of the parcels in the complaint is as follows:

1. La caa dulce sembrada por los inquilinos del ejecutado Leon Sibal 1. en una parcela de
terreno de la pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban,
Tarlac, de unas dos hectareas poco mas o menos de superficie.

2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., Ilamado Alejandro
Policarpio, en una parcela de terreno de la pertenencia del ejecutado, situada en Dalayap,
Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco mas o menos." The
description of parcel 2 given in the certificate of sale (Exhibit A) is as follows:
 2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados
de superficie, linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con
Francisco Dizon, Felipe Mau and others; al S. con Alejandro Dayrit, Isidro Santos and
Melecio Mau; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, vador
amillarado P4,200 pesos.

On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the
complaint were included among the parcels bought by Valdez from Macondray on June 25, 1924,
and corresponded to parcel 4 in the deed of sale (Exhibit B and 2), and were also included among
the parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25, 1924, and
corresponded to parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The description of
parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:

Parcels No. 4. Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F.

de 145,000 metros cuadrados de superficie, lindante al Norte con Road of the barrio of
Culubasa that goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao y Canuto
Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de P2,990.
Tax No. 2856.

As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4
(Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the
trial when the defendant offered his evidence, we are inclined to give more weight to the evidence
adduced by him that to the evidence adduced by the plaintiff, with respect to the ownership of
parcels 1 and 2 of the compliant. We, therefore, conclude that parcels 1 and 2 of the complaint
belong to the defendant, having acquired the same from Macondray & Co. on June 25, 1924, and
from the plaintiff Leon Sibal on the same date.

It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190
cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half of the
crop, or 95 cavans. He should therefore be condemned to pay to the defendant for 95 cavans only,
at P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held by the lower court.

As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to
parcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the
certificate of sale to Valdez of real property belonging to Sibal, executed by the sheriff as above
stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest
of both Macondray and Sibal in said parcel.

With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second
cause of action, it appears from the testimony of the plaintiff himself that said parcel corresponds to
parcel 8 of the deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of
sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of
said parcel, having acquired the interest of both Macondray and Sibal therein.

In this connection the following facts are worthy of mention:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under
said execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923.
Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the
redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the
sugar cane in question. (Exhibit A) The said personal property so attached, sold at public auction
May 9 and 10, 1924. April 29, 1924, the real property was attached under the execution in favor of
Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A).

June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on
the 30th day of July, 1923, to Valdez.

As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that
the sugar cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that
said area would have yielded an average crop of 1039 picos and 60 cates; that one-half of the
quantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; that
during the season the sugar was selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the defendant,
as owner, would have netted P 6,757.40 from the sugar cane in question. The evidence also shows
that the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de
cana) and not 1,170,000 as computed by the lower court. During the season the shoots were selling
at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 from
sugar-cane shoots and not P1,435.68 as allowed by the lower court.

As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190
cavans, one-half of said quantity should belong to the plaintiff, as stated above, and the other half to
the defendant. The court erred in awarding the whole crop to the defendant. The plaintiff should
therefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646 as
allowed by the lower court.

The evidence also shows that the defendant was prevented by the acts of the plaintiff from
cultivating about 10 hectares of the land involved in the litigation. He expected to have raised about
600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The lower
court has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would have netted
him P600.

In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his
sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the
defendant jointly and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower
court, as follows:

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;

323.00 for the palay harvested by plaintiff in parcels 1 and 2;

600.00 for the palay which defendant could have raised.

8,900.80
============

In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.

Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-17870 September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro
City,respondents.

Binamira, Barria and Irabagon for petitioner.

Vicente E. Sabellina for respondents.

LABRADOR, J.:

This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710
holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its
maintenance and repair equipment hereunder referred to.

Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-
mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals
on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city
assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the
assessment.

In the Court of Tax Appeals the parties submitted the following stipulation of facts:

Petitioner and respondents, thru their respective counsels agreed to the following stipulation
of facts:

1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by
motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by
the Public Service Commission;

2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch
Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and
Kibawe, Bukidnon Province;

3. That the machineries sought to be assessed by the respondent as real properties are the
following:

(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked
Annex "A";
 (b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";

(c) Lathe machine with motor, appearing in the attached photograph, marked Annex
"C";

(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex
"D";

(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex
"E";

(f) Battery charger (Tungar charge machine) appearing in the attached photograph,
marked Annex "F"; and

(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked

Annex "G".

4. That these machineries are sitting on cement or wooden platforms as may be seen in the
attached photographs which form part of this agreed stipulation of facts;

5. That petitioner is the owner of the land where it maintains and operates a garage for its
TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these
machineries which are placed therein, its TPU trucks are made; body constructed; and same
are repaired in a condition to be serviceable in the TPU land transportation business it
operates;

6. That these machineries have never been or were never used as industrial equipments to
produce finished products for sale, nor to repair machineries, parts and the like offered to the
general public indiscriminately for business or commercial purposes for which petitioner has
never engaged in, to date. 1awphl.nt

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied
a motion for reconsideration, petitioner brought the case to this Court assigning the following errors:

1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the
questioned assessments are valid; and that said tools, equipments or machineries are
immovable taxable real properties.

2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil
Code, and holding that pursuant thereto the movable equipments are taxable realties, by
reason of their being intended or destined for use in an industry.

3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City
Assessor's power to assess and levy real estate taxes on machineries is further restricted by
section 31, paragraph (c) of Republic Act No. 521; and

4. The Tax Court erred in denying petitioner's motion for reconsideration.

Respondents contend that said equipments, tho movable, are immobilized by destination, in
accordance with paragraph 5 of Article 415 of the New Civil Code which provides:
 Art. 415. The following are immovable properties:

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works. (Emphasis
ours.)

Note that the stipulation expressly states that the equipment are placed on wooden or cement
platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H.
Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:

Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real
property to "machinery, liquid containers, instruments or implements intended by the owner
of any building or land for use in connection with any industry or trade being carried on
therein and which are expressly adapted to meet the requirements of such trade or industry."

If the installation of the machinery and equipment in question in the central of the Mabalacat
Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar and industry,
converted them into real property by reason of their purpose, it cannot be said that their
incorporation therewith was not permanent in character because, as essential and principle
elements of a sugar central, without them the sugar central would be unable to function or
carry on the industrial purpose for which it was established. Inasmuch as the central is
permanent in character, the necessary machinery and equipment installed for carrying on the
sugar industry for which it has been established must necessarily be permanent. (Emphasis
ours.)

So that movable equipments to be immobilized in contemplation of the law must first be "essential
and principal elements" of an industry or works without which such industry or works would be
"unable to function or carry on the industrial purpose for which it was established." We may here
distinguish, therefore, those movable which become immobilized by destination because they
are essential and principal elements in the industry for those which may not be so considered
immobilized because they are merely incidental, not essential and principal. Thus, cash registers,
typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals
and are not and should not be considered immobilized by destination, for these businesses can
continue or carry on their functions without these equity comments. Airline companies use forklifts,
jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus
retain their movable nature. On the other hand, machineries of breweries used in the manufacture of
liquor and soft drinks, though movable in nature, are immobilized because they are essential to said
industries; but the delivery trucks and adding machines which they usually own and use and are
found within their industrial compounds are merely incidental and retain their movable nature.

Similarly, the tools and equipments in question in this instant case are, by their nature, not essential
and principle municipal elements of petitioner's business of transporting passengers and cargoes by
motor trucks. They are merely incidentals acquired as movables and used only for expediency to
facilitate and/or improve its service. Even without such tools and equipments, its business may be
carried on, as petitioner has carried on, without such equipments, before the war. The transportation
business could be carried on without the repair or service shop if its rolling equipment is repaired or
serviced in another shop belonging to another.

The law that governs the determination of the question at issue is as follows:
 Art. 415. The following are immovable property:

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works; (Civil Code of
the Phil.)

Aside from the element of essentiality the above-quoted provision also requires that the industry or
works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu
Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found in a
building constructed on the land. A sawmill would also be installed in a building on land more or less
permanently, and the sawing is conducted in the land or building.

But in the case at bar the equipments in question are destined only to repair or service the
transportation business, which is not carried on in a building or permanently on a piece of land, as
demanded by the law. Said equipments may not, therefore, be deemed real property.

Resuming what we have set forth above, we hold that the equipments in question are not absolutely
essential to the petitioner's transportation business, and petitioner's business is not carried on in a
building, tenement or on a specified land, so said equipment may not be considered real estate
within the meaning of Article 415 (c) of the Civil Code.

WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment
in question declared not subject to assessment as real estate for the purposes of the real estate tax.
Without costs.

So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-41643 July 31, 1935

B.H. BERKENKOTTER, plaintiff-appellant,

vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY,
MABALACAT SUGAR COMPANY and THE PROVINCE SHERIFF OF PAMPANGA, defendants-
appellees.
Briones and Martinez for appellant.
Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.

VILLA-REAL, J.:

This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment of the Court of First
Instance of Manila, dismissing said plaintiff's complaint against Cu Unjiengs e Hijos et al., with costs.

In support of his appeal, the appellant assigns six alleged errors as committed by the trial court in its
decision in question which will be discussed in the course of this decision.

The first question to be decided in this appeal, which is raised in the first assignment of alleged error,
is whether or not the lower court erred in declaring that the additional machinery and equipment, as
improvement incorporated with the central are subject to the mortgage deed executed in favor of the
defendants Cu Unjieng e Hijos.

It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar
central situated in Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan
secured by a first mortgage constituted on two parcels and land "with all its buildings, improvements,
sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is
necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that
may in the future exist is said lots."

On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co.,
Inc., decided to increase the capacity of its sugar central by buying additional machinery and
equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated cost of said
additional machinery and equipment was approximately P100,000. In order to carry out this plan,
B.A. Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance
the necessary amount for the purchase of said machinery and equipment, promising to reimburse
him as soon as he could obtain an additional loan from the mortgagees, the herein defendants Cu
Unjieng e Hijos. Having agreed to said proposition made in a letter dated October 5, 1926 (Exhibit
E), B.H. Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to B.A. Green,
president of the Mabalacat Sugar Co., Inc., the total amount supplied by him to said B.A. Green
having been P25,750. Furthermore, B.H. Berkenkotter had a credit of P22,000 against said
corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat
Sugar Co., Inc., purchased the additional machinery and equipment now in litigation.

On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e
Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment
acquired by said B.A. Green and installed in the sugar central after the execution of the original
mortgage deed, on April 27, 1927, together with whatever additional equipment acquired with said
loan. B.A. Green failed to obtain said loan.

Article 1877 of the Civil Code provides as follows.

ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and
rents not collected when the obligation falls due, and the amount of any indemnities paid or
due the owner by the insurers of the mortgaged property or by virtue of the exercise of the
power of eminent domain, with the declarations, amplifications, and limitations established by
law, whether the estate continues in the possession of the person who mortgaged it or
whether it passes into the hands of a third person.
In the case of Bischoff vs. Pomar and Compaia General de Tabacos (12 Phil., 690), cited with
approval in the case of Cea vs. Villanueva (18 Phil., 538), this court laid shown the following
doctrine:

1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND

FIXTURES. It is a rule, established by the Civil Code and also by the Mortgage Law, with
which the decisions of the courts of the United States are in accord, that in a mortgage of
real estate, the improvements on the same are included; therefore, all objects permanently
attached to a mortgaged building or land, although they may have been placed there after
the mortgage was constituted, are also included. (Arts. 110 and 111 of the Mortgage Law,
and 1877 of the Civil Code; decision of U.S. Supreme Court in the matter of Royal Insurance
Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)

2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. In order that it may be

understood that the machinery and other objects placed upon and used in connection with a
mortgaged estate are excluded from the mortgage, when it was stated in the mortgage that
the improvements, buildings, and machinery that existed thereon were also comprehended,
it is indispensable that the exclusion thereof be stipulated between the contracting parties.

The appellant contends that the installation of the machinery and equipment claimed by him in the
sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch as
B.A. Green, in proposing to him to advance the money for the purchase thereof, made it appear in
the letter, Exhibit E, that in case B.A. Green should fail to obtain an additional loan from the
defendants Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said
B.A. Green binding himself not to mortgage nor encumber them to anybody until said plaintiff be fully
reimbursed for the corporation's indebtedness to him.

Upon acquiring the machinery and equipment in question with money obtained as loan from the
plaintiff-appellant by B.A. Green, as president of the Mabalacat Sugar Co., Inc., the latter became
owner of said machinery and equipment, otherwise B.A. Green, as such president, could not have
offered them to the plaintiff as security for the payment of his credit.

Article 334, paragraph 5, of the Civil Code gives the character of real property to "machinery, liquid
containers, instruments or implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and which are expressly adapted to
meet the requirements of such trade or industry.

If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar
Co., Inc., in lieu of the other of less capacity existing therein, for its sugar industry, converted them
into real property by reason of their purpose, it cannot be said that their incorporation therewith was
not permanent in character because, as essential and principal elements of a sugar central, without
them the sugar central would be unable to function or carry on the industrial purpose for which it was
established. Inasmuch as the central is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for which it has been established must
necessarily be permanent.

Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said
machinery and equipment as security for the payment of the latter's credit and to refrain from
mortgaging or otherwise encumbering them until Berkenkotter has been fully reimbursed therefor, is
not incompatible with the permanent character of the incorporation of said machinery and equipment
with the sugar central of the Mabalacat Sugar Co., Inc., as nothing could prevent B.A. Green from
giving them as security at least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had
been permanently incorporated with sugar central of the Mabalacat Sugar Co., Inc., and while the
mortgage constituted on said sugar central to Cu Unjieng e Hijos remained in force, only the right of
redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with which said machinery
and equipment had been incorporated, was transferred thereby, subject to the right of the
defendants Cu Unjieng e Hijos under the first mortgage.

For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a
machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the
purpose of carrying out the industrial functions of the latter and increasing production, constitutes a
permanent improvement on said sugar central and subjects said machinery and equipment to the
mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the purchaser of the
new machinery and equipment has bound himself to the person supplying him the purchase money
to hold them as security for the payment of the latter's credit, and to refrain from mortgaging or
otherwise encumbering them does not alter the permanent character of the incorporation of said
machinery and equipment with the central; and (3) that the sale of the machinery and equipment in
question by the purchaser who was supplied the purchase money, as a loan, to the person who
supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest
the creditor with ownership of said machinery and equipment but simply with the right of redemption.

Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the
appellant. So ordered.

Malcolm, Imperial, Butte, and Goddard, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17898 October 31, 1962

PASTOR D. AGO, petitioner,

vs.
THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ, Judge of the Court of First
Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO and GRACE PARK
ENGINEERING, INC., respondents.

Jose M. Luison for petitioner.

Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.
The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.

LABRABOR, J.:

Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R. No. 26723-R
entitled "Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al." which in part reads:
 In this case for certiorari and prohibition with preliminary injunction, it appears from the
records that the respondent Judge of the Court of First Instance of Agusan rendered
judgment (Annex "A") in open court on January 28, 1959, basing said judgment on a
compromise agreement between the parties.

On August 15, 1959, upon petition, the Court of First Instance issued a writ of execution.

Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or his
counsel, did not receive a formal and valid notice of said decision, which motion for
reconsideration was denied by the court below in the order of November 14, 1959.

Petitioner now contends that the respondent Judge exceeded in his jurisdiction in rendering
the execution without valid and formal notice of the decision.

A compromise agreement is binding between the parties and becomes the law between
them. (Gonzales vs. Gonzales G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin,
G.R. No. L-12439, May 22, 1959) .

It is a general rule in this jurisdiction that a judgment based on a compromise agreement is

not appealable and is immediately executory, unless a motion is filed on the ground fraud,
mistake or duress. (De los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No. L-
10089, July 31, 1957)

Petitioner's claim that he was not notified or served notice of the decision is untenable. The
judgment on the compromise agreement rendered by the court below dated January 28,
1959, was given in open court. This alone is a substantial compliance as to notice. (De los
Reyes vs. Ugarte, supra)

IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its jurisdiction
in ordering the execution of the judgment. The petition for certiorari is hereby dismissed and
the writ of preliminary injunction heretofore dissolved, with costs against the petitioner.

IT IS SO ORDERED.

The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago bought
sawmill machineries and equipments from respondent Grace Park Engineer domineering, Inc.,
executing a chattel mortgage over said machineries and equipments to secure the payment of
balance of the price remaining unpaid of P32,000.00, which petitioner agreed to pay on installment
basis.

Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park Engineering, Inc.
instituted extra-judicial foreclosure proceedings of the mortgage. To enjoin said foreclosure,
petitioner herein instituted Special Civil Case No. 53 in the Court of First Instance of Agusan. The
parties to the case arrived at a compromise agreement and submitted the same in court in writing,
signed by Pastor D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz, Judge of
the Court of First Instance of Agusan, then presiding, dictated a decision in open court on January
28, 1959.

Petitioner continued to default in his payments as provided in the judgment by compromise, so

Grace Park Engineering, Inc. filed with the lower court a motion for execution, which was granted by
the court on August 15, 1959. A writ of execution, dated September 23, 1959, later followed.
The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution issued by the
lower court, levied upon and ordered the sale of the sawmill machineries and equipments in
question. These machineries and equipments had been taken to and installed in a sawmill building
located in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill, Inc., to whom,
petitioner alleges, he had sold them on February 16, 1959 (a date after the decision of the lower
court but before levy by the Sheriff).

Having been advised by the sheriff that the public auction sale was set for December 4, 1959,
petitioner, on December 1, 1959, filed the petition for certiorari and prohibition with preliminary
injunction with respondent Court of Appeals, alleging that a copy of the aforementioned judgment
given in open court on January 28, 1959 was served upon counsel for petitioner only on September
25, 1959 (writ of execution is dated September 23, 1959); that the order and writ of execution having
been issued by the lower court before counsel for petitioner received a copy of the judgment, its
resultant last order that the "sheriff may now proceed with the sale of the properties levied
constituted a grave abuse of discretion and was in excess of its jurisdiction; and that the respondent
Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ of execution by levying
the same upon the sawmill machineries and equipments which have become real properties of the
Golden Pacific sawmill, Inc., and is about to proceed in selling the same without prior publication of
the notice of sale thereof in some newspaper of general circulation as required by the Rules of
Court.

The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction against the
sheriff but it turned out that the latter had already sold at public auction the machineries in question,
on December 4, 1959, as scheduled. The respondent Grace Park Engineering, Inc. was the only
bidder for P15,000.00, although the certificate sale was not yet executed. The Court of Appeals
constructed the sheriff to suspend the issuance of a certificate of sale of the said sawmill
machineries and equipment sold by him on December 4, 1959 until the final decision of the case. On
November 9, 1960 the Court of Appeals rendered the aforequoted decision.

Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the rendition of
judgment on compromise in open court on January 1959 was a sufficient notice; and (2) in not
resolving the other issues raised before it, namely, (a) the legality of the public auction sale made by
the sheriff, and (b) the nature of the machineries in question, whether they are movables or
immovables.

The Court of Appeals held that as a judgment was entered by the court below in open court upon the
submission of the compromise agreement, the parties may be considered as having been notified of
said judgment and this fact constitutes due notice of said judgment. This raises the following legal
question: Is the order dictated in open court of the judgment of the court, and is the fact the petitioner
herein was present in open court was the judgment was dictated, sufficient notice thereof? The
provisions of the Rules of Court decree otherwise. Section 1 of Rule 35 describes the manner in
which judgment shall be rendered, thus:

SECTION 1. How judgment rendered. All judgments determining the merits of cases shall
be in writing personally and directly prepared by the judge, and signed by him, stating clearly
and distinctly the facts and the law on which it is based, filed with the clerk of the court.

The court of first instance being a court of record, in order that a judgment may be considered as
rendered, must not only be in writing, signed by the judge, but it must also be filed with the clerk of
court. The mere pronouncement of the judgment in open court with the stenographer taking note
thereof does not, therefore, constitute a rendition of the judgment. It is the filing of the signed
decision with the clerk of court that constitutes rendition. While it is to be presumed that the
judgment that was dictated in open court will be the judgment of the court, the court may still modify
said order as the same is being put into writing. And even if the order or judgment has already been
put into writing and signed, while it has not yet been delivered to the clerk for filing it is still subject to
amendment or change by the judge. It is only when the judgment signed by the judge is actually filed
with the clerk of court that it becomes a valid and binding judgment. Prior thereto, it could still be
subject to amendment and change and may not, therefore, constitute the real judgment of the court.

Regarding the notice of judgment, the mere fact that a party heard the judge dictating the judgment
in open court, is not a valid notice of said judgment. If rendition thereof is constituted by the filing
with the clerk of court of a signed copy (of the judgment), it is evident that the fact that a party or an
attorney heard the order or judgment being dictated in court cannot be considered as notice of the
real judgment. No judgment can be notified to the parties unless it has previously been rendered.
The notice, therefore, that a party has of a judgment that was being dictated is of no effect because
at the time no judgment has as yet been signed by the judge and filed with the clerk.

Besides, the Rules expressly require that final orders or judgments be served personally or by
registered mail. Section 7 of Rule 27 provides as follows:

SEC. 7. Service of final orders or judgments. Final orders or judgments shall be served
either personally or by registered mail.

In accordance with this provision, a party is not considered as having been served with the judgment
merely because he heard the judgment dictating the said judgment in open court; it is necessary that
he be served with a copy of the signed judgment that has been filed with the clerk in order that he
may legally be considered as having been served with the judgment.

For all the foregoing, the fact that the petitioner herein heard the trial judge dictating the judgment in
open court, is not sufficient to constitute the service of judgement as required by the above-quoted
section 7 of Rule 2 the signed judgment not having been served upon the petitioner, said judgment
could not be effective upon him (petitioner) who had not received it. It follows as a consequence that
the issuance of the writ of execution null and void, having been issued before petitioner her was
served, personally or by registered mail, a copy of the decision.

The second question raised in this appeal, which has been passed upon by the Court of Appeals,
concerns the validity of the proceedings of the sheriff in selling the sawmill machineries and
equipments at public auction with a notice of the sale having been previously published.

The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill machineries
and equipments he assigned the same to the Golden Pacific Sawmill, Inc. in payment of his
subscription to the shares of stock of said corporation. Thereafter the sawmill machinery and
equipments were installed in a building and permanently attached to the ground. By reason of such
installment in a building, the said sawmill machineries and equipment became real estate properties
in accordance with the provision of Art. 415 (5) of the Civil Code, thus:

ART. 415. The following are immovable property:

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements tended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said industry or works;
This Court in interpreting a similar question raised before it in the case of Berkenkotter vs. Cu
Unjieng e Hijos, 61 Phil. 683, held that the installation of the machine and equipment in the central of
the Mabalacat Sugar Co., Inc. for use in connection with the industry carried by the company,
converted the said machinery and equipment into real estate by reason of their purpose.
Paraphrasing language of said decision we hold that by the installment of the sawmill machineries in
the building of the Gold Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building,
the same became a necessary and permanent part of the building or real estate on which the same
was constructed, converting the said machineries and equipments into real estate within the
meaning of Article 415(5) above-quoted of the Civil Code of the Philippines.

Considering that the machineries and equipments in question valued at more than P15,000.00
appear to have been sold without the necessary advertisement of sale by publication in a
newspaper, as required in Sec. 16 of Rule 39 of the Rules of Court, which is as follows:

SEC. 16. Notice of sale of property on execution. Before the sale of property on
execution, notice thereof must be given as follows:

xxx xxx xxx

(c) In case of real property, by posting a similar notice particularly describing the property for
twenty days in three public places in the municipality or city where the property is situated,
and also where the property is to be sold, and, if the assessed value of the property exceeds
four hundred pesos, by publishing a copy of the notice once a week, for the same period, in
some newspaper published or having general circulation in the province, if there be one. If
there are newspapers published in the province in both the English and Spanish languages,
then a like publication for a like period shall be made in one newspaper published in the
English language, and in one published in the Spanish language.

the sale made by the sheriff must be declared null and void.

WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside and
We declare that the issuance of the writ of execution in this case against the sawmill machineries
and equipments purchased by petitioner Pastor D. Ago from the Grace Park Engineering, Inc., as
well as the sale of the same by the Sheriff of Surigao, are null and void. Costs shall be against the
respondent Grace Park Engineering, Inc.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and
Makalintal, JJ.,concur.
Padilla, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-19527 March 30, 1963

RICARDO PRESBITERO, in his capacity as Executor of the Testate Estate of EPERIDION

PRESBITERO,petitioner,
vs.
THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the PROVINCIAL SHERIFF OF
NEGROS OCCIDENTAL, respondents.

San Juan, Africa and Benedicto and Hilado and Hilado for petitioner.
Paredes, Poblador, Cruz and Nazareno and Manuel Soriano for respondents.

REYES, J.B.L., J.:

Petition for a writ of certiorari against the Court of First Instance of Negros Occidental.

It appears that during the lifetime of Esperidion Presbitero, judgment was rendered against him by
the Court of Appeals on October 14, 1959, in CA-G.R. No. 20879,

... to execute in favor of the plaintiff, within 30 days from the time this judgment becomes
final, a deed of reconveyance of Lot No. 788 of the cadastral survey of Valladolid, free from
all liens and encumbrances, and another deed of reconveyance of a 7-hectare portion of Lot
No. 608 of the same cadastral survey, also free from all liens and encumbrances, or, upon
failure to do so, to pay to the plaintiff the value of each of the said properties, as may be
determined by the Court a quo upon evidence to be presented by the parties before it. The
defendant is further adjudged to pay to the plaintiff the value of the products received by him
from the 5-hectare portion equivalent to 20 cavans of palay per hectare every year, or 125
cavans yearly, at the rate of P10.00 per cavan, from 1951 until possession of the said 5-
hectare portion is finally delivered to the plaintiff with legal interest thereon from the time the
complaint was filed; and to pay to the plaintiff the sum of P1,000.00 by way of attorney's
fees, plus costs.

This judgment, which became final, was a modification of a decision of the Court of First Instance of
Negros Occidental, in its Civil Case No. 3492, entitled "Helen Caram Nava, plaintiff, versus
Esperidion Presbitero, defendant."

Thereafter, plaintiff's counsel, in a letter dated December 8, 1959, sought in vain to amicably settle
the case through petitioner's son, Ricardo Presbitero. When no response was forthcoming, said
counsel asked for, and the court a quo ordered on June 9, 1960, the issuance of a partial writ of
execution for the sum of P12,250.00. On the following day, June 10, 1960, said counsel, in another
friendly letter, reiterated his previous suggestion for an amicable settlement, but the same produced
no fruitful result. Thereupon, on June 21, 1960, the sheriff levied upon and garnished the sugar
quotas allotted to plantation audit Nos. 26-237, 26-238, 26-239, 26-240 and 26-241 adhered to the
Ma-ao Mill District and "registered in the name of Esperidion Presbitero as the original plantation-
owner", furnishing copies of the writ of execution and the notice of garnishment to the manager of
the Ma-ao Sugar Central Company, Bago, Negros Occidental, and the Sugar Quota Administration
at Bacolod City, but without presenting for registration copies thereof to the Register of Deeds.

Plaintiff Helen Caram Nava (herein respondent) then moved the court, on June 22, 1960, to hear
evidence on the market value of the lots; and after some hearings, occasionally protracted by
postponements, the trial court, on manifestation of defendant's willingness to cede the properties in
litigation, suspended the proceedings and ordered him to segregate the portion of Lot 608 pertaining
to the plaintiff from the mass of properties belonging to the defendant within a period to expire on
August 24, 1960, and to effect the final conveyance of the said portion of Lot 608 and the whole of
Lot 788 free from any lien and encumbrance whatsoever. Because of Presbitero's failure to comply
with this order within the time set forth by the court, the plaintiff again moved on August 25, 1960 to
declare the market value of the lots in question to be P2,500.00 per hectare, based on
uncontradicted evidence previously adduced. But the court, acting on a prayer of defendant
Presbitero, in an order dated August 27, 1960, granted him twenty (20) days to finalize the survey of
Lot 608, and ordered him to execute a reconveyance of Lot 788 not later than August 31, 1960.
Defendant again defaulted; and so plaintiff, on September 21, 1960, moved the court for payment by
the defendant of the sum of P35,000.00 for the 14 hectares of land at P2,500.00 to the hectare, and
the court, in its order dated September 24, 1960, gave the defendant until October 15, 1960 either to
pay the value of the 14 hectares at the rate given or to deliver the clean titles of the lots. On October
15, 1960, the defendant finally delivered Certificate of Title No. T-28046 covering Lot 788, but not
the title covering Lot 608 because of an existing encumbrance in favor of the Philippine National
Bank. In view thereof, Helen Caram Nava moved for, and secured on October 19, 1960, a writ of
execution for P17,500.00, and on the day following wrote the sheriff to proceed with the auction sale
of the sugar quotas previously scheduled for November 5, 1960. The sheriff issued the notice of
auction sale on October 20, 1960.

On October 22, 1960, death overtook the defendant Esperidion Presbitero.

Proceedings for the settlement of his estate were commenced in Special Proceedings No. 2936 of
the Court of First Instance of Negros Occidental; and on November 4, 1960, the special
administrator, Ricardo Presbitero, filed an urgent motion, in Case No. 3492, to set aside the writs of
execution, and to order the sheriff to desist from holding the auction sale on the grounds that the
levy on the sugar quotas was invalid because the notice thereof was not registered with the Register
of Deeds, as for real property, and that the writs, being for sums of money, are unenforceable since
Esperidion Presbitero died on October 22, 1960, and, therefore, could only be enforced as a money
claim against his estate.

This urgent motion was heard on November 5, 1960, but the auction sale proceeded on the same
date, ending in the plaintiff's putting up the highest bid for P34,970.11; thus, the sheriff sold 21,640
piculs of sugar quota to her.

On November 10, 1960, plaintiff Nava filed her opposition to Presbitero's urgent motion of November
4, 1960; the latter filed on May 4, 1961 a supplement to his urgent motion; and on May 8 and 23,
1961, the court continued hearings on the motion, and ultimately denied it on November 18, 1961.

On January 11, 1962, plaintiff Nava also filed an urgent motion to order the Ma-ao Sugar Central to
register the sugar quotas in her name and to deliver the rentals of these quotas corresponding to the
crop year 1960-61 and succeeding years to her. The court granted this motion in its order dated
February 3, 1962. A motion for reconsideration by Presbitero was denied in a subsequent order
under date of March 5, 1962. Wherefore, Presbitero instituted the present proceedings for certiorari.

A preliminary restraining writ was thereafter issued by the court against the respondents from
implementing the aforesaid orders of the respondent Judge, dated February 3, 1960 and March 5,
1962, respectively. The petition further seeks the setting aside of the sheriff's certificate of sale of the
sugar quotas made out in favor of Helen Caram Nava, and that she be directed to file the judgment
credit in her favor in Civil Case No. 3492 as a money claim in the proceedings to settle the Estate of
Esperidion Presbitero.

The petitioner denies having been personally served with notice of the garnishment of the sugar
quotas, but this disclaimer cannot be seriously considered since it appears that he was sent a copy
of the notice through the chief of police of Valladolid on June 21, 1960, as certified to by the sheriff,
and that he had actual knowledge of the garnishment, as shown by his motion of November 4, 1960
to set aside the writs of execution and to order the sheriff to desist from holding the auction sale.
Squarely at issue in this case is whether sugar quotas are real (immovable) or personal properties. If
they be realty, then the levy upon them by the sheriff is null and void for lack of compliance with the
procedure prescribed in Section 14, Rule 39, in relation with Section 7, Rule 59, of the Rules of
Court requiring "the filing with the register of deeds a copy of the orders together with a description
of the property . . . ."

In contending that sugar quotas are personal property, the respondent, Helen Caram Nava, invoked
the test formulated by Manresa (3 Manresa, 6th Ed. 43), and opined that sugar quotas can be
carried from place to place without injury to the land to which they are attached, and are not one of
those included in Article 415 of the Civil Code; and not being thus included, they fall under the
category of personal properties:

ART. 416. The following are deemed to be personal property:

xxx xxx xxx

4. In general, all things which can be transported from place to place without impairment of
the real property to which they are fixed.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1wph1.t

Respondent likewise points to evidence she submitted that sugar quotas are, in fact, transferred
apart from the plantations to which they are attached, without impairing, destroying, or diminishing
the potentiality of either quota or plantation. She was sustained by the lower court when it stated that
"it is a matter of public knowledge and it is universal practice in this province, whose principal
industry is sugar, to transfer by sale, lease, or otherwise, sugar quota allocations from one plantation
to any other" and that it is "specious to insist that quotas are improvements attaching to one
plantation when in truth and in fact they are no longer attached thereto for having been sold or
leased away to be used in another plantation". Respondent would add weight to her argument by
invoking the role that sugar quotas play in our modern social and economic life, and cites that the
Sugar Office does not require any registration with the Register of Deeds for the validity of the sale
of these quotas; and, in fact, those here in question were not noted down in the certificate of title of
the land to which they pertain; and that Ricardo Presbitero had leased sugar quotas independently
of the land. The respondent cites further that the U.S.-Philippine Trade Relations Act, approved by
the United States Congress in 1946, limiting the production of unrefined sugar in the Philippines did
not allocate the quotas for said unrefined sugar among lands planted to sugarcane but among "the
sugar producing mills and plantation OWNERS", and for this reason Section 3 of Executive Order
No. 873, issued by Governor General Murphy, authorizes the lifting of sugar allotments from one
land to another by means only of notarized deeds.

While respondent's arguments are thought-provoking, they cannot stand against the positive
mandate of the pertinent statute. The Sugar Limitation Law (Act 4166, as amended) provides

SEC. 9. The allotment corresponding to each piece of land under the provisions of this Act
shall be deemed to be an improvement attaching to the land entitled thereto ....

and Republic Act No. 1825 similarly provides

SEC. 4. The production allowance or quotas corresponding to each piece of land under the
provisions of this Act shall be deemed to be an improvement attaching to the land entitled thereto ....
And Executive Order No. 873 defines "plantation" as follows:

(a) The term 'plantation' means any specific area of land under sole or undivided ownership
to which is attached an allotment of centrifugal sugar.

Thus, under express provisions of law, the sugar quota allocations are accessories to land, and can
not have independent existence away from a plantation, although the latter may vary. Indeed, this
Court held in the case ofAbelarde vs. Lopez, 74 Phil. 344, that even if a contract of sale
of haciendas omitted "the right, title, interest, participation, action (and) rent" which the grantors had
or might have in relation to the parcels of land sold, the sale would include the quotas, it being
provided in Section 9, Act 4166, that the allotment is deemed an improvement attached to the land,
and that at the time the contract of sale was signed the land devoted to sugar were practically of no
use without the sugar allotment.

As an improvement attached to land, by express provision of law, though not physically so united,
the sugar quotas are inseparable therefrom, just like servitudes and other real rights over an
immovable. Article 415 of the Civil Code, in enumerating what are immovable properties, names

10. Contracts for public works, and servitudes and other real rights over immovable property.
(Emphasis supplied)

It is by law, therefore, that these properties are immovable or real, Article 416 of the Civil Code being
made to apply only when the thing (res) sought to be classified is not included in Article 415.

The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th Congress) allows transfers
of sugar quotas does not militate against their immovability. Neither does the fact that the Sugar
Quota Office does not require registration of sales of quotas with the Register of Deeds for their
validity, nor the fact that allocation of unrefined sugar quotas is not made among lands planted to
sugarcane but among "the sugar producing mills and plantation OWNERS", since the lease or sale
of quotas are voluntary transactions, the regime of which, is not necessarily identical
to involuntary transfers or levies; and there cannot be a sugar plantation owner without land to which
the quota is attached; and there can exist no quota without there being first a corresponding
plantation.

Since the levy is invalid for non-compliance with law, it is impertinent to discuss the survival or non-
survival of claims after the death of the judgment debtor, gauged from the moment of actual levy.
Suffice it to state that, as the case presently stands, the writs of execution are not in question, but
the levy on the quotas, and, because of its invalidity, the levy amount to no levy at all. Neither is it
necessary, or desirable, to pass upon the conscionableness or unconscionableness of the amount
produced in the auction sale as compared with the actual value of the quotas inasmuch as the sale
must necessarily be also illegal.

As to the remedial issue that the respondents have presented: that certiorari does not lie in this case
because the petitioner had a remedy in the lower court to "suspend" the auction sale, but did not
avail thereof, it may be stated that the latter's urgent motion of November 4, 1960, a day before the
scheduled sale (though unresolved by the court on time), did ask for desistance from holding the
sale.

WHEREFORE, the preliminary injunction heretofore granted is hereby made permanent, and the
sheriff's certificate of sale of the sugar quotas in question declared null and void. Costs against
respondent Nava.
Bengzon, C.J., Padilla, Labrador, Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-15334 January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON

CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.

Assistant City Attorney Jaime R. Agloro for petitioners.

Ross, Selph and Carrascoso for respondent.

PAREDES, J.:

From the stipulation of facts and evidence adduced during the hearing, the following appear:

On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the
Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street
railway and electric light, heat and power system in the City of Manila and its suburbs to the person
or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on
March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved on
March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and
owner of the franchise.

Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna
and is transmitted to the City of Manila by means of electric transmission wires, running from the
province of Laguna to the said City. These electric transmission wires which carry high voltage
current, are fastened to insulators attached on steel towers constructed by respondent at intervals,
from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco
has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of
one of these steel towers is attached to the petition for review, marked Annex A. Three steel towers
were inspected by the lower court and parties and the following were the descriptions given there of
by said court:

The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The
findings were as follows: the ground around one of the four posts was excavated to a depth
of about eight (8) feet, with an opening of about one (1) meter in diameter, decreased to
about a quarter of a meter as it we deeper until it reached the bottom of the post; at the
bottom of the post were two parallel steel bars attached to the leg means of bolts; the tower
proper was attached to the leg three bolts; with two cross metals to prevent mobility; there
was no concrete foundation but there was adobe stone underneath; as the bottom of the
excavation was covered with water about three inches high, it could not be determined with
certainty to whether said adobe stone was placed purposely or not, as the place abounds
with this kind of stone; and the tower carried five high voltage wires without cover or any
insulating materials.
 The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land
owned by the petitioner approximate more than one kilometer from the first tower. As in the
first tower, the ground around one of the four legs was excavate from seven to eight (8) feet
deep and one and a half (1-) meters wide. There being very little water at the bottom, it
was seen that there was no concrete foundation, but there soft adobe beneath. The leg was
likewise provided with two parallel steel bars bolted to a square metal frame also bolted to
each corner. Like the first one, the second tower is made up of metal rods joined together by
means of bolts, so that by unscrewing the bolts, the tower could be dismantled and
reassembled.

The third tower examined is located along Kamias Road, Quezon City. As in the first two
towers given above, the ground around the two legs of the third tower was excavated to a
depth about two or three inches beyond the outside level of the steel bar foundation. It was
found that there was no concrete foundation. Like the two previous ones, the bottom
arrangement of the legs thereof were found to be resting on soft adobe, which, probably due
to high humidity, looks like mud or clay. It was also found that the square metal frame
supporting the legs were not attached to any material or foundation.

On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers
for real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's
petition to cancel these declarations, an appeal was taken by respondent to the Board of
Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86
as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid the
amount under protest, and filed a petition for review in the Court of Tax Appeals (CTA for short)
which rendered a decision on December 29, 1958, ordering the cancellation of the said tax
declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of
P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant
petition for review was filed.

In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term
"poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise;
(2) the steel towers are personal properties and are not subject to real property tax; and (3) the City
Treasurer of Quezon City is held responsible for the refund of the amount paid. These are assigned
as errors by the petitioner in the brief.

The tax exemption privilege of the petitioner is quoted hereunder:

PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings,
plant (not including poles, wires, transformers, and insulators), machinery and personal
property as other persons are or may be hereafter required by law to pay ... Said percentage
shall be due and payable at the time stated in paragraph nineteen of Part One hereof, ... and
shall be in lieu of all taxes and assessments of whatsoever nature and by whatsoever
authority upon the privileges, earnings, income, franchise, and poles, wires, transformers,
and insulators of the grantee from which taxes and assessments the grantee is hereby
expressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's Franchise; emphasis
supplied.)

The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as
typically the stem of a small tree stripped of its branches; also by extension, a similar typically
cylindrical piece or object of metal or the like". The term also refers to "an upright standard to the top
of which something is affixed or by which something is supported; as a dovecote set on a pole;
telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New International
Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen cylindrical metal
poles, cubical concrete poles, and poles of the PLDT Co. which are made of two steel bars joined
together by an interlacing metal rod. They are called "poles" notwithstanding the fact that they are no
made of wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" for
which exemption is granted, is not determined by their place or location, nor by the character of the
electric current it carries, nor the material or form of which it is made, but the use to which they are
dedicated. In accordance with the definitions, pole is not restricted to a long cylindrical piece of wood
or metal, but includes "upright standards to the top of which something is affixed or by which
something is supported. As heretofore described, respondent's steel supports consists of a
framework of four steel bars or strips which are bound by steel cross-arms atop of which are cross-
arms supporting five high voltage transmission wires (See Annex A) and their sole function is to
support or carry such wires.

The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not
a novelty. Several courts of last resort in the United States have called these steel supports "steel
towers", and they denominated these supports or towers, as electric poles. In their decisions the
words "towers" and "poles" were used interchangeably, and it is well understood in that jurisdiction
that a transmission tower or pole means the same thing.

In a proceeding to condemn land for the use of electric power wires, in which the law provided that
wires shall be constructed upon suitable poles, this term was construed to mean either wood or
metal poles and in view of the land being subject to overflow, and the necessary carrying of
numerous wires and the distance between poles, the statute was interpreted to
include towers or poles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and
Phrases, p. 365.)

The term "poles" was also used to denominate the steel supports or towers used by an association
used to convey its electric power furnished to subscribers and members, constructed for the purpose
of fastening high voltage and dangerous electric wires alongside public highways. The steel supports
or towers were made of iron or other metals consisting of two pieces running from the ground up
some thirty feet high, being wider at the bottom than at the top, the said two metal pieces being
connected with criss-cross iron running from the bottom to the top, constructed like ladders and
loaded with high voltage electricity. In form and structure, they are like the steel towers in question.
(Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)

The term "poles" was used to denote the steel towers of an electric company engaged in the
generation of hydro-electric power generated from its plant to the Tower of Oxford and City of
Waterbury. These steel towers are about 15 feet square at the base and extended to a height of
about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of
which extends above the surface of the soil in the tower of Oxford, and to the towers are attached
insulators, arms, and other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).

In a case, the defendant admitted that the structure on which a certain person met his death was
built for the purpose of supporting a transmission wire used for carrying high-tension electric power,
but claimed that the steel towers on which it is carried were so large that their wire took their
structure out of the definition of a pole line. It was held that in defining the word pole, one should not
be governed by the wire or material of the support used, but was considering the danger from any
elevated wire carrying electric current, and that regardless of the size or material wire of its individual
members, any continuous series of structures intended and used solely or primarily for the purpose
of supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper Co. v.
Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the
petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the
very object for which the franchise was granted. The poles as contemplated thereon, should be
understood and taken as a part of the electric power system of the respondent Meralco, for the
conveyance of electric current from the source thereof to its consumers. If the respondent would be
required to employ "wooden poles", or "rounded poles" as it used to do fifty years back, then one
should admit that the Philippines is one century behind the age of space. It should also be conceded
by now that steel towers, like the ones in question, for obvious reasons, can better effectuate the
purpose for which the respondent's franchise was granted.

Granting for the purpose of argument that the steel supports or towers in question are not embraced
within the term poles, the logical question posited is whether they constitute real properties, so that
they can be subject to a real property tax. The tax law does not provide for a definition of real
property; but Article 415 of the Civil Code does, by stating the following are immovable property:

(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;

xxx xxx xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or works which may be carried in a building or on a piece of land,
and which tends directly to meet the needs of the said industry or works;

xxx xxx xxx

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1,
because they do not constitute buildings or constructions adhered to the soil. They are not
construction analogous to buildings nor adhering to the soil. As per description, given by the lower
court, they are removable and merely attached to a square metal frame by means of bolts, which
when unscrewed could easily be dismantled and moved from place to place. They can not be
included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they
can be separated without breaking the material or causing deterioration upon the object to which
they are attached. Each of these steel towers or supports consists of steel bars or metal strips,
joined together by means of bolts, which can be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel towers or supports do not also fall under paragraph
5, for they are not machineries, receptacles, instruments or implements, and even if they were, they
are not intended for industry or works on the land. Petitioner is not engaged in an industry or works
in the land in which the steel supports or towers are constructed.

It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the
sum of P11,651.86, despite the fact that Quezon City is not a party to the case. It is argued that as
the City Treasurer is not the real party in interest, but Quezon City, which was not a party to the suit,
notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. This
question has not been raised in the court below, and, therefore, it cannot be properly raised for the
first time on appeal. The herein petitioner is indulging in legal technicalities and niceties which do not
help him any; for factually, it was he (City Treasurer) whom had insisted that respondent herein pay
the real estate taxes, which respondent paid under protest. Having acted in his official capacity as
City Treasurer of Quezon City, he would surely know what to do, under the circumstances.

IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala,
JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-47943 May 31, 1982

MANILA ELECTRIC COMPANY, petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF
BATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:

This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila
Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc.
The tanks are within the Caltex refinery compound. They have a total capacity of 566,000 barrels.
They are used for storing fuel oil for Meralco's power plants.

According to Meralco, the storage tanks are made of steel plates welded and assembled on the
spot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer, a
sand pad as the intermediate layer and a two-inch thick bituminous asphalt stratum as the top layer.
The bottom of each tank is in contact with the asphalt layer,

The steel sides of the tank are directly supported underneath by a circular wall made of concrete,
eighteen inches thick, to prevent the tank from sliding. Hence, according to Meralco, the tank is not
attached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate
is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits
on its foundation. Each empty tank can be floated by flooding its dike-inclosed location with water
four feet deep. (pp. 29-30, Rollo.)
On the other hand, according to the hearing commissioners of the Central Board of Assessment
Appeals, the area where the two tanks are located is enclosed with earthen dikes with electric steel
poles on top thereof and is divided into two parts as the site of each tank. The foundation of the
tanks is elevated from the remaining area. On both sides of the earthen dikes are two separate
concrete steps leading to the foundation of each tank.

Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick.
Pipelines were installed on the sides of each tank and are connected to the pipelines of the Manila
Enterprises Industrial Corporation whose buildings and pumping station are near Tank No. 2.

The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the
walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the
pipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the municipal treasurer of Bauan,
Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to pay
realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and penalties
amounted to P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as
a condition for entertaining its appeal from the adverse decision of the Batangas board of
assessment appeals.

The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M.
Almanzor as chairman and Secretary of Justice Vicente Abad Santos and Secretary of Local
Government and Community Development Jose Roo as members) in its decision dated November
5, 1976 ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and other
appurtenances constitute taxable improvements.

Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion
for reconsideration which the Board denied in its resolution of November 25, 1977, a copy of which
was received by Meralco on February 28, 1978.

On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision
and resolution. It contends that the Board acted without jurisdiction and committed a grave error of
law in holding that its storage tanks are taxable real property.

Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property
enumerated in article 415 of the Civil Code and, therefore, they cannot be categorized as realty by
nature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks are
not attached to the land and that they were placed on leased land, not on the land owned by
Meralco.

This is one of those highly controversial, borderline or penumbral cases on the classification of
property where strong divergent opinions are inevitable. The issue raised by Meralco has to be
resolved in the light of the provisions of the Assessment Law, Commonwealth Act No. 470, and the
Real Property Tax Code, Presidential Decree No. 464 which took effect on June 1, 1974.

Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land,
buildings, machinery, and other improvements" not specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the Real Property Tax Code which provides:

Sec. 38. Incidence of Real Property Tax. They shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted.
The Code contains the following definition in its section 3:

k) Improvements is a valuable addition made to property or an amelioration in its

condition, amounting to more than mere repairs or replacement of waste, costing
labor or capital and intended to enhance its value, beauty or utility or to adapt it for
new or further purposes.

We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be
considered as improvements on the land, enhancing its utility and rendering it useful to the oil
industry. It is undeniable that the two tanks have been installed with some degree of permanence as
receptacles for the considerable quantities of oil needed by Meralco for its operations.

Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City,
15 Atl. 2nd 271.

For purposes of taxation, the term "real property" may include things which should generally be
regarded as personal property(84 C.J.S. 171, Note 8). It is a familiar phenomenon to see things
classed as real property for purposes of taxation which on general principle might be considered
personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein
Meralco's steel towers were held not to be subject to realty tax, is not in point because in that case
the steel towers were regarded as poles and under its franchise Meralco's poles are exempt from
taxation. Moreover, the steel towers were not attached to any land or building. They were removable
from their metal frames.

Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil.
501, where the tools and equipment in the repair, carpentry and blacksmith shops of a transportation
company were held not subject to realty tax because they were personal property.

WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution are
affirmed. No costs.

SO ORDERED.

Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.

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

Justice Abad Santos, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-40411 August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,
vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.

Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.

MALCOLM, J.:

The issue in this case, as announced in the opening sentence of the decision in the trial court and as
set forth by counsel for the parties on appeal, involves the determination of the nature of the
properties described in the complaint. The trial judge found that those properties were personal in
nature, and as a consequence absolved the defendants from the complaint, with costs against the
plaintiff.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the
Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of
Davao, Province of Davao. However, the land upon which the business was conducted belonged to
another person. On the land the sawmill company erected a building which housed the machinery
used by it. Some of the implements thus used were clearly personal property, the conflict concerning
machines which were placed and mounted on foundations of cement. In the contract of lease
between the sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings
introduced and erected by the party of the second part shall pass to the exclusive ownership
of the party of the first part without any obligation on its part to pay any amount for said
improvements and buildings; also, in the event the party of the second part should leave or
abandon the land leased before the time herein stipulated, the improvements and buildings
shall likewise pass to the ownership of the party of the first part as though the time agreed
upon had expired: Provided, however, That the machineries and accessories are not
included in the improvements which will pass to the party of the first part on the expiration or
abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw,
Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action
against the defendant in that action; a writ of execution issued thereon, and the properties now in
question were levied upon as personalty by the sheriff. No third party claim was filed for such
properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein.
Indeed the bidder, which was the plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession of the machinery and other properties
described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has
on a number of occasions treated the machinery as personal property by executing chattel
mortgages in favor of third persons. One of such persons is the appellee by assignment from the
original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property
consists of

1. Land, buildings, roads and constructions of all kinds adhering to the soil;
 xxx xxx xxx

5. Machinery, liquid containers, instruments or implements intended by the owner of any

building or land for use in connection with any industry or trade being carried on therein and
which are expressly adapted to meet the requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain
no doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing
from the facts.

In the first place, it must again be pointed out that the appellant should have registered its protest
before or at the time of the sale of this property. It must further be pointed out that while not
conclusive, the characterization of the property as chattels by the appellant is indicative of intention
and impresses upon the property the character determined by the parties. In this connection the
decision of this court in the case of Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil.,
630), whether obiter dicta or not, furnishes the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues.
It is machinery which is involved; moreover, machinery not intended by the owner of any building or
land for use in connection therewith, but intended by a lessee for use in a building erected on the
land by the latter to be returned to the lessee on the expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme
Court, it was held that machinery which is movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a
usufructuary, or any person having only a temporary right, unless such person acted as the agent of
the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well
known, it was in part said:

To determine this question involves fixing the nature and character of the property from the
point of view of the rights of Valdes and its nature and character from the point of view of
Nevers & Callaghan as a judgment creditor of the Altagracia Company and the rights derived
by them from the execution levied on the machinery placed by the corporation in the plant.
Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not
only land and buildings, but also attributes immovability in some cases to property of a
movable nature, that is, personal property, because of the destination to which it is applied.
"Things," says section 334 of the Porto Rican Code, "may be immovable either by their own
nature or by their destination or the object to which they are applicable." Numerous
illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery,
vessels, instruments or implements intended by the owner of the tenements for the industrial
or works that they may carry on in any building or upon any land and which tend directly to
meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq.
to and inclusive of article 534, recapitulating the things which, though in themselves
movable, may be immobilized.) So far as the subject-matter with which we are dealing
machinery placed in the plant it is plain, both under the provisions of the Porto Rican Law
and of the Code Napoleon, that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant. Such result would
not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a
usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203;
Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in
Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as
pointed out by Demolombe, upon the fact that one only having a temporary right to the
 possession or enjoyment of property is not presumed by the law to have applied movable
property belonging to him so as to deprive him of it by causing it by an act of immobilization
to become the property of another. It follows that abstractly speaking the machinery put by
the Altagracia Company in the plant belonging to Sanchez did not lose its character of
movable property and become immovable by destination. But in the concrete immobilization
took place because of the express provisions of the lease under which the Altagracia held,
since the lease in substance required the putting in of improved machinery, deprived the
tenant of any right to charge against the lessor the cost such machinery, and it was
expressly stipulated that the machinery so put in should become a part of the plant belonging
to the owner without compensation to the lessee. Under such conditions the tenant in putting
in the machinery was acting but as the agent of the owner in compliance with the obligations
resting upon him, and the immobilization of the machinery which resulted arose in legal
effect from the act of the owner in giving by contract a permanent destination to the
machinery.

xxx xxx xxx

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the
plant by the Altagracia Company, being, as regards Nevers & Callaghan, movable property,
it follows that they had the right to levy on it under the execution upon the judgment in their
favor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes,
since as to him the property was a part of the realty which, as the result of his obligations
under the lease, he could not, for the purpose of collecting his debt, proceed separately
against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)

Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of
this instance to be paid by the appellant.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

FIRST DIVISION

[G.R. No. 156295. September 23, 2003]

MARCELO R. SORIANO, petitioner, vs. SPOUSES RICARDO and ROSALINA

GALIT, respondents.

DECISION
YNARES-SANTIAGO, J.:

Petitioner was issued a writ of possession in Civil Case No. 6643 [1] for Sum of Money by the
Regional Trial Court of Balanga, Bataan, Branch 1. The writ of possession was, however, nullified by
the Court of Appeals in CA-G.R. SP No. 65891[2] because it included a parcel of land which was not
among those explicitly enumerated in the Certificate of Sale issued by the Deputy Sheriff, but on which
stand the immovables covered by the said Certificate. Petitioner contends that the sale of
these immovables necessarily encompasses the land on which they stand.
Dissatisfied, petitioner filed the instant petition for review on certiorari.
Respondent Ricardo Galit contracted a loan from petitioner Marcelo Soriano, in the total sum of
P480,000.00, evidenced by four promissory notes in the amount of P120,000.00 each datedAugust 2,
1996;[3] August 15, 1996;[4] September 4, 1996[5] and September 14, 1996.[6] This loan was secured
by a real estate mortgage over a parcel of land covered by Original Certificate of Title No. 569.[7] After
he failed to pay his obligation, Soriano filed a complaint for sum of money against him with
the Regional Trial Court of Balanga City, Branch 1, which was docketed as Civil Case No. 6643.[8]
Respondents, the Spouses Ricardo and Rosalina Galit, failed to file their answer. Hence, upon
motion of Marcelo Soriano, the trial court declared the spouses in default and proceeded to receive
evidence for petitioner Soriano ex parte.
On July 7, 1997, the Regional Trial Court of Balanga City, Branch 1 rendered judgment[9] in favor
of petitioner Soriano, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant
ordering the latter to pay:

1. the plaintiff the amount of P350,000.00 plus 12% interest to be computed from the
dates of maturity of the promissory notes until the same are fully paid;

2. the plaintiff P20,000.00, as attorneys fees; and

3. the costs of suit.

SO ORDERED.[10]

The judgment became final and executory. Accordingly, the trial court issued a writ of execution
in due course, by virtue of which, Deputy Sheriff Renato E. Robles levied on the following real
properties of the Galit spouses:

1. A parcel of land covered by Original Certificate of Title No. T-569 (Homestead Patent
No. 14692) situated in the Bo. of Tapulac, Orani, Bataan. Bounded on the SW, along
line 1-2 by Lot No. 3, Cad. 145; containing an area of THIRTY FIVE THOUSAND
SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or less x x x;

2. STORE/HOUSE CONSTRUCTED on Lot No. 1103 made of strong materials G.I.

roofing situated at Centro I, Orani, Bataan, x x x containing an area of 30 sq. meters,
more or less x x x (constructed on TCT No. T40785);

3. BODEGA constructed on Lot 1103, made of strong materials, G.I. roofing, situated
in Centro I, Orani, Bataan, x x x with a floor area of 42.75 sq. m. more or less
x x x.[11]

At the sale of the above-enumerated properties at public auction held on December 23, 1998,
petitioner was the highest and only bidder with a bid price of P483,000.00. Accordingly, onFebruary
4, 1999, Deputy Sheriff Robles issued a Certificate of Sale of Execution of Real Property, [12] which
reads:
 CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY

TO ALL WHO MAY SEE THESE PRESENTS:

GREETINGS:

I HEREBY that (sic) by virtue of the writ of execution dated October 16, 1998, issued in the above-
entitled case by the HON. BENJAMIN T. VIANZON, ordering the Provincial Sheriff of Bataan or her
authorized Deputy Sheriff to cause to be made (sic) the sum of P350,000.00 plus 12% interest to be
computed from the date of maturity of the promissory notes until the same are fully paid; P20,000.00
as attorneys fees plus legal expenses in the implementation of the writ of execution, the
undersigned Deputy Sheriff sold at public auction on December 23, 1998 the rights and interests of
defendants Sps. Ricardo and Rosalina Galit, to the plaintiff Marcelo Soriano, the highest and only
bidder for the amount of FOUR HNDRED EIGHTY THREE THOUSAND PESOS (P483,000.00,
Philippine Currency), the following real estate properties more particularly described as follows :

ORIGINAL CERTIFICATE OF TITLE NO. T-569

A parcel of land (Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani, Bataan,
x x x. Bounded on the SW., along line 1-2 by Lot No. 3, Cad. 145, containing an area of THIRTY
FIVE THOUSAND SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or less x x x

TAX DEC. NO. PROPERTY INDEX NO. 018-09-001-02

STOREHOUSE constructed on Lot 1103, made of strong materials G.I. roofing situated at Centro
I, Orani, Bataan x x x containing an area of 30 sq. meters, more or less x x (constructed on TCT No.
40785)

TAX DEC. NO. 86 PROPERTY INDEX No. 018-09-001-02

BODEGA constructed on Lot 1103, made of strong materials G.I. roofing situated in Centro
I, Orani, Bataan, x x x with a floor area of 42.75 sq. m. more or less x x x

IT IS FURTHER CERTIFIED, that the aforesaid highest and lone bidder, Marcelo Soriano, being the
plaintiff did not pay to the Provincial Sheriff of Bataan the amount of P483,000.00, the sale price of
the above-described property which amount was credited to partial/full satisfaction of the judgment
embodied in the writ of execution.

The period of redemption of the above described real properties together with all the improvements
thereon will expire One (1) year from and after the registration of this Certificate of Sale with the
Register of Deeds.

This Certificate of Sheriffs Sale is issued to the highest and lone bidder, Marcelo Soriano, under
guarantees prescribed by law.

Balanga, Bataan, February 4, 1999.

On April 23, 1999, petitioner caused the registration of the Certificate of Sale on Execution of
Real Property with the Registry of Deeds.
 The said Certificate of Sale registered with the Register of Deeds includes at the dorsal portion
thereof the following entry, not found in the Certificate of Sale on file with Deputy Sheriff RenatoE.
Robles:[13]

ORIGINAL CERTIFICATE OF TITLE NO. T-40785

A parcel of land (Lot No. 1103 of the Cadastral Survey of Orani) , with the improvements thereon,
situated in the Municipality of Orani, Bounded on the NE; by Calle P. Gomez; on the E. by Lot No.
1104; on the SE byCalle Washington; and on the W. by Lot 4102, containing an area of ONE
HUNDRED THIRTY NINE (139) SQUARE METERS, more or less. All points referred to are
indicated on the plan; bearing true; declination 0 deg. 40E., date of survey, February 191-March
1920.

On February 23, 2001, ten months from the time the Certificate of Sale on Execution was
registered with the Registry of Deeds, petitioner moved[14] for the issuance of a writ of possession. He
averred that the one-year period of redemption had elapsed without the respondents having redeemed
the properties sold at public auction; thus, the sale of said properties had already become final. He
also argued that after the lapse of the redemption period, the titles to the properties should be
considered, for all legal intents and purposes, in his name and favor.[15]
On June 4, 2001, the Regional Trial Court of Balanga City, Branch 1 granted the motion for
issuance of writ of possession.[16] Subsequently, on July 18, 2001, a writ of possession[17] was issued
in petitioners favor which reads:

WRIT OF POSSESSION

Mr. Renato E. Robles

Deputy Sheriff
RTC, Br. 1, Balanga City

Greetings :

WHEREAS on February 3, 2001, the counsel for plaintiff filed Motion for the Issuance of Writ of
Possession;

WHEREAS on June 4, 2001, this court issued an order granting the issuance of the Writ of
Possession;

WHEREFORE, you are hereby commanded to place the herein plaintiff Marcelo Soriano in
possession of the property involved in this case situated (sic) more particularly described as:

1. STORE HOUSE constructed on Lot No. 1103 situated at Centro

1, Orani, Bataan covered by TCT No. 40785;

2. BODEGA constructed on Lot No. 1103 with an area of 42.75 square meters under
Tax Declaration No. 86 situated at Centro 1, Orani, Bataan;

3. Original Certificate of Title No. 40785 with an area of 134 square meters known as
Lot No. 1103 of the Cadastral Survey of Orani
against the mortgagor/former owners Sps. Ricardo and Rosalinda (sic) Galit, her (sic) heirs,
successors, assigns and all persons claiming rights and interests adverse to the petitioner and make
a return of this writ every thirty (30) days from receipt hereof together with all the proceedings
thereon until the same has been fully satisfied.

WITNESS THE HONORABLE BENJAMIN T. VIANZON, Presiding Judge, this 18th day of July 2001,
at Balanga City.

(Sgd) GILBERT S.
ARGONZA
OI
C
Respondents filed a petition for certiorari with the Court of Appeals, which was docketed as CA-
G.R. SP No. 65891, assailing the inclusion of the parcel of land covered by Transfer Certificate of Title
No. T-40785 among the list of real properties in the writ of possession.[18] Respondents argued that
said property was not among those sold on execution by Deputy SheriffRenato E. Robles as reflected
in the Certificate of Sale on Execution of Real Property.
In opposition, petitioner prayed for the dismissal of the petition because respondent spouses
failed to move for the reconsideration of the assailed order prior to the filing of the petition. Moreover,
the proper remedy against the assailed order of the trial court is an appeal, or a motion to quash the
writ of possession.
On May 13, 2002, the Court of Appeals rendered judgment as follows:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the writ of possession issued
by the Regional Trial Court of Balanga City, Branch 1, on 18 July 2001 is declared NULL and VOID.

In the event that the questioned writ of possession has already been implemented, the Deputy
Sheriff of the Regional Trial Court of Balanga City, Branch 1, and private respondent
Marcelo Soriano are hereby ordered to cause the redelivery of Transfer Certificate of Title No. T-
40785 to the petitioners.

SO ORDERED.[19]

Aggrieved, petitioner now comes to this Court maintaining that

1.) THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 IS NOT THE
PLAIN, SPEEDY AND ADEQUATE REMEDY OF THE RESPONDENTS IN
ASSAILING THE WRIT OF POSSESSION ISSUED BY THE LOWER COURT BUT
THERE WERE STILL OTHER REMEDIES AVAILABLE TO THEM AND WHICH
WERE NOT RESORTED TO LIKE THE FILING OF A MOTION FOR
RECONSIDERATION OR MOTION TO QUASH OR EVEN APPEAL.

2.) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARAING

THE CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY AS NULL
AND VOID AND SUBSEQUENTLY THE WRIT OF POSSESSION BECAUSE THE
SAME IS A PUBLIC DOCUMENT WHICH ENJOYS THE PRESUMPTION OF
REGULARITY AND IT CANNOT BE OVERCOME BY A MERE STRANGE FEELING
THAT SOMETHING IS AMISS ON ITS SURFACE SIMPLY BECAUSE THE
TYPEWRITTEN WORDS ON THE FRONT PAGE AND AT THE DORSAL PORTION
THEREOF IS DIFFERENT OR THAT IT IS UNLIKELY FOR THE SHERIFF TO USE
 THE DORSAL PORTION OF THE FIRST PAGE BECAUSE THE SECOND PAGE IS
MERELY HALF FILLED AND THE NOTATION ON THE DORSAL PORTION
COULD STILL BE MADE AT THE SECOND PAGE.

On the first ground, petitioner contends that respondents were not without remedy before the trial
court. He points out that respondents could have filed a motion for reconsideration of the Order
dated June 4, 1999, but they did not do so. Respondents could also have filed an appeal but they,
likewise, did not do so. When the writ of possession was issued, respondents could have filed a
motion to quash the writ. Again they did not. Respondents cannot now avail of the special civil action
for certiorari as a substitute for these remedies. They should suffer the consequences for sleeping on
their rights.
We disagree.
Concededly, those who seek to avail of the procedural remedies provided by the rules must
adhere to the requirements thereof, failing which the right to do so is lost. It is, however, equally settled
that the Rules of Court seek to eliminate undue reliance on technical rules and to make litigation as
inexpensive as practicable and as convenient as can be done.[20] This is in accordance with the
primary purpose of the 1997 Rules of Civil Procedure as provided in Rule 1, Section 6, which reads:

Section 6. Construction. These rules shall be liberally construed in order to promote their objective
of securing a just, speedy and inexpensive determination of every action and proceeding.[21]

The rules of procedure are not to be applied in a very rigid, technical sense and are used only to
help secure substantial justice. If a technical and rigid enforcement of the rules is made, their aim
would be defeated.[22] They should be liberally construed so that litigants can have ample opportunity
to prove their claims and thus prevent a denial of justice due to technicalities.[23] Thus, inChina Banking
Corporation v. Members of the Board of Trustees of Home Development Mutual Fund,[24] it was held:

while certiorari as a remedy may not be used as a substitute for an appeal, especially for a lost
appeal, this rule should not be strictly enforced if the petition is genuinely meritorious.[25] It has been
said that where the rigid application of the rules would frustrate substantial justice, or bar the
vindication of a legitimate grievance, the courts are justified in exempting a particular case
from the operation of the rules.[26] (Emphasis ours)

Indeed, well-known is the rule that departures from procedure may be forgiven where they do not
appear to have impaired the substantial rights of the parties.[27] Apropos in this regard
isCometa v. CA,[28] where we said that

There is no question that petitioners were remiss in attending with dispatch to the protection of their
interests as regards the subject lots, and for that reason the case in the lower court was dismissed
on a technicality and no definitive pronouncement on the inadequacy of the price paid for the levied
properties was ever made. In this regard, it bears stressing that procedural rules are not to be
belittled or dismissed simply because their non-observance may have resulted in prejudice to a
partys substantive rights as in this case. Like all rules, they are required to be followed except
when only for the most persuasive of reasons they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed.[29] (emphasis and italics supplied.)

In short, since rules of procedure are mere tools designed to facilitate the attainment of justice,
their strict and rigid application which would result in technicalities that tend to frustrate rather than
promote substantial justice must always be avoided.[30] Technicality should not be allowed to stand in
the way of equitably and completely resolving the rights and obligations of the parties.[31]
 Eschewing, therefore, the procedural objections raised by petitioner, it behooves us to address
the issue of whether or not the questioned writ of possession is in fact a nullity considering that it
includes real property not expressly mentioned in the Certificate of Sale of Real Property.
Petitioner, in sum, dwells on the general proposition that since the certificate of sale is a public
document, it enjoys the presumption of regularity and all entries therein are presumed to be done in
the performance of regular functions.
The argument is not persuasive.
There are actually two (2) copies of the Certificate of Sale on Execution of Real Properties issued
on February 4, 1999 involved, namely: (a) copy which is on file with the deputy sheriff; and (b) copy
registered with the Registry of Deeds. The object of scrutiny, however, is not the copy of the Certificate
of Sale on Execution of Real Properties issued by the deputy sheriff on February 4, 1999,[32] but the
copy thereof subsequently registered by petitioner with the Registry of Deeds on April 23,
1999,[33] which included an entry on the dorsal portion of the first page thereof describing a parcel of
land covered by OCT No. T-40785 not found in the Certificate of Sale of Real Properties on file with
the sheriff.
True, public documents by themselves may be adequate to establish the presumption of their
validity. However, their probative weight must be evaluated not in isolation but in conjunction with other
evidence adduced by the parties in the controversy, much more so in this case where the contents of
a copy thereof subsequently registered for documentation purposes is being contested. No reason
has been offered how and why the questioned entry was subsequently intercalated in the copy of the
certificate of sale subsequently registered with the Registry of Deeds. Absent any satisfactory
explanation as to why said entry was belatedly inserted, the surreptitiousness of its inclusion coupled
with the furtive manner of its intercalation casts serious doubt on the authenticity of petitioners copy
of the Certificate of Sale. Thus, it has been held that while a public document like a notarized deed of
sale is vested with the presumption of regularity, this is not a guarantee of the validity of its contents.[34]
It must be pointed out in this regard that the issuance of a Certificate of Sale is an end result of
judicial foreclosure where statutory requirements are strictly adhered to; where even the slightest
deviations therefrom will invalidate the proceeding[35] and the sale.[36] Among these requirements is an
explicit enumeration and correct description of what properties are to be sold stated in the notice.
The stringence in the observance of these requirements is such that an incorrect title number together
with a correct technical description of the property to be sold and vice versa is deemed a substantial
and fatal error which results in the invalidation of the sale.[37]
The certificate of sale is an accurate record of what properties were actually sold to satisfy the
debt. The strictness in the observance of accuracy and correctness in the description of the properties
renders the enumeration in the certificate exclusive. Thus, subsequently including properties which
have not been explicitly mentioned therein for registration purposes under suspicious circumstances
smacks of fraud. The explanation that the land on which the properties sold is necessarily included
and, hence, was belatedly typed on the dorsal portion of the copy of the certificate subsequently
registered is at best a lame excuse unworthy of belief.
The appellate court correctly observed that there was a marked difference in the appearance of
the typewritten words appearing on the first page of the copy of the Certificate of Sale registered with
the Registry of Deeds[38] and those appearing at the dorsal portion thereof. Underscoring the
irregularity of the intercalation is the clearly devious attempt to let such an insertion pass unnoticed by
typing the same at the back of the first page instead of on the second page which was merely half-
filled and could accommodate the entry with room to spare.
The argument that the land on which the buildings levied upon in execution is necessarily included
is, likewise, tenuous. Article 415 of the Civil Code provides:
ART. 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil.

xxx xxx
xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking them material or deterioration of the object;

(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on
lands by the owner of the immovable in such a manner that it reveals the intention to attach them
permanently to the tenements;

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;

(6) Animal houses, pigeon houses, beehives, fish ponds or breeding places of similar nature, in
case their owner has placed them or preserves them with the intention to have them permanently
attached to the land, and forming a permanent part of it; the animals in these places are also
included;

xxx xxx
xxx

(9) Docks and structures which, though floating, are intended by their nature and object to remain
at a fixed place on a river, lake or coast;

xxx xxx
x x x.
The foregoing provision of the Civil Code enumerates land and buildings separately. This can
only mean that a building is, by itself, considered immovable.[39] Thus, it has been held that

. . . while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the
improvements thereon, buildings, still a building by itself may be mortgaged apart from the land
on which it has been built. Such mortgage would be still a real estate mortgage for the building
would still be considered immovable property even if dealt with separately and apart from the
land.[40] (emphasis and italics supplied)

In this case, considering that what was sold by virtue of the writ of execution issued by the trial
court was merely the storehouse and bodega constructed on the parcel of land covered by Transfer
Certificate of Title No. T-40785, which by themselves are real properties of respondents spouses, the
same should be regarded as separate and distinct from the conveyance of the lot on which they stand.
WHEREFORE, in view of all the foregoing, the petition is hereby DENIED for lack of merit. The
Decision dated May 13, 2002 of the Court of Appeals in CA-G.R. SP No. 65891, which declared the
writ of possession issued by the Regional Trial Court of Balanga City, Branch 1, on July 18, 2001, null
and void, is AFFIRMED in toto.
SO ORDERED.
 Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur.
Azcuna, J., on leave.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-46245 May 31, 1982

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF
LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.

AQUINO, J.:

In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision
of the Central Board of Assessment Appeals (composed of the Secretary of Finance as chairman
and the Secretaries of Justice and Local Government and Community Development as members)
dated May 6, 1976, holding that Meralco Securities' oil pipeline is subject to realty tax.

The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of 1949,
Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system
consisting of cylindrical steel pipes joined together and buried not less than one meter below the
surface along the shoulder of the public highway. The portion passing through Laguna is about thirty
kilometers long.

The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a
maximum capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen inches
by forty-eight feet with a maximum capacity of 100,000 barrels daily.

The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude
breakage or damage thereto and prevent leakage or seepage of the oil. The valves are welded to
the pipes so as to make the pipeline system one single piece of property from end to end.

In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut
by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground where
they are buried. In points where the pipeline traversed rivers or creeks, the pipes were laid beneath
the bed thereof. Hence, the pipes are permanently attached to the land.

However, Meralco Securities notes that segments of the pipeline can be moved from one place to
another as shown in the permit issued by the Secretary of Public Works and Communications which
permit provides that the government reserves the right to require the removal or transfer of the pipes
by and at the concessionaire's expense should they be affected by any road repair or improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna
treated the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro; 7473-
7478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Bian and 15806-15810, Calamba, containing
the assessed values of portions of the pipeline.

Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna
composed of the register of deeds as chairman and the provincial auditor as member. That board in
its decision of June 18, 1975 upheld the assessments (pp. 47-49, Rollo).

Meralco Securities brought the case to the Central Board of Assessment Appeals. As already stated,
that Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary
of Justice Vicente Abad Santos and Secretary of Local Government and Community Development
Jose Roo as members, ruled that the pipeline is subject to realty tax (p. 40, Rollo).

A copy of that decision was served on Meralco Securities' counsel on August 27, 1976. Section 36 of
the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974,
provides that the Board's decision becomes final and executory after the lapse of fifteen days from
the date of receipt of a copy of the decision by the appellant.

Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals (70
O.G. 10085), a party may ask for the reconsideration of the Board's decision within fifteen days after
receipt. On September 7, 1976 (the eleventh day), Meralco Securities filed its motion for
reconsideration.

Secretary of Finance Cesar Virata and Secretary Roo (Secretary Abad Santos abstained) denied
the motion in a resolution dated December 2, 1976, a copy of which was received by appellant's
counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977, Meralco Securities filed the instant petition
for certiorari.

The Solicitor General contends that certiorari is not proper in this case because the Board acted
within its jurisdiction and did not gravely abuse its discretion and Meralco Securities was not denied
due process of law.

Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to review the
decision of the Central Board of Assessment Appeals and because no judicial review of the Board's
decision is provided for in the Real Property Tax Code, Meralco Securities' recourse is to file a
petition for certiorari.

We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to
an inferior court, board or officer exercising judicial or quasi-judicial functions whereby the record of
a particular case is ordered to be elevated for review and correction in matters of law (14 C.J.S. 121-
122; 14 Am Jur. 2nd 777).

The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying
power in the courts to scrutinize the acts of such agencies on questions of law and jurisdiction even
though no right of review is given by the statute (73 C.J.S. 506, note 56).

"The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect
substantial rights of parties affected by its decisions" (73 C.J.S. 507, See. 165). The review is a part
of the system of checks and balances which is a limitation on the separation of powers and which
forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial
functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative decision is corrupt, arbitrary or capricious (Mafinco Trading
Corporation vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs.
Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56, 60, Mun. Council of Lemery vs. Prov.
Board of Batangas, 56 Phil. 260, 268).

The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor and
the provincial board of assessment appeals that Meralco Securities' pipeline is subject to realty tax,
reasoned out that the pipes are machinery or improvements, as contemplated in the Assessment
Law and the Real Property Tax Code; that they do not fall within the category of property exempt
from realty tax under those laws; that articles 415 and 416 of the Civil Code, defining real and
personal property, have no application to this case; that even under article 415, the steel pipes can
be regarded as realty because they are constructions adhered to the soil and things attached to the
land in a fixed manner and that Meralco Securities is not exempt from realty tax under the Petroleum
Law (pp. 36-40).

Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property
within the meaning of article 415. This contention is not sustainable under the provisions of the
Assessment Law, the Real Property Tax Code and the Civil Code.

Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land,
buildings, machinery, and other improvements" not specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the Real Property Tax Code which provides:

SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted. *

It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of
exempt real property enumerated in section 3 of the Assessment Law and section 40 of the Real
Property Tax Code.

Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids,
gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it the right
to the use of the soil in which it is placed (Note 21[10],54 C.J.S. 561).

Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered to
the soil and everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object.

The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p. 39,
Rollo). It is attached to the land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline.

Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in a
sense machinery within the meaning of the Real Property Tax Code.

It should be borne in mind that what are being characterized as real property are not the steel pipes
but the pipeline system as a whole. Meralco Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller
County Highway, etc., Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red
River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note
86).

The other contention of Meralco Securities is that the Petroleum Law exempts it from the payment of
realty taxes. The alleged exemption is predicated on the following provisions of that law which
exempt Meralco Securities from local taxes and make it liable for taxes of general application:

ART. 102. Work obligations, taxes, royalties not to be changed. Work obligations,
special taxes and royalties which are fixed by the provisions of this Act or by the
concession for any of the kinds of concessions to which this Act relates, are
considered as inherent on such concessions after they are granted, and shall not be
increased or decreased during the life of the concession to which they apply; nor
shall any other special taxes or levies be applied to such concessions, nor shall
0concessionaires under this Act be subject to any provincial, municipal or other local
taxes or levies;nor shall any sales tax be charged on any petroleum produced from
the concession or portion thereof, manufactured by the concessionaire and used in
the working of his concession. All such concessionaires, however, shall be subject
to such taxes as are of general application in addition to taxes and other levies
specifically provided in this Act.

Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general
application. This argument is untenable because the realty tax has always been imposed by the
lawmaking body and later by the President of the Philippines in the exercise of his lawmaking
powers, as shown in section 342 et seq. of the Revised Administrative Code, Act No. 3995,
Commonwealth Act No. 470 and Presidential Decree No. 464.

The realty tax is enforced throughout the Philippines and not merely in a particular municipality or
city but the proceeds of the tax accrue to the province, city, municipality and barrio where the realty
taxed is situated (Sec. 86, P.D. No. 464). In contrast, a local tax is imposed by the municipal or city
council by virtue of the Local Tax Code, Presidential Decree No. 231, which took effect on July 1,
1973 (69 O.G. 6197).

We hold that the Central Board of Assessment Appeals did not act with grave abuse of discretion,
did not commit any error of law and acted within its jurisdiction in sustaining the holding of the
provincial assessor and the local board of assessment appeals that Meralco Securities' pipeline
system in Laguna is subject to realty tax.

WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No
costs.

SO ORDERED.

Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.

Justice Abad Santos, Concepcion, Jr., JJ., took no part.

Footnotes
 * The Real Property Tax Code contains the following definitions in its section 3:

"k) Improvements - is a valuable addition made to property or an amelioration in its

condition, amounting to more than mere repairs or replacement of waste, costing
labor or capital and intended to enhance its value, beauty or utility or to adapt it for
new or further purposes. "

"m) Machinery - shall embrace machines, mechanical contrivances, instruments,

appliances and apparatus attached to the real estate. It includes the physical
facilities available for production, as well as the installations and appurtenant service
facilities, together with all other equipment designed for or essential to its
manufacturing, industrial or agricultural purposes." (See sec. 3[f], Assessment Law).

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 168557 February 16, 2007

FELS ENERGY, INC., Petitioner,

vs.
THE PROVINCE OF BATANGAS and

THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents.

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

G.R. No. 170628 February 16, 2007

NATIONAL POWER CORPORATION, Petitioner,

vs.
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his
capacity as the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS
represented by its Provincial Assessor, Respondents.

DECISION

CALLEJO, SR., J.:

Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which
were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC),
respectively. The first is a petition for review on certiorari assailing the August 25, 2004 Decision1 of
the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its Resolution2 dated June 20, 2005; the
second, also a petition for review on certiorari, challenges the February 9, 2005 Decision3 and
November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were dismissed
on the ground of prescription.

The pertinent facts are as follows:

On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW
diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as an Energy Conversion Agreement5 (Agreement), was for a period of five years.
Article 10 reads:

10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import
duties, fees, charges and other levies imposed by the National Government of the Republic of the
Philippines or any agency or instrumentality thereof to which POLAR may be or become subject to
or in relation to the performance of their obligations under this agreement (other than (i) taxes
imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its
employees and (ii) construction permit fees, environmental permit fees and other similar fees and
charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the
Power Barges.6

Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially
opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.

On August 7, 1995, FELS received an assessment of real property taxes on the power barges from
Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered
those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC,
reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the
full power and authority to represent it in any conference regarding the real property assessment of
the Provincial Assessor.

In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors
decision to assess real property taxes on the power barges. However, the motion was denied on
September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment.8 This
prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting
aside of the assessment and the declaration of the barges as non-taxable items; it also prayed that
should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the
necessary corrections.9

In its Answer to the petition, the Provincial Assessor averred that the barges were real property for
purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.

Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the
Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly
stated that power barges are not real property subject to real property assessment.

On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:

WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the
amount ofP56,184,088.40, for the year 1994.

SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable or personal
property, are nevertheless considered real property for taxation purposes because they are installed
at a specific location with a character of permanency. The LBAA also pointed out that the owner of
the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making
NPC responsible for the payment of all real estate taxes and assessments will not justify the
exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS.
Finally, the LBAA also ruled that the petition was filed out of time.

Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA).

On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant
by Distraint13over the power barges, seeking to collect real property taxes amounting
to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially served to FELS on
November 8, 1996. It then filed a Motion to Lift Levy dated November 14, 1996, praying that the
Provincial Assessor be further restrained by the CBAA from enforcing the disputed assessment
during the pendency of the appeal.

On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the properties of
FELS in order not to preempt and render ineffectual, nugatory and illusory any resolution or
judgment which the Board would issue.

Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings before
the CBAA. This was approved by the CBAA in an Order16 dated September 22, 1998.

During the pendency of the case, both FELS and NPC filed several motions to admit bond to
guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event that
the judgment be unfavorable to them). The bonds were duly approved by the CBAA.

On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real
property tax. The dispositive portion reads:

WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of
Batangas is hereby reversed. Respondent-appellee Provincial Assessor of the Province of Batangas
is hereby ordered to drop subject property under ARP/Tax Declaration No. 018-00958 from the List
of Taxable Properties in the Assessment Roll. The Provincial Treasurer of Batangas is hereby
directed to act accordingly.

SO ORDERED.18

Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since
they are actually, directly and exclusively used by it, the power barges are covered by the
exemptions under Section 234(c) of R.A. No. 7160.19 As to the other jurisdictional issue, the CBAA
ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in
accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a motion for
reconsideration, which was opposed by FELS and NPC.

In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier
decision. The fallo of the resolution reads:

WHEREFORE, premises considered, it is the resolution of this Board that:

 (a) The decision of the Board dated 6 April 2000 is hereby reversed.

(b) The petition of FELS, as well as the intervention of NPC, is dismissed.

(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed,

(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is
likewise hereby affirmed.

SO ORDERED.21

FELS and NPC filed separate motions for reconsideration, which were timely opposed by the
Provincial Assessor. The CBAA denied the said motions in a Resolution22 dated October 19, 2001.

Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490.
Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.

On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No. 67490
praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a Resolution23 dated
February 12, 2002, the appellate court directed NPC to re-file its motion for consolidation with CA-
G.R. SP No. 67491, since it is the ponente of the latter petition who should resolve the request for
reconsideration.

NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the
appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of
prescription. The decretal portion of the decision reads:

WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions
dated July 31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are
AFFIRMED.

SO ORDERED.24

On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the
appellate courts decision in CA-G.R. SP No. 67490.

Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as
G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP No. 67490. The petition
was, however, denied in this Courts Resolution25 of November 8, 2004, for NPCs failure to
sufficiently show that the CA committed any reversible error in the challenged decision. NPC filed a
motion for reconsideration, which the Court denied with finality in a Resolution26 dated January 19,
2005.

Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the right
to question the assessment of the Provincial Assessor had already prescribed upon the failure of
FELS to appeal the disputed assessment to the LBAA within the period prescribed by law. Since
FELS had lost the right to question the assessment, the right of the Provincial Government to collect
the tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the February
5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a Resolution27 dated
November 23, 2005.

The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for
lack of merit in a Resolution28 dated June 20, 2005.

On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising
the following issues:

A.

Whether power barges, which are floating and movable, are personal properties and therefore, not
subject to real property tax.

B.

Assuming that the subject power barges are real properties, whether they are exempt from real
estate tax under Section 234 of the Local Government Code ("LGC").

C.

Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it
should be NPC which should be made to pay the same under the law.

D.

Assuming arguendo that the subject power barges are real properties, whether or not the same is
subject to depreciation just like any other personal properties.

E.

Whether the right of the petitioner to question the patently null and void real property tax assessment
on the petitioners personal properties is imprescriptible.29

On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628),
indicating the following errors committed by the CA:

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA
WAS FILED OUT OF TIME.

II

THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES
ARE NOT SUBJECT TO REAL PROPERTY TAXES.

III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON
THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.30

Considering that the factual antecedents of both cases are similar, the Court ordered the
consolidation of the two cases in a Resolution31 dated March 8, 2006.1awphi1.net

In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their
respective Memoranda within 30 days from notice. Almost a year passed but the parties had not
submitted their respective memoranda. Considering that taxesthe lifeblood of our economyare
involved in the present controversy, the Court was prompted to dispense with the said pleadings,
with the end view of advancing the interests of justice and avoiding further delay.

In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred.
FELS argues that when NPC moved to have the assessment reconsidered on September 7, 1995,
the running of the period to file an appeal with the LBAA was tolled. For its part, NPC posits that the
60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its
motion for reconsideration.

Petitioners contentions are bereft of merit.

Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:

SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal interest in
the property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice
of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition
under oath in the form prescribed for the purpose, together with copies of the tax declarations and
such affidavits or documents submitted in support of the appeal.

We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7,
1995, contained the following statement:

If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt
hereof, appeal to the Board of Assessment Appeals of the province by filing a petition under oath on
the form prescribed for the purpose, together with copies of ARP/Tax Declaration and such affidavits
or documents submitted in support of the appeal.32

Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file
a motion for reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law.

The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city
or municipal assessor in the assessment of the property. It follows then that the determination made
by the respondent Provincial Assessor with regard to the taxability of the subject real properties falls
within its power to assess properties for taxation purposes subject to appeal before the LBAA.33

We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No.
67491. The two divisions of the appellate court cited the case of Callanta v. Office of the
Ombudsman,34 where we ruled that under Section 226 of R.A. No 7160,35 the last action of the local
assessor on a particular assessment shall be the notice of assessment; it is this last action which
gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not
permit the property owner the remedy of filing a motion for reconsideration before the local assessor.
The pertinent holding of the Court in Callanta is as follows:

x x x [T]he same Code is equally clear that the aggrieved owners should have brought their appeals
before the LBAA. Unfortunately, despite the advice to this effect contained in their respective notices
of assessment, the owners chose to bring their requests for a review/readjustment before the city
assessor, a remedy not sanctioned by the law. To allow this procedure would indeed invite
corruption in the system of appraisal and assessment. It conveniently courts a graft-prone situation
where values of real property may be initially set unreasonably high, and then subsequently reduced
upon the request of a property owner. In the latter instance, allusions of a possible covert, illicit
trade-off cannot be avoided, and in fact can conveniently take place. Such occasion for mischief
must be prevented and excised from our system.36

For its part, the appellate court declared in CA-G.R. SP No. 67491:

x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner or
lawful possessor of real property of its revised assessed value, the former shall no longer have any
jurisdiction to entertain any request for a review or readjustment. The appropriate forum where the
aggrieved party may bring his appeal is the LBAA as provided by law. It follows ineluctably that the
60-day period for making the appeal to the LBAA runs without interruption. This is what We held in
SP 67490 and reaffirm today in SP 67491.37

To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect
the taxes due with respect to the taxpayers property becomes absolute upon the expiration of the
period to appeal.38 It also bears stressing that the taxpayers failure to question the assessment in
the LBAA renders the assessment of the local assessor final, executory and demandable, thus,
precluding the taxpayer from questioning the correctness of the assessment, or from invoking any
defense that would reopen the question of its liability on the merits.39

In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having been filed out
of time; the CBAA and the appellate court were likewise correct in affirming the dismissal.
Elementary is the rule that the perfection of an appeal within the period therefor is both mandatory
and jurisdictional, and failure in this regard renders the decision final and executory.40

In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred by
res judicata; that the final and executory judgment in G.R. No. 165113 (where there was a final
determination on the issue of prescription), effectively precludes the claims herein; and that the filing
of the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum shopping.

FELS maintains that the argument of the Provincial Assessor is completely misplaced since it was
not a party to the erroneous petition which the NPC filed in G.R. No. 165113. It avers that it did not
participate in the aforesaid proceeding, and the Supreme Court never acquired jurisdiction over it. As
to the issue of forum shopping, petitioner claims that no forum shopping could have been committed
since the elements of litis pendentia or res judicata are not present.

We do not agree.

Res judicata pervades every organized system of jurisprudence and is founded upon two grounds
embodied in various maxims of common law, namely: (1) public policy and necessity, which makes it
to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the hardship on the
individual of being vexed twice for the same cause nemo debet bis vexari et eadem causa. A
conflicting doctrine would subject the public peace and quiet to the will and dereliction of individuals
and prefer the regalement of the litigious disposition on the part of suitors to the preservation of the
public tranquility and happiness.41 As we ruled in Heirs of Trinidad De Leon Vda. de Roxas v. Court
of Appeals:42

x x x An existing final judgment or decree rendered upon the merits, without fraud or collusion, by
a court of competent jurisdiction acting upon a matter within its authority is conclusive on the rights
of the parties and their privies. This ruling holds in all other actions or suits, in the same or any other
judicial tribunal of concurrent jurisdiction, touching on the points or matters in issue in the first suit.

xxx

Courts will simply refuse to reopen what has been decided. They will not allow the same parties or
their privies to litigate anew a question once it has been considered and decided with finality.
Litigations must end and terminate sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has become final, the prevailing party should
not be deprived of the fruits of the verdict by subsequent suits on the same issues filed by the same
parties.

This is in accordance with the doctrine of res judicata which has the following elements: (1) the
former judgment must be final; (2) the court which rendered it had jurisdiction over the subject matter
and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and
the second actions, identity of parties, subject matter and causes of action. The application of the
doctrine of res judicata does not require absolute identity of parties but merely substantial identity of
parties. There is substantial identity of parties when there is community of interest or privity of
interest between a party in the first and a party in the second case even if the first case did not
implead the latter.43

To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding
real property assessment. Therefore, when petitioner NPC filed its petition for review docketed as
G.R. No. 165113, it did so not only on its behalf but also on behalf of FELS. Moreover, the assailed
decision in the earlier petition for review filed in this Court was the decision of the appellate court in
CA-G.R. SP No. 67490, in which FELS was the petitioner. Thus, the decision in G.R. No. 165116 is
binding on petitioner FELS under the principle of privity of interest. In fine, FELS and NPC are
substantially "identical parties" as to warrant the application of res judicata. FELSs argument that it
is not bound by the erroneous petition filed by NPC is thus unavailing.

On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists when,
as a result of an adverse judgment in one forum, a party seeks another and possibly favorable
judgment in another forum other than by appeal or special civil action or certiorari. There is also
forum shopping when a party institutes two or more actions or proceedings grounded on the same
cause, on the gamble that one or the other court would make a favorable disposition.44

Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not
present in the cases at bar; however, as already discussed, res judicata may be properly applied
herein. Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and 170628 after
the petition for review in G.R. No. 165116. Indeed, petitioners went from one court to another trying
to get a favorable decision from one of the tribunals which allowed them to pursue their cases.
It must be stressed that an important factor in determining the existence of forum shopping is the
vexation caused to the courts and the parties-litigants by the filing of similar cases to claim
substantially the same reliefs.45 The rationale against forum shopping is that a party should not be
allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or complaints
constitutes abuse of court processes, which tends to degrade the administration of justice, wreaks
havoc upon orderly judicial procedure, and adds to the congestion of the heavily burdened dockets
of the courts.46

Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as
represent the same interests in both actions, (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and (c) the identity of the two preceding particulars is such
that any judgment rendered in the pending case, regardless of which party is successful, would
amount to res judicata in the other.47

Having found that the elements of res judicata and forum shopping are present in the consolidated
cases, a discussion of the other issues is no longer necessary. Nevertheless, for the peace and
contentment of petitioners, we shall shed light on the merits of the case.

As found by the appellate court, the CBAA and LBAA power barges are real property and are thus
subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113
was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax
examiners are presumed correct and made in good faith, with the taxpayer having the burden of
proving otherwise.48 Besides, factual findings of administrative bodies, which have acquired
expertise in their field, are generally binding and conclusive upon the Court; we will not assume to
interfere with the sensible exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed.49 We find no reason to depart from this rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a power
company brought an action to review property tax assessment. On the citys motion to dismiss, the
Supreme Court of New York held that the barges on which were mounted gas turbine power plants
designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant
barges, and the accessory equipment mounted on the barges were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though
floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast"
are considered immovable property. Thus, power barges are categorized as immovable property by
destination, being in the nature of machinery and other implements intended by the owner for an
industry or work which may be carried on in a building or on a piece of land and which tend directly
to meet the needs of said industry or work.51

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under
Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by
petitioner NPC, a government- owned and controlled corporation engaged in the supply, generation,
and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner
FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section
2.11, Article 2 of the Agreement:

OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures,
fittings, machinery and equipment on the Site used in connection with the Power Barges which have
been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges
for the purpose of converting Fuel of NAPOCOR into electricity.52

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its
exemption in Section 234 (c) of R.A. No. 7160, which reads:

SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:

xxx

(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power; x x x

Indeed, the law states that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in
this provision because Section 5.5, Article 5 of the Agreement provides:

OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the
necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power
Barges to convert such Fuel into electricity in accordance with Part A of Article 7.53

It is a basic rule that obligations arising from a contract have the force of law between the parties.
Not being contrary to law, morals, good customs, public order or public policy, the parties to the
contract are bound by its terms and conditions.54

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception.55 The law does not look with favor on tax exemptions and the entity that would seek to be
thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions, and
the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is
considered a taxable entity.

The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be
responsible for the payment of all real estate taxes and assessments, does not justify the exemption.
The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between
FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of
Batangas.

It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local
governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited
in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is
to be found only in the responsibility of the legislature which imposes the tax on the constituency
who are to pay for it.57 The right of local government units to collect taxes due must always be
upheld to avoid severe tax erosion. This consideration is consistent with the State policy to
guarantee the autonomy of local governments58 and the objective of the Local Government Code
that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest
development as self-reliant communities and make them effective partners in the attainment of
national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed
revenues to finance and support myriad activities of the local government units for the delivery of
basic services essential to the promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people.60

WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 106041 January 29, 1993

BENGUET CORPORATION, petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF
ZAMBALES, PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and
MUNICIPALITY OF SAN MARCELINO, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

CRUZ, J.:

The realty tax assessment involved in this case amounts to P11,319,304.00. It has been imposed on
the petitioner's tailings dam and the land thereunder over its protest.

The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said
properties as taxable improvements. The assessment was appealed to the Board of Assessment
Appeals of the Province of Zambales. On August 24, 1988, the appeal was dismissed mainly on the
ground of the petitioner's "failure to pay the realty taxes that fell due during the pendency of the
appeal."

The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals, 1 one of
the herein respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the
appeal but, on the merits, agreed that "the tailings dam and the lands submerged thereunder (were)
subject to realty tax."
 For purposes of taxation the dam is considered as real property as it comes within
the object mentioned in paragraphs (a) and (b) of Article 415 of the New Civil Code.
It is a construction adhered to the soil which cannot be separated or detached
without breaking the material or causing destruction on the land upon which it is
attached. The immovable nature of the dam as an improvement determines its
character as real property, hence taxable under Section 38 of the Real Property Tax
Code. (P.D. 464).

Although the dam is partly used as an anti-pollution device, this Board cannot accede
to the request for tax exemption in the absence of a law authorizing the same.

xxx xxx xxx

We find the appraisal on the land submerged as a result of the construction of the
tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for
Zambales which was reviewed and allowed for use by the Ministry (Department) of
Finance in the 1981-1982 general revision. No serious attempt was made by
Petitioner-Appellant Benguet Corporation to impugn its reasonableness, i.e., that the
P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to disturb the
market value applied by Respondent Appellee Provincial Assessor of Zambales on
the properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.

This petition for certiorari now seeks to reverse the above ruling.

The principal contention of the petitioner is that the tailings dam is not subject to realty tax because it
is not an "improvement" upon the land within the meaning of the Real Property Tax Code. More
particularly, it is claimed

(1) as regards the tailings dam as an "improvement":

(a) that the tailings dam has no value separate from and independent
of the mine; hence, by itself it cannot be considered an improvement
separately assessable;

(b) that it is an integral part of the mine;

(c) that at the end of the mining operation of the petitioner corporation
in the area, the tailings dam will benefit the local community by
serving as an irrigation facility;

(d) that the building of the dam has stripped the property of any
commercial value as the property is submerged under water wastes
from the mine;

(e) that the tailings dam is an environmental pollution control device

for which petitioner must be commended rather than penalized with a
realty tax assessment;
 (f) that the installation and utilization of the tailings dam as a pollution
control device is a requirement imposed by law;

(2) as regards the valuation of the tailings dam and the submerged lands:

(a) that the subject properties have no market value as they cannot
be sold independently of the mine;

(b) that the valuation of the tailings dam should be based on its
incidental use by petitioner as a water reservoir and not on the
alleged cost of construction of the dam and the annual build-up
expense;

(c) that the "residual value formula" used by the Provincial Assessor
and adopted by respondent CBAA is arbitrary and erroneous; and

(3) as regards the petitioner's liability for penalties for

non-declaration of the tailings dam and the submerged lands for realty tax purposes:

(a) that where a tax is not paid in an honest belief that it is not due, no
penalty shall be collected in addition to the basic tax;

(b) that no other mining companies in the Philippines operating a

tailings dam have been made to declare the dam for realty tax
purposes.

The petitioner does not dispute that the tailings dam may be considered realty within the meaning of
Article 415. It insists, however, that the dam cannot be subjected to realty tax as a separate and
independent property because it does not constitute an "assessable improvement" on the mine
although a considerable sum may have been spent in constructing and maintaining it.

To support its theory, the petitioner cites the following cases:

1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes and
gates constructed by the taxpayer in connection with a fishpond operation as integral parts of the
fishpond.

2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a road
constructed by the timber concessionaire in the area, where this Court did not impose a realty tax on
the road primarily for two reasons:

In the first place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right of accession not only
because it is inherently incorporated or attached to the timber land . . . but also
because upon the expiration of the concession said road would ultimately pass to the
national government. . . . In the second place, while the road was constructed by
appellee primarily for its use and benefit, the privilege is not exclusive, for . . .
appellee cannot prevent the use of portions of the concession for homesteading
purposes. It is also duty bound to allow the free use of forest products within the
concession for the personal use of individuals residing in or within the vicinity of the
land. . . . In other words, the government has practically reserved the rights to use
 the road to promote its varied activities. Since, as above shown, the road in question
cannot be considered as an improvement which belongs to appellee, although in part
is for its benefit, it is clear that the same cannot be the subject of assessment within
the meaning of Section 2 of C.A.
No. 470.

Apparently, the realty tax was not imposed not because the road was an integral part of the lumber
concession but because the government had the right to use the road to promote its varied activities.

3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was declared
that the reservoir dam went with and formed part of the reservoir and that the dam would be
"worthless and useless except in connection with the outlet canal, and the water rights in the
reservoir represent and include whatever utility or value there is in the dam and headgates."

4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This case
involved drain tunnels constructed by plaintiff when it expanded its mining operations downward,
resulting in a constantly increasing flow of water in the said mine. It was held that:

Whatever value they have is connected with and in fact is an integral part of the mine
itself. Just as much so as any shaft which descends into the earth or an underground
incline, tunnel, or drift would be which was used in connection with the mine.

On the other hand, the Solicitor General argues that the dam is an assessable improvement
because it enhances the value and utility of the mine. The primary function of the dam is to receive,
retain and hold the water coming from the operations of the mine, and it also enables the petitioner
to impound water, which is then recycled for use in the plant.

There is also ample jurisprudence to support this view, thus:

. . . The said equipment and machinery, as appurtenances to the gas station building
or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are
necessary to the operation of the gas station, for without them the gas station would
be useless and which have been attached or affixed permanently to the gas station
site or embedded therein, are taxable improvements and machinery within the
meaning of the Assessment Law and the Real Property Tax Code. (Caltex [Phil.] Inc.
v. CBAA, 114 SCRA 296).

We hold that while the two storage tanks are not embedded in the land, they may,
nevertheless, be considered as improvements on the land, enhancing its utility and
rendering it useful to the oil industry. It is undeniable that the two tanks have been
installed with some degree of permanence as receptacles for the considerable
quantities of oil needed by MERALCO for its operations. (Manila Electric Co. v.
CBAA, 114 SCRA 273).

The pipeline system in question is indubitably a construction adhering to the soil. It is

attached to the land in such a way that it cannot be separated therefrom without
dismantling the steel pipes which were welded to form the pipeline. (MERALCO
Securities Industrial Corp. v. CBAA, 114 SCRA 261).

The tax upon the dam was properly assessed to the plaintiff as a tax upon real
estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742).
 The oil tanks are structures within the statute, that they are designed and used by the
owner as permanent improvement of the free hold, and that for such reasons they
were properly assessed by the respondent taxing district as improvements.
(Standard Oil Co. of New Jersey v. Atlantic City, 15 A 2d. 271)

The Real Property Tax Code does not carry a definition of "real property" and simply says that the
realty tax is imposed on "real property, such as lands, buildings, machinery and other improvements
affixed or attached to real property." In the absence of such a definition, we apply Article 415 of the
Civil Code, the pertinent portions of which state:

Art. 415. The following are immovable property.

(1) Lands, buildings and constructions of all kinds adhered to the soil;

xxx xxx xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it

cannot be separated therefrom without breaking the material or deterioration of the
object.

Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is
due "on the real property, including land, buildings, machinery and other improvements" not
specifically exempted in Section 3 thereof. A reading of that section shows that the tailings dam of
the petitioner does not fall under any of the classes of exempt real properties therein enumerated.

Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines
improvement as follows:

(k) Improvements is a valuable addition made to property or an amelioration in its

condition, amounting to more than mere repairs or replacement of waste, costing
labor or capital and intended to enhance its value, beauty or utility or to adopt it for
new or further purposes.

The term has also been interpreted as "artificial alterations of the physical condition of the ground
that arereasonably permanent in character." 2

The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein could
not be operated without the aid of the drain tunnels, which were indispensable to the successful
development and extraction of the minerals therein. This is not true in the present case.

Even without the tailings dam, the petitioner's mining operation can still be carried out because the
primary function of the dam is merely to receive and retain the wastes and water coming from the
mine. There is no allegation that the water coming from the dam is the sole source of water for the
mining operation so as to make the dam an integral part of the mine. In fact, as a result of the
construction of the dam, the petitioner can now impound and recycle water without having to spend
for the building of a water reservoir. And as the petitioner itself points out, even if the petitioner's
mine is shut down or ceases operation, the dam may still be used for irrigation of the surrounding
areas, again unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable because it involved
water reservoir dams used for different purposes and for the benefit of the surrounding areas. By
contrast, the tailings dam in question is being used exclusively for the benefit of the petitioner.

Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate existence,
just as vigorously contends that at the end of the mining operation the tailings dam will serve the
local community as an irrigation facility, thereby implying that it can exist independently of the mine.

From the definitions and the cases cited above, it would appear that whether a structure constitutes
an improvement so as to partake of the status of realty would depend upon the degree
of permanence intended in its construction and use. The expression "permanent" as applied to an
improvement does not imply that the improvement must be used perpetually but only until the
purpose to which the principal realty is devoted has been accomplished. It is sufficient that the
improvement is intended to remain as long as the land to which it is annexed is still used for the said
purpose.

The Court is convinced that the subject dam falls within the definition of an "improvement" because it
is permanent in character and it enhances both the value and utility of petitioner's mine. Moreover,
the immovable nature of the dam defines its character as real property under Article 415 of the Civil
Code and thus makes it taxable under Section 38 of the Real Property Tax Code.

The Court will also reject the contention that the appraisal at P50.00 per square meter made by the
Provincial Assessor is excessive and that his use of the "residual value formula" is arbitrary and
erroneous.

Respondent Provincial Assessor explained the use of the "residual value formula" as follows:

A 50% residual value is applied in the computation because, while it is true that when
slime fills the dike, it will then be covered by another dike or stage, the stage covered
is still there and still exists and since only one face of the dike is filled, 50% or the
other face is unutilized.

In sustaining this formula, the CBAA gave the following justification:

We find the appraisal on the land submerged as a result of the construction of the
tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for
San Marcelino, Zambales, which is fifty (50.00) pesos per square meter for third
class industrial land (TSN, page 17, July 5, 1989) and Schedule of Market Values for
Zambales which was reviewed and allowed for use by the Ministry (Department) of
Finance in the 1981-1982 general revision. No serious attempt was made by
Petitioner-Appellant Benguet Corporation to impugn its reasonableness, i.e, that the
P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to disturb the
market value applied by Respondent-Appellee Provincial Assessor of Zambales on
the properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.

It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial
agencies like the CBAA, which, because of the nature of its functions and its frequent exercise
thereof, has developed expertise in the resolution of assessment problems. The only exception to
this rule is where it is clearly shown that the administrative body has committed grave abuse of
discretion calling for the intervention of this Court in the exercise of its own powers of review. There
is no such showing in the case at bar.

We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of the
issue of the propriety of the penalties imposed upon it, which was raised by the petitioner for the first
time only on appeal. The CBAA held that this "is an entirely new matter that petitioner can take up
with the Provincial Assessor (and) can be the subject of another protest before the Local Board or a
negotiation with the local sanggunian . . ., and in case of an adverse decision by either the Local
Board or the local sanggunian, (it can) elevate the same to this Board for appropriate action."

There is no need for this time-wasting procedure. The Court may resolve the issue in this petition
instead of referring it back to the local authorities. We have studied the facts and circumstances of
this case as above discussed and find that the petitioner has acted in good faith in questioning the
assessment on the tailings dam and the land submerged thereunder. It is clear that it has not done
so for the purpose of evading or delaying the payment of the questioned tax. Hence, we hold that the
petitioner is not subject to penalty for its
non-declaration of the tailings dam and the submerged lands for realty tax purposes.

WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of
respondent Central Board of Assessment Appeals is tainted with grave abuse of discretion except as
to the imposition of penalties upon the petitioner which is hereby SET ASIDE. Costs against the
petitioner. It is so ordered.

Narvasa, C.J., Gutierrez, Jr., Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Bellosillo, Melo and Campos, Jr., JJ., concur.

Feliciano, J., took no part.

# Footnotes

1 Secretary of Finance Jesus Estanislao as chairman with Secretary of Justice

Franklin M. Drilon and Secretary of Local Government Luis T. Santos as members.

2 Francisco, Philippine Mining Law, Vol. 1, 2nd Ed., p. 274.

ARTSTROC. 416

September 1, 1911

G.R. No. 6295

THE UNITED STATES, plaintiff-appellee,
vs.
IGNACIO CARLOS, defendant-appellant.
A. D. Gibbs for appellant.
Acting Attorney-General Harvey for appellee.
PER CURIAM:
The information filed in this case is as follows:

The undersigned accuses Ignacio Carlos of the crime of theft, committed as follows:

That on, during, and between the 13th day of February, 1909, and the 3d day of March, 1910, in
the city of Manila, Philippine Islands, the said Ignacio Carlos, with intent of gain and without
violence or intimidation against the person or force against the thing, did then and there,
willfully, unlawfully, and feloniously, take, steal , and carry away two thousand two hundred and
seventy-three (2,273) kilowatts of electric current, of the value of nine hundred and nine (909)
pesos and twenty (20) cents Philippine currency, the property of the Manila Electric Railroad
and Light Company, a corporation doing business in the Philippine Islands, without the consent
of the owner thereof; to the damage and prejudice of the said Manila Electric Railroad and Light
Company in the said sum of nine hundred and nine (909) pesos and twenty (20) cents
Philippine currency, equal to and equivalent of 4,546 pesetas Philippine currency. All contrary to
law.

(Sgd.) L. M. SOUTWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine
Islands, by L. M. Southworth, prosecuting attorney for the city of Manila.

(Sgd.) CHARLES S. LOBINGIER,

Judge, First Instance.
A preliminary investigation has heretofore been conducted in this case, under my direction,
having examined the witness under oath, in accordance with the provisions of section 39 of Act
No. 183 of the Philippine Commission, as amended by section 2 ofAct No. 612 of the Philippine
Commission.
(Sgd) L. M. SOUTHWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine
Islands, by L. M. Southworth, prosecuting attorney for the city of Manila.

(Sgd.) CHARLES LOBINGIER,

Judge, First Instance.
A warrant for the arrest of the defendant was issued by the Honorable J. C. Jenkins on the 4th
of March and placed in the hands of the sheriff. The sheriff's return shows that the defendant
gave bond for his appearance. On the 14th of the same month counsel for the defendant
demurrer to the complaint on the following grounds:

1 That the court has no jurisdiction over the person of the accused nor of the offense charged
because the accused has not been accorded a preliminary investigation or examination as
required by law and no court, magistrate, or other competent authority has determined from a
sworn complaint or evidence adduced that there is probable cause to believe that a crime has
been committed, or that this defendant has committed any crime.

2 That the facts charged do not constitute a public offense.

The demurrer was overruled on the same day and the defendant having refused to plead, a plea
of not guilty was entered by direction of the court for him and the trial proceeded.

After due consideration of all the proofs presented and the arguments of counsel the trial court
found the defendant guilty of the crime charged and sentenced him to one year eight months
and twenty-one days' presidio correccional, to indemnify the offended party, The Manila Electric
Railroad and Light Company, in the sum of P865.26, to the corresponding subsidiary
imprisonment in case of insolvency and to the payment of the costs. From this judgment the
defendant appealed and makes the following assignments of error:
I.
The court erred in overruling the objection of the accused to the jurisdiction of the court,
because he was not given a preliminary investigation as required by law, and in overruling his
demurrer for the same reason.

II.

The court erred in declaring the accused to be guilty, in view of the evidence submitted.

III.

The court erred in declaring that electrical energy may be stolen.

IV.

The court erred in not declaring that the plaintiff consented to the taking of the current.

V.

The court erred in finding the accused guilty of more than one offense.

VI.

The court erred in condemning the accused to pay P865.26 to the electric company as
damages.

Exactly the same question as that raised in the first assignment of error, was after a through
examination and due consideration, decided adversely to appellant's contention in the case of
U. S. vs.Grant and Kennedy (18 Phil. Rep., 122). No sufficient reason is presented why we
should not follow the doctrine enunciated in that case.
The question raised in the second assignment of error is purely one fact. Upon this point the trial
court said:

For considerably more than a year previous to the filing of this complaint the accused had been
a consumer of electricity furnished by the Manila Electric Railroad and Light Company for a
building containing the residence of the accused and three other residences, and which was
equipped, according to the defendant's testimony, with thirty electric lights. On March 15, 1909,
the representatives of the company, believing that more light was being used than their meter
showed, installed an additional meter (Exhibit A) on a pole outside of defendant's house, and
both it and the meter (Exhibit B) which had been previously installed in the house were read on
said date. Exhibit A read 218 kilowatt hours; Exhibit B, 745 kilowatt hours. On March 3, 1910
each was read again, Exhibit A showing 2,718 kilowatt hours and Exhibit B, 968. It is undisputed
that the current which supplied the house passed through both meters and the city electrician
testifies that each meter was tested on the date of the last reading and was "in good condition."
The result of this registration therefore is that while the outsider meter (Exhibit A) showed a
consumption in defendant's building of 2,500 kilowatt hours of electricity, this inside meter
(Exhibit B) showed but 223 kilowatt hours. In other words the actual consumption, according to
the outside meter, was more than ten times as great as that registered by the one inside.
Obviously this difference could not be due to normal causes, for while the electrician called by
the defense (Lanusa) testifies to the possibility of a difference between two such meters, he
places the extreme limit of such difference between them 5 per cent. Here, as we have seen,
the difference is more than 900 per cent. Besides, according to the defendant's electrician, the
outside meter should normally run faster, while according to the test made in this case the
inside meter (Exhibit B) ran the faster. The city electrician also testifies that the electric current
could have been deflected from the inside meter by placing thereon a device known as a
"jumper" connecting the two outside wires, and there is other testimony that there were marks
on the insulation of the meter Exhibit B which showed the use of such a device. There is a
further evidence that the consumption of 223 kilowatt hours, registered by the inside meter
would not be a reasonable amount for the number of lights installed in defendant's building
during the period in question, and the accused fails to explain why he should have had thirty
lights installed if he needed but four or five.

On the strength of this showing a search warrant was issued for the examination of defendant's
premises and was duly served by a police officer (Hartpence). He was accompanied at the time
by three employees of the Manila Electric Railroad and Light Company, and he found there the
accused, his wife and son, and perhaps one or two others. There is a sharp conflict between the
several spectators on some points but on one there is no dispute. All agree that the "jumper"
(Exhibit C) was found in a drawer of a small cabinet in the room of defendant's house where the
meter was installed and not more than 20 feet therefrom. In the absence of a satisfactory
explanation this constituted possession on defendant's part, and such possession, under
the Code of Civil Procedure, section 334 (10), raises the presumption that the accused was the
owner of a device whose only use was to deflect the current from the meter.
Is there any other "satisfactory explanation" of the "jumper's" presence? The only one sought to
be offered is the statement by the son of the accused, a boy of twelve years, that he saw the
"jumper" placed there by the witness Porter, an employee of the Light Company. The boy is the
only witness who so testifies and Porter himself squarely denies it. We can not agree with
counsel for the defense that the boy's interest in the outcome of this case is less than that of the
witness for the prosecution. It seems to us that his natural desire to shield his father would far
outweight any interest such an employee like Porter would have and which, at most, would be
merely pecuniary.

There is, however, one witness whom so far as appears, has no interest in the matter
whatsoever. This is officer Hartpence, who executed the search warrant. He testifies that after
inspecting other articles and places in the building as he and the other spectators, including the
accused, approached the cabinet in which the "jumper" was found, the officer's attention was
called to the defendant's appearance and the former noticed that the latter was becoming
nervous. Where the only two witnesses who are supposed to know anything of the matter thus
contradict each other this item of testimony by the officer is of more than ordinary significance;
for if, as the accused claims, the "jumper" was placed in the cabinet for the first time by Porter
there would be no occasion for any change of demeanor on the part of the accused. We do not
think that the officer's declination to wait until defendant should secure a notary public shows
bias. The presence of such an official was neither required nor authorized by law and the very
efficacy of a search depends upon its swiftness.

We must also agree with the prosecuting attorney that the attending circumstances do not
strengthen the story told by the boy; that the latter would have been likely to call out at the time
he saw the "jumper" being placed in the drawer, or at least directed his father's attention to it
immediately instead of waiting, as he says, until the latter was called by the officer. Finally, to
accept the boy's story we must believe that this company or its representatives deliberately
conspired not merely to lure the defendant into the commission of a crime but to fasten upon
him a crime which he did not commit and thus convict an innocent man by perjured evidence.
This is a much more serious charge than that contained in the complaint and should be
supported by very strong corroborating circumstances which we do not find here. We are,
accordingly, unable to consider as satisfactory defendant's explanation of the "jumper's"
presence.

The only alternative is the conclusion that the "jumper" was placed there by the accused or by
some one acting for him and that it was the instrument by which the current was deflected from
the matter Exhibit B and the Light Company deprived of its lawful compensation.

After a careful examination of the entire record we are satisfied beyond peradventure of a doubt
that the proofs presented fully support the facts as set forth in the foregoing finding.

Counsel for the appellant insists that the only corporeal property can be the subject of the crime
of larceny, and in the support of this proposition cites several authorities for the purpose of
showing that the only subjects of larceny are tangible, movable, chattels, something which could
be taken in possession and carried away, and which had some, although trifling, intrinsic value,
and also to show that electricity is an unknown force and can not be a subject of larceny.

In the U. S. vs. Genato (15 Phi. Rep., 170) the defendant, the owner of the store situated at No.
154 Escolta, Manila, was using a contrivance known as a "jumper" on the electric meter
installed by the Manila Electric Railroad and the Light Company. As a result of the use of this
"jumper" the meter, instead of making one revolution in every four seconds, registered one in
seventy-seven seconds, thereby reducing the current approximately 95 per cent. Genato was
charged in the municipal court with a violation of a certain ordinance of the city of Manila, and
was sentenced to pay a fine of P200. He appealed to the Court of First Instance, was again tried
and sentenced to pay the same fine. An appeal was taken from the judgment of the Court of
First Instance to the Supreme Court on the ground that the ordinance in question was null and
void. It is true that the only question directly presented was of the validity of the city ordinance.
The court, after holding that said ordinance was valid, said:
Even without them (ordinances), the right of ownership of electric current is secured by articles
517 and 518 of the Penal Code; the application of these articles in case of subtraction of gas, a
fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid
down in the decisions of the supreme court of Spain January 20, 1887, and April 1, 1897,
construing and enforcing the provisions of articles 530 and 531 of the penal code of that
country, articles identical with articles 517 and 518 of the code in force in these Islands.

Article 517 of the Penal Code above referred to reads as follows:

The following are guilty of larceny:

(1) Those who with intent of gain and without violence or intimidation against the person, or
force against things, shall take another's personal property without the owner's consent.

And article 518 fixes the penalty for larceny in proportion to the value of the personal property
stolen.

It is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but its
manifestation and effects, like those of gas, may be seen and felt. The true test of what is a
proper subject of larceny seems to be not whether the subject is corporeal, but whether it is
capable of appropriation by another than the owner.

It is well-settled that illuminating gas may be the subject of larceny, even in the absence of a
statute so providing. (Decisions of supreme court of Spain, January 20, 1887, and April 1,
1897, supra; also (England) Queen vs. Firth, L. R. 1 C. C., 172, 11 Cox C. C., 234;
Queen vs. White, 3 C. & K., 363, 6 Cox C. C., 213; Woods vs. People, 222 III., 293, 7 L. R. A.,
520; Commonwealth vs.Shaw, 4 Allen (Mass), 308; State vs. Wellman, 34 Minn., 221, N. W.
Rep., 385, and 25 Cyc., p. 12, note 10.)
In the case of Commonwealth vs. Shaw, supra, the court, speaking through Chief Justice
Bigelow, said:
There is nothing in the nature of gas used for illuminating purposes which renders it incapable of
being feloniously taken and carried away. It is a valuable article of merchandise, bought and
sold like other personal property, susceptible of being severed from a mass or larger quantity,
and of being transported from place to place. In the present case it appears that it was the
property of the Boston Gas Light Company; that it was in their possession by being confined in
conduits and tubes which belonged to them, and that the defendant severed a portion of that
which was in the pipes of the company by taking it into her house and there consuming it. All
this being proved to have been done by her secretly and with intent to deprive the company of
their property and to appropriate it to her own use, clearly constitutes the crime of larceny.

Electricity, the same as gas, is a valuable article of merchandise, bought and sold like other
personal property and is capable of appropriation by another. So no error was committed by the
trial court in holding that electricity is a subject of larceny.

It is urged in support of the fourth assignment of error that if it be true that the appellant did
appropriate to his own use the electricity as charged he can not be held guilty of larceny for any
part of the electricity thus appropriated, after the first month, for the reason that the complaining
party, the Manila Electric Road and Light Company, knew of this misappropriation and
consented thereto.

The outside meter was installed on March 15, 1909, and read 218 kilowatt hours. On the same
day the inside meter was read and showed 745 kilowatt hours. Both meters were again read on
March 3, 1910, and the outside one showed 2,718 kilowatt hours while the one on the inside
only showed 968, the difference in consumption during this time being 2,277 kilowatt hours. The
taking of this current continued over a period of one year, less twelve days. Assuming that the
company read both meters at the end of each month; that it knew the defendant was
misappropriating the current to that extent; and that t continued to furnish the current, thereby
giving the defendant an opportunity to continue the misppropriation, still, we think, that the
defendant is criminally responsible for the taking of the whole amount, 2,277 kilowatt hours. The
company had a contract with the defendant to furnish him with current for lighting purposes. It
could not stop the misappropriation without cutting off the current entirely. It could not reduce
the current so as to just furnish sufficient for the lighting of two, three, or five lights, as claimed
by the defendant that he used during the most of this time, but the current must always be
sufficiently strong to furnish current for the thirty lights, at any time the defendant desired to use
them.

There is no pretense that the accused was solicited by the company or any one else to commit
the acts charged. At most there was a mere passive submission on the part of the company that
the current should be taken and no indication that it wished it to be taken, and no knowledge by
the defendant that the company wished him to take the current, and no mutual understanding
between the company and the defendant, and no measures of inducement of any kind were
employed by the company for the purpose of leading the defendant into temptation, and no
preconcert whatever between him and company. The original design to misappropriate this
current was formed by the defendant absolutely independent of any acts on the part of the
company or its agents. It is true, no doubt, as a general proposition, that larceny is not
committed when the property is taken with the consent of its owner. It may be difficult in some
instances to determine whether certain acts constitute, in law, such "consent." But under the
facts in the case at bar it is not difficult to reach a conclusion that the acts performed by the
plaintiff company did not constitute a consent on its part the defendant take its property. We
have been unable to find a well considered case holding contrary opinion under similar facts,
but, there are numerous cases holding that such acts do not constitute such consent as would
relieve the taker of criminal responsibility. The fourth assignment of error is, therefore, not well
founded.

It is also contended that since the "jumper" was not used continuously, the defendant committed
not a single offense but a series of offenses. It is, no doubt, true that the defendant did not allow
the "jumper" to remain in place continuously for any number of days as the company inspected
monthly the inside meter. So the "jumper" was put on and taken off at least monthly, if not daily,
in order to avoid detection, and while the "jumper" was off the defendant was not
misappropriating the current. The complaint alleged that the defendant did on, during, and
between the 13th day of February, 1909, and the 3d of March, 1910. willfully, unlawfully, and
feloniously take, steal, and carry away 2,277 kilowatts of electric current of the value of P909.
No demurrer was presented against this complaint on the ground that more than one crime was
charged. The Government had no opportunity to amend or correct this error, if error at all. In the
case of U. S. vs. Macaspac (12 Phil. Rep., 26), the defendant received from one Joquina Punu
the sum of P31.50, with the request to deliver it to Marcelina Dy-Oco. The defendant called
upon Marcelina, but instead of delivering the said amount she asked Marcelina for P30 in the
name of Joaquina who had in no way authorized her to do so. Marcelina gave her P30,
believing that Joaquina had sent for it. Counsel for the defendant insisted that the complaint
charged his client with two different crimes of estafa in violation of section 11 of General Orders,
No. 58. In disposing of this question this court said:
The said defect constitutes one of the dilatory pleas indicated by section 21, and the accused
ought to have raised the point before the trial began. Had this been done, the complaint might
have been amended in time, because it is merely a defect of form easily remedied. . . .
Inasmuch as in the first instance the accused did not make the corresponding dilatory plea to
the irregularity of the complaint, it must be understood that has waived such objection, and is
not now entitled to raise for the first time any question in reference thereto when submitting to
this court her assignment of errors. Apart from the fact that the defense does not pretend that
any of the essential rights of the accused have been injured, the allegation of the defect above
alluded to, which in any case would only affect form of the complaint, can not justify a reversal
of the judgment appealed from, according to the provisions of section 10 of General Orders, No.
58.

In the case at bar it is not pointed out wherein any of the essential rights of the defendant have
been prejudiced by reason of the fact that the complaint covered the entire period. If twelve
distinct and separate complaints had been filed against the defendant, one for each month, the
sum total of the penalties imposed might have been very much greater than that imposed by the
court in this case. The covering of the entire period by one charge has been beneficial, if
anything, and not prejudicial to the rights of the defendant. The prosecuting attorney elected to
cover the entire period with one charge and the accused having been convicted for this offense,
he can not again be prosecuted for the stealing of the current at any time within that period.
Then, again, we are of the opinion that the charge was properly laid. The electricity was stolen
from the same person, in the same manner, and in the same place. It was substantially one
continuous act, although the "jumper" might have been removed and replaced daily or monthly.
The defendant was moved by one impulse to appropriate to his own use the current, and the
means adopted by him for the taking of the current were in the execution of a general fraudulent
plan.

A person stole gas for the use of a manufactory by means of pipe, which drew off the gas from
the main without allowing it to pass through the meter. The gas from this pipe was burnt every
day, and turned off at night. The pipe was never closed at this junction with the main, and
consequently always remained full of gas. It was held, that if the pipe always remained full,
there was, in fact, a continuous taking of the gas and not a series of separate talkings. It was
held also that even if the pipe had not been kept full, the taking would have been continuous, as
it was substantially all one transaction. (Regina vs. Firth, L. R., 1 C. C., 172; 11 Cox C. C., 234.
Cited on p. 758 of Wharton's Criminal Law, vol. 1, 10th ed.)
The value of the electricity taken by the defendant was found by the trial court to be P865.26.
This finding is fully in accordance with the evidence presented. So no error was committed in
sentencing the defendant to indemnify the company in this amount, or to suffer the
corresponding subsidiary imprisonment in case of insolvency.

The judgment being strictly in accordance with the law and the merits of the case, same is
hereby affirmed, with costs against the appellant.

Arellano, C.J., Torres, Mapa and Carson, JJ.

EN BANC

LUIS MARCOS P. LAUREL, G.R. No. 155076

Petitioner,
Present:

Puno, C.J.,
Quisumbing,
Ynares-Santiago,
Carpio,
- versus - Austria-Martinez,
Corona,
Carpio Morales,
Azcuna,
Tinga,
Chico-Nazario,
Velasco, Jr.,
Nachura,
Leonardo-De Castro, and
Brion, JJ.
HON. ZEUS C. ABROGAR,
Presiding Judge of the Regional
Trial Court, Makati City, Branch 150,
PEOPLE OF THE PHILIPPINES Promulgated:
& PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY,
Respondents. January 13, 2009

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

RESOLUTION

YNARES-SANTIAGO, J.:

On February 27, 2006, this Courts First Division rendered judgment in this case as
follows:

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The

assailed Orders of the Regional Trial Court and the Decision of the Court of
Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed
to issue an order granting the motion of the petitioner to quash the Amended
Information.

SO ORDERED.[1]
 By way of brief background, petitioner is one of the accused in Criminal Case No. 99-
2425, filed with the Regional Trial Court of Makati City, Branch 150. The Amended Information
charged the accused with theft under Article 308 of the Revised Penal Code, committed as
follows:

On or about September 10-19, 1999, or prior thereto in Makati City, and

within the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one another,
with intent to gain and without the knowledge and consent of the Philippine Long
Distance Telephone (PLDT), did then and there willfully, unlawfully and
feloniously take, steal and use the international long distance calls belonging to
PLDT by conducting International Simple Resale (ISR), which is a method of
routing and completing international long distance calls using lines, cables,
antenae, and/or air wave frequency which connect directly to the local or
domestic exchange facilities of the country where the call is destined, effectively
stealing this business from PLDT while using its facilities in the estimated amount
of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.

CONTRARY TO LAW.[2]

Petitioner filed a Motion to Quash (with Motion to Defer Arraignment), on the ground
that the factual allegations in the Amended Information do not constitute the felony of theft. The
trial court denied the Motion to Quash the Amended Information, as well petitioners subsequent
Motion for Reconsideration.

Petitioners special civil action for certiorari was dismissed by the Court of
Appeals. Thus, petitioner filed the instant petition for review with this Court.

In the above-quoted Decision, this Court held that the Amended Information does not
contain material allegations charging petitioner with theft of personal property since international
long distance calls and the business of providing telecommunication or telephone services are
not personal properties under Article 308 of the Revised Penal Code.

Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for
Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It maintains that
the Amended Information charging petitioner with theft is valid and sufficient; that it states the
names of all the accused who were specifically charged with the crime of theft of PLDTs
international calls and business of providing telecommunication or telephone service on or
about September 10 to 19, 1999 in Makati City by conducting ISR or International Simple
Resale; that it identifies the international calls and business of providing telecommunication or
telephone service of PLDT as the personal properties which were unlawfully taken by the
accused; and that it satisfies the test of sufficiency as it enabled a person of common
understanding to know the charge against him and the court to render judgment properly.

PLDT further insists that the Revised Penal Code should be interpreted in the context of
the Civil Codes definition of real and personal property. The enumeration of real properties in
Article 415 of the Civil Code is exclusive such that all those not included therein are personal
properties. Since Article 308 of the Revised Penal Code used the words personal property
without qualification, it follows that all personal properties as understood in the context of the
Civil Code, may be the subject of theft under Article 308 of the Revised Penal Code. PLDT
alleges that the international calls and business of providing telecommunication or telephone
service are personal properties capable of appropriation and can be objects of theft.

PLDT also argues that taking in relation to theft under the Revised Penal Code does
not require asportation, the sole requisite being that the object should be capable of
appropriation. The element of taking referred to in Article 308 of the Revised Penal Code
means the act of depriving another of the possession and dominion of a movable coupled with
the intention, at the time of the taking, of withholding it with the character of
permanency. There must be intent to appropriate, which means to deprive the lawful owner of
the thing. Thus, the term personal properties under Article 308 of the Revised Penal Code is
not limited to only personal properties which are susceptible of being severed from a mass or
larger quantity and of being transported from place to place.

PLDT likewise alleges that as early as the 1930s, international telephone calls were in
existence; hence, there is no basis for this Courts finding that the Legislature could not have
contemplated the theft of international telephone calls and the unlawful transmission and routing
of electronic voice signals or impulses emanating from such calls by unlawfully tampering with
the telephone device as within the coverage of the Revised Penal Code.

According to respondent, the international phone calls which are electric currents or
sets of electric impulses transmitted through a medium, and carry a pattern representing the
human voice to a receiver, are personal properties which may be subject of theft. Article
416(3) of the Civil Code deems forces of nature (which includes electricity) which are brought
under the control by science, are personal property.
 In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a
telephone call is a conversation on the phone or a communication carried out using the
telephone. It is not synonymous to electric current or impulses. Hence, it may not be
considered as personal property susceptible of appropriation. Petitioner claims that the analogy
between generated electricity and telephone calls is misplaced. PLDT does not produce or
generate telephone calls. It only provides the facilities or services for the transmission and
switching of the calls. He also insists that business is not personal property. It is not the
business that is protected but the right to carry on a business. This right is what is
considered as property. Since the services of PLDT cannot be considered as property, the
same may not be subject of theft.

The Office of the Solicitor General (OSG) agrees with respondent PLDT that
international phone calls and the business or service of providing international phone calls are
subsumed in the enumeration and definition of personal property under the Civil Code hence,
may be proper subjects of theft. It noted that the cases of United States v. Genato,[3] United
States v. Carlos[4] and United States v. Tambunting,[5] which recognized intangible properties
like gas and electricity as personal properties, are deemed incorporated in our penal
laws. Moreover, the theft provision in the Revised Penal Code was deliberately couched in
broad terms precisely to be all-encompassing and embracing even such scenario that could not
have been easily anticipated.

According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access
Device Regulations Act of 1998 and RA 8792 or the Electronic Commerce Act of 2000 does not
preclude prosecution under the Revised Penal Code for the crime of theft. The latter embraces
unauthorized appropriation or use of PLDTs international calls, service and business, for
personal profit or gain, to the prejudice of PLDT as owner thereof. On the other hand, the
special laws punish the surreptitious and advanced technical means employed to illegally obtain
the subject service and business. Even assuming that the correct indictment should have been
under RA 8484, the quashal of the information would still not be proper. The charge of theft as
alleged in the Information should be taken in relation to RA 8484 because it is the elements, and
not the designation of the crime, that control.

Considering the gravity and complexity of the novel questions of law involved in this case,
the Special First Division resolved to refer the same to the Banc.
 We resolve to grant the Motion for Reconsideration but remand the case to the trial court
for proper clarification of the Amended Information.

Article 308 of the Revised Penal Code provides:

Art. 308. Who are liable for theft. Theft is committed by any person
who, with intent to gain but without violence against, or intimidation of persons
nor force upon things, shall take personal property of another without the latters
consent.

The elements of theft under Article 308 of the Revised Penal Code are as follows: (1)
that there be taking of personal property; (2) that said property belongs to another; (3) that the
taking be done with intent to gain; (4) that the taking be done without the consent of the owner;
and (5) that the taking be accomplished without the use of violence against or intimidation of
persons or force upon things.

Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of
the term personal property in the penal code provision on theft had been established in
Philippine jurisprudence. This Court, in United States v. Genato, United States v. Carlos,
and United States v. Tambunting, consistently ruled that any personal property, tangible or
intangible, corporeal or incorporeal, capable of appropriation can be the object of theft.

Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term
personal property has had a generally accepted definition in civil law. In Article 335 of the Civil
Code of Spain, personal property is defined as anything susceptible of appropriation and not
included in the foregoing chapter (not real property). Thus, the term personal property in the
Revised Penal Code should be interpreted in the context of the Civil Code provisions in
accordance with the rule on statutory construction that where words have been long used in a
technical sense and have been judicially construed to have a certain meaning, and have been
adopted by the legislature as having a certain meaning prior to a particular statute, in which they
are used, the words used in such statute should be construed according to the sense in which
they have been previously used.[6] In fact, this Court used the Civil Code definition of personal
property in interpreting the theft provision of the penal code in United States v. Carlos.

Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term
personal property at the time the old Penal Code was being revised, still the legislature did not
limit or qualify the definition of personal property in the Revised Penal Code. Neither did it
provide a restrictive definition or an exclusive enumeration of personal property in the Revised
Penal Code, thereby showing its intent to retain for the term an extensive and unqualified
interpretation. Consequently, any property which is not included in the enumeration of real
properties under the Civil Code and capable of appropriation can be the subject of theft under
the Revised Penal Code.

The only requirement for a personal property to be the object of theft under the penal
code is that it be capable of appropriation. It need not be capable of asportation, which is
defined as carrying away.[7] Jurisprudence is settled that to take under the theft provision of
the penal code does not require asportation or carrying away.[8]

To appropriate means to deprive the lawful owner of the thing.[9] The word take in the
Revised Penal Code includes any act intended to transfer possession which, as held in the
assailed Decision, may be committed through the use of the offenders own hands, as well as
any mechanical device, such as an access device or card as in the instant case. This includes
controlling the destination of the property stolen to deprive the owner of the property, such as
the use of a meter tampering, as held in Natividad v. Court of Appeals,[10] use of a device to
fraudulently obtain gas, as held in United States v. Tambunting, and the use of a jumper to
divert electricity, as held in the cases of United States v. Genato, United States v. Carlos,
and United States v. Menagas.[11]

As illustrated in the above cases, appropriation of forces of nature which are brought
under control by science such as electrical energy can be achieved by tampering with any
apparatus used for generating or measuring such forces of nature, wrongfully redirecting such
forces of nature from such apparatus, or using any device to fraudulently obtain such forces of
nature. In the instant case, petitioner was charged with engaging in International Simple Resale
(ISR) or the unauthorized routing and completing of international long distance calls using lines,
cables, antennae, and/or air wave frequency and connecting these calls directly to the local or
domestic exchange facilities of the country where destined.

As early as 1910, the Court declared in Genato that ownership over electricity (which an
international long distance call consists of), as well as telephone service, is protected by the
provisions on theft of the Penal Code. The pertinent provision of the Revised Ordinance of the
City of Manila, which was involved in the said case, reads as follows:
 Injury to electric apparatus; Tapping current; Evidence. No person shall
destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter, or
other apparatus installed or used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service, nor tap or otherwise
wrongfully deflect or take any electric current from such wire, meter, or other
apparatus.

No person shall, for any purpose whatsoever, use or enjoy the benefits of
any device by means of which he may fraudulently obtain any current of
electricity or any telegraph or telephone service; and the existence in any
building premises of any such device shall, in the absence of satisfactory
explanation, be deemed sufficient evidence of such use by the persons
benefiting thereby.

It was further ruled that even without the above ordinance the acts of subtraction
punished therein are covered by the provisions on theft of the Penal Code then in force, thus:

Even without them (ordinance), the right of the ownership of electric

current is secured by articles 517 and 518 of the Penal Code; the application of
these articles in cases of subtraction of gas, a fluid used for lighting, and in some
respects resembling electricity, is confirmed by the rule laid down in the decisions
of the supreme court of Spain of January 20, 1887, and April 1, 1897, construing
and enforcing the provisions of articles 530 and 531 of the Penal Code of that
country, articles 517 and 518 of the code in force in these islands.

The acts of subtraction include: (a) tampering with any wire, meter, or other apparatus
installed or used for generating, containing, conducting, or measuring electricity, telegraph or
telephone service; (b) tapping or otherwise wrongfully deflecting or taking any electric current
from such wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device
by means of which one may fraudulently obtain any current of electricity or any telegraph or
telephone service.

In the instant case, the act of conducting ISR operations by illegally connecting various
equipment or apparatus to private respondent PLDTs telephone system, through which
petitioner is able to resell or re-route international long distance calls using respondent PLDTs
facilities constitutes all three acts of subtraction mentioned above.

The business of providing telecommunication or telephone service is likewise personal

property which can be the object of theft under Article 308 of the Revised Penal
Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence,
could be object of theft:

Section 2. Any sale, transfer, mortgage, or assignment of a stock of

goods, wares, merchandise, provisions, or materials otherwise than in the
ordinary course of trade and the regular prosecution of the business of the
vendor, mortgagor, transferor, or assignor, or any sale, transfer, mortgage, or
assignment of all, or substantially all, of the business or trade theretofore
conducted by the vendor, mortgagor, transferor or assignor, or all, or
substantially all, of the fixtures and equipment used in and about the business of
the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and
transfer in bulk, in contemplation of the Act. x x x.

In Strochecker v. Ramirez,[12] this Court stated:

With regard to the nature of the property thus mortgaged which is one-
half interest in the business above described, such interest is a personal property
capable of appropriation and not included in the enumeration of real properties in
article 335 of the Civil Code, and may be the subject of mortgage.

Interest in business was not specifically enumerated as personal property in the Civil
Code in force at the time the above decision was rendered. Yet, interest in business was
declared to be personal property since it is capable of appropriation and not included in the
enumeration of real properties. Article 414 of the Civil Code provides that all things which are or
may be the object of appropriation are considered either real property or personal
property. Business is likewise not enumerated as personal property under the Civil Code. Just
like interest in business, however, it may be appropriated. Following the ruling in Strochecker v.
Ramirez, business should also be classified as personal property. Since it is not included in the
exclusive enumeration of real properties under Article 415, it is therefore personal property.[13]

As can be clearly gleaned from the above disquisitions, petitioners acts constitute theft
of respondent PLDTs business and service, committed by means of the unlawful use of the
latters facilities. In this regard, the Amended Information inaccurately describes the offense by
making it appear that what petitioner took were the international long distance telephone calls,
rather than respondent PLDTs business.

A perusal of the records of this case readily reveals that petitioner and respondent PLDT
extensively discussed the issue of ownership of telephone calls. The prosecution has taken the
position that said telephone calls belong to respondent PLDT. This is evident from its Comment
where it defined the issue of this case as whether or not the unauthorized use or appropriation
of PLDT international telephone calls, service and facilities, for the purpose of generating
personal profit or gain that should have otherwise belonged to PLDT, constitutes theft.[14]

In discussing the issue of ownership, petitioner and respondent PLDT gave their
respective explanations on how a telephone call is generated.[15] For its part, respondent PLDT
explains the process of generating a telephone call as follows:

38. The role of telecommunication companies is not limited to merely

providing the medium (i.e. the electric current) through which the human
voice/voice signal of the caller is transmitted. Before the human voice/voice
signal can be so transmitted, a telecommunication company, using its facilities,
must first break down or decode the human voice/voice signal into electronic
impulses and subject the same to further augmentation and
enhancements. Only after such process of conversion will the resulting
electronic impulses be transmitted by a telecommunication company, again,
through the use of its facilities. Upon reaching the destination of the call, the
telecommunication company will again break down or decode the electronic
impulses back to human voice/voice signal before the called party receives the
same. In other words, a telecommunication company both converts/reconverts
the human voice/voice signal and provides the medium for transmitting the same.

39. Moreover, in the case of an international telephone call, once the

electronic impulses originating from a foreign telecommunication company
country (i.e. Japan) reaches the Philippines through a local telecommunication
company (i.e. private respondent PLDT), it is the latter which decodes, augments
and enhances the electronic impulses back to the human voice/voice signal and
provides the medium (i.e. electric current) to enable the called party to receive
the call. Thus, it is not true that the foreign telecommunication company provides
(1) the electric current which transmits the human voice/voice signal of the caller
and (2) the electric current for the called party to receive said human voice/voice
signal.

40. Thus, contrary to petitioner Laurels assertion, once the electronic

impulses or electric current originating from a foreign telecommunication
company (i.e. Japan) reaches private respondent PLDTs network, it is private
respondent PLDT which decodes, augments and enhances the electronic
impulses back to the human voice/voice signal and provides the medium (i.e.
electric current) to enable the called party to receive the call. Without private
respondent PLDTs network, the human voice/voice signal of the calling party will
never reach the called party.[16]

In the assailed Decision, it was conceded that in making the international phone calls, the
human voice is converted into electrical impulses or electric current which are transmitted to the
party called. A telephone call, therefore, is electrical energy. It was also held in the assailed
Decision that intangible property such as electrical energy is capable of appropriation because it
may be taken and carried away. Electricity is personal property under Article 416 (3) of the Civil
Code, which enumerates forces of nature which are brought under control by science.[17]

Indeed, while it may be conceded that international long distance calls, the matter
alleged to be stolen in the instant case, take the form of electrical energy, it cannot be said that
such international long distance calls were personal properties belonging to PLDT since the
latter could not have acquired ownership over such calls. PLDT merely encodes, augments,
enhances, decodes and transmits said calls using its complex communications infrastructure
and facilities. PLDT not being the owner of said telephone calls, then it could not validly claim
that such telephone calls were taken without its consent. It is the use of these communications
facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful
taking of the telephone services and business.

Therefore, the business of providing telecommunication and the telephone service are
personal property under Article 308 of the Revised Penal Code, and the act of engaging in ISR
is an act of subtraction penalized under said article. However, the Amended Information
describes the thing taken as, international long distance calls, and only later mentions stealing
the business from PLDT as the manner by which the gain was derived by the accused. In
order to correct this inaccuracy of description, this case must be remanded to the trial court and
the prosecution directed to amend the Amended Information, to clearly state that the property
subject of the theft are the services and business of respondent PLDT. Parenthetically, this
amendment is not necessitated by a mistake in charging the proper offense, which would have
called for the dismissal of the information under Rule 110, Section 14 and Rule 119, Section 19
of the Revised Rules on Criminal Procedure. To be sure, the crime is properly designated as
one of theft. The purpose of the amendment is simply to ensure that the accused is fully and
sufficiently apprised of the nature and cause of the charge against him, and thus guaranteed of
his rights under the Constitution.

ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision

dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the Court of
Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar of the
Regional Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion
to Defer Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The case is
remanded to the trial court and the Public Prosecutor of Makati City is hereby DIRECTED to
amend the Amended Information to show that the property subject of the theft were services
and business of the private offended party.

SO ORDERED.

ART. 417
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 18520 September 26, 1922

INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee,

vs.
ILDEFONSO RAMIREZ, creditor and appellant.
WILLIAM EDMONDS, assignee.

Lim & Lim for appellant.

Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co.

ROMUALDEZ, J.:

The question at issue in this appeal is, which of the two mortgages here in question must be given
preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of Ildefonso Ramirez.
The first was declared by the trial court to be entitled to preference.

In the lower court there were three mortgagees each of whom claimed preference. They were the
two above mentioned and Concepcion Ayala. The latter's claim was rejected by the trial court, and
from that ruling she did not appeal.

There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety Co.
which was executed on March 10, 1919, and registered in due time in the registry of property, that in
favor of the appellant being dated September 22, 1919, and registered also in the registry.

The appellant claims preference on these grounds: (a) That the first mortgage above-mentioned is
not valid because the property which is the subject-matter thereof is not capable of being mortgaged,
and the description of said property is not sufficient; and (b) that the amount due the appellant is a
purchase price, citing article 1922 of the Civil Code in support thereof, and that his mortgage is but a
modification of the security given by the debtor on February 15, 1919, that is, prior to the mortgage
executed in favor of the Fidelity & Surety Co.

As to the first ground, the thing that was mortgaged to this corporation is described in the document
as follows:
 . . . his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta.
Dolores del Rosario and the mortgagor herein referred to as the partnership), located at
Calle Real Nos. 123 and 125, District of Intramuros, Manila, Philippine Islands.

With regard to the nature of the property thus mortgaged, which is one-half interest in the business
above described, such interest is a personal property capable of appropriation and not included in
the enumeration of real properties in article 335 of the Civil Code, and may be the subject of
mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.)

The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only
a description of the following nature:

The description of the mortgaged property shall be such as to enable the parties to the
mortgage, or any other person, after reasonable inquiry and investigation, to identify the
same.

Turning to the second error assigned, numbers 1, 2, and 3 of article 1922 of the Civil Code invoked
by the appellant are not applicable. Neither he, as debtor, nor the debtor himself, is in possession of
the property mortgaged, which is, and since the registration of the mortgage has been, legally in
possession of the Fidelity & Surety Co. (Sec. 4, Act No. 1508; Meyers vs. Thein, 15 Phil., 303.)

In no way can the mortgage executed in favor of the appellant on September 22, 1919, be given
effect as of February 15, 1919, the date of the sale of the drug store in question. On the 15th of
February of that year, there was a stipulation about a persons security, but not a mortgage upon any
property, and much less upon the property in question.

Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the
Fidelity & Surety Co. because in the very document executed in his favor it was stated that his
mortgage was a second mortgage, subordinate to the one made in favor of the Fidelity & Surety Co.

The judgment appealed from is affirmed with costs against the appellant. So ordered.

Araullo, C.J., Street, Malcolm, Avancea, Villamor, Ostrand and Johns, JJ., concur.

ART. 420

NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA
POLINAR, respondents.

[G.R. No. 155055. January 26, 2005]

LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO &
CECILIA POLINAR, respondents.

DECISION
CORONA, J.:

Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the
Rules of Court. The first petition, docketed as G.R. No. 152115, filed by Nimfa Usero, assails
the September 19, 2001 decision[1] of the Court of Appeals in CA-GR SP No. 64718. The
second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails the January
11, 2002 decision[2] of the Court of Appeals in CA-GR SP NO. 64181.
The undisputed facts follow.
Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and
2, Block 5, Golden Acres Subdivision, Barrio Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18
Anahaw St., Pilar Village, Las Pias City, behind the lots of petitioners Samela and Usero.
Situated between the lots of the parties is a low-level strip of land, with a stagnant body of
water filled with floating water lilies; abutting and perpendicular to the lot of petitioner Samela,
the lot of the Polinars and the low-level strip of land is the perimeter wall of Pilar Village
Subdivision.
Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and
the strong current passing through it causes considerable damage to the house of respondent
Polinars. Frustrated by their predicament, private respondent spouses, on July 30, 1998,
erected a concrete wall on the bank of the low-level strip of land about three meters from their
house and rip-rapped the soil on that portion of the strip of land.
Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded
that the spouses Apolinar stop their construction but the spouses paid no heed, believing the
strip to be part of a creek. Nevertheless, for the sake of peace, the Polinars offered to pay for
the land being claimed by petitioners Samela and Usero. However, the parties failed to settle
their differences.
On November 9, 1998, petitioners filed separate complaints for forcible entry against the
Polinars at the Metropolitan Trial Court of Las Pias City. The case filed by petitioner Samela
was docketed as Civil Case No. 5242, while that of petitioner Usero was docketed as Civil Case
No. 5243.
In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer
Certificate of Title, plan of consolidation, subdivision survey, the tax declaration in her name,
and affidavits of petitioner Usero and a certain Justino Gamela whose property was located
beside the perimeter wall of Pilar Village.
The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay
certification as to the existence of the creek; a certification from the district engineer that the
western portion of Pilar Village is bound by a tributary of Talon Creek throughout its entire
length; boundary and index map of Pilar Village showing that the village is surrounded by a
creek and that the Polinar property is situated at the edge of said creek; and pictures of the
subject strip of land filled with water lilies.
 On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:

WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and
remove at their expense the improvements made on the subject lot; ordering the defendants to
pay the plaintiff P1,000.00 a month as reasonable compensation for the use of the portion
encroached from the filing of the complaint until the same is finally vacated; and to pay
plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.[3]

In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an
order on February 29, 2000, directing petitioner Usero and the Polinar spouses to commission a
professional geodetic engineer to conduct a relocation survey and to submit the report to the
trial court.
On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation
survey of Useros property covered by TCT No. T- 29545. The result of the said relocation
survey, as stated in his affidavit, was as follows:
1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by
TCT No. T-29545 registered in the name of Nimfa O. Usero;
2. That according to my survey, I found out that there is no existing creek on the
boundary of the said lot;
3. That based on the relocation plan surveyed by the undersigned, attached herewith,
appearing is the encroachment on the above-mentioned lot by Spouses
Herminigildo and Cecilia Polinar with an area of FORTY THREE (43) SQUARE
METERS;
4. That this affidavit was made in compliance with Court Order dated February 23,
2000 of Metropolitan Trial Court, Las Pias City, Branch LXXIX.[4]
On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants
ordering them:

a) To vacate and remove at their expense the improvement made on the subject lot;
b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion
encroached from the time of the filing of the complaint until the same is finally
vacated;
c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.

SO ORDERED.[5]

The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the
Regional Trial Court of Las Pias, Branch 253 which heard the appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed
the decision of the trial court and ordered the dismissal of the complaint. It confirmed the
existence of the creek between the northwestern portion of the lot of petitioner Samela and the
southwestern portion of the lot of the spouses Polinar:
Finding the existence of a creek between the respective properties of the parties, plaintiff-
appellee cannot therefore lay claim of lawful ownership of that portion because the same forms
part of public dominion. Consequently, she cannot legally stop the defendants-appellants from
rip-rapping the bank of the creek to protect the latters property from soil erosion thereby
avoiding danger to their lives and damage to property.

Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-
appellants are not duty bound to pay the former compensation for the use of the same. As a
result, they may maintain the said improvements introduced thereon subject to existing laws,
rules and regulations and/or ordinances appurtenant thereto.

WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan

Trial Court, Las Pias is REVERSED. Accordingly, the instant complaint is DISMISSED.

SO ORDERED.[6]

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the
finding of the Municipal Trial Court:

From the foregoing, defendants-appellants may maintain the improvements introduced on the
subject portion of the lot subject to existing laws, rules and regulations and/or ordinances
pertaining thereto. Consequently, no compensation may be awarded in favor of the plaintiff-
appellee.

WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of

the Las Pias City Metropolitan Trial Court is REVERSED. Accordingly, the instant complaint is
DISMISSED.

From the adverse decisions of the Regional Trial Court, petitioners filed their respective
petitions for review on certiorari to the Court of Appeals. Petitioner Samelas case was docketed
as CA-G.R. SP 64181 while that of petitioner Usero was docketed as CA-G.R. SP 64718.
Both petitions failed in the CA. Thus the instant consolidated petitions.
The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly
encroached upon by the spouses Polinar, is the private property of petitioners or part of the
creek and therefore part of the public domain. Clearly this an issue which calls for a review of
facts already determined by the Court of Appeals.
The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules
of Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are devoid of support by the evidence on record or the assailed judgment is
based on a misapprehension of facts.[7] This is obviously not the case here.
A careful scrutiny of the records reveals that the assailed decisions are founded on
sufficient evidence. That the subject strip of land is a creek is evidenced by: (1) a barangay
certification that a creek exists in the disputed strip of land; (2) a certification from the Second
Manila Engineering District, NCR-DPWH, that the western portion of Pilar Village where the
subject strip of land is located is bounded by a tributary of Talon Creek and (3) photographs
showing the abundance of water lilies in the subject strip of land. The Court of Appeals was
correct: the fact that water lilies thrive in that strip of land can only mean that there is a
permanent stream of water or creek there.
 In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners
presented the TCTs of their respective lots to prove that there is no creek between their
properties and that of the Polinars. However, an examination of said TCTs reveals that the
descriptions thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no
boundary description relative to the northwest portion of the property pertaining to the site of the
creek. Likewise in TCT No. T-22329-A of the spouses Polinar, the southeast portion which
pertains to the site of the creek has no described boundary. Moreover the tax declaration
presented by petitioner is devoid of any entry on the west boundary vis-a-vis the location of the
creek. All the pieces of evidence taken together, we can only conclude that the adjoining
portion of these boundaries is in fact a creek and belongs to no one but the state.
Property is either of public dominion or of private ownership.[8] Concomitantly, Article 420 of
the Civil Code provides:

ART. 420. The following things are property of public dominion:

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

The phrase others of similar character includes a creek which is a recess or an arm of a
river. It is property belonging to the public domain which is not susceptible to private
ownership.[9]Being public water, a creek cannot be registered under the Torrens System in the
name of any individual[10].
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent
the erosion of their property.
WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the
Court of Appeals in CA-G.R. SP 64181 and CA-G.R. SP 64718 are affirmed in toto.
SO ORDERED.

G.R. No. 155650 July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE,
SANGGUNIANG PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE,
and CITY TREASURER OF PARAAQUE, respondents.

DECISION

CARPIO, J.:

The Antecedents

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International
Airport (NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as
the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive
Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos.
Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, improvements and
equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600
hectares of land,3 including the runways and buildings ("Airport Lands and Buildings") then
under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of
the land transferred to MIAA shall be disposed of through sale or any other mode unless
specifically approved by the President of the Philippines.5

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion
No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption
from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City.
MIAA then paid some of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of
Paraaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken
down as follows:

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

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75

#9476101 for P28,676,480.00

#9476103 for P49,115.006

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and
warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque
threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the
real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The
OGCC pointed out that Section 206 of the Local Government Code requires persons exempt
from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA
Charter is the proof that MIAA is exempt from real estate tax.

On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and
injunction, with prayer for preliminary injunction or temporary restraining order. The petition
sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and
auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-
G.R. SP No. 66878.

On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond
the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002
MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA
filed on 5 December 2002 the present petition for review.7

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the
Barangay Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public
market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall. The City of
Paraaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily
Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public
auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00
a.m., at the Legislative Session Hall Building of Paraaque City.

A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this
Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining
Order. The motion sought to restrain respondents the City of Paraaque, City Mayor of
Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the
City Assessor of Paraaque ("respondents") from auctioning the Airport Lands and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective
immediately. The Court ordered respondents to cease and desist from selling at public auction
the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court
issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the
conclusion of the public auction.

On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.

On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the
directive issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor
General subsequently submitted their respective Memoranda.

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the
name of MIAA. However, MIAA points out that it cannot claim ownership over these properties
since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The
MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the
general public. Since the Airport Lands and Buildings are devoted to public use and public
service, the ownership of these properties remains with the State. The Airport Lands and
Buildings are thus inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the
payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section
234 of the Local Government Code because the Airport Lands and Buildings are owned by the
Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax
itself. MIAA points out that the reason for tax exemption of public property is that its taxation
would not inure to any public advantage, since in such a case the tax debtor is also the tax
creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly
withdrew the tax exemption privileges of "government-owned and-controlled corporations"
upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of
statutory construction is that the express mention of one person, thing, or act excludes all
others. An international airport is not among the exceptions mentioned in Section 193 of the
Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport
Lands and Buildings are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v.
Marcos8 where we held that the Local Government Code has withdrawn the exemption from
real estate tax granted to international airports. Respondents further argue that since MIAA has
already paid some of the real estate tax assessments, it is now estopped from claiming that the
Airport Lands and Buildings are exempt from real estate tax.

The Issue

This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are
exempt from real estate tax under existing laws. If so exempt, then the real estate tax
assessments issued by the City of Paraaque, and all proceedings taken pursuant to such
assessments, are void. In such event, the other issues raised in this petition become moot.

The Court's Ruling

We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by
local governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the

National Government and thus exempt from local taxation. Second, the real properties of MIAA
are owned by the Republic of the Philippines and thus exempt from real estate tax.

1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not

exempt from real estate tax. Respondents claim that the deletion of the phrase "any
government-owned or controlled so exempt by its charter" in Section 234(e) of the Local
Government Code withdrew the real estate tax exemption of government-owned or controlled
corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax
Code enumerating the entities exempt from real estate tax.

There is no dispute that a government-owned or controlled corporation is not exempt from real
estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13)
of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned
or controlled corporation as follows:

SEC. 2. General Terms Defined. x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a

stock or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or through
its instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x.
(Emphasis supplied)

A government-owned or controlled corporation must be "organized as a stock or non-stock

corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock
corporation because it has no capital stock divided into shares. MIAA has no stockholders or
voting shares. Section 10 of the MIAA Charter9provides:

SECTION 10. Capital. The capital of the Authority to be contributed by the National
Government shall be increased from Two and One-half Billion (P2,500,000,000.00)
Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:

(a) The value of fixed assets including airport facilities, runways and equipment and such
other properties, movable and immovable[,] which may be contributed by the National
Government or transferred by it from any of its agencies, the valuation of which shall be
determined jointly with the Department of Budget and Management and the Commission
on Audit on the date of such contribution or transfer after making due allowances for
depreciation and other deductions taking into account the loans and other liabilities of
the Authority at the time of the takeover of the assets and other properties;

(b) That the amount of P605 million as of December 31, 1986 representing about
seventy percentum (70%) of the unremitted share of the National Government from 1983
to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. O. No.
903 as amended, shall be converted into the equity of the National Government in the
Authority. Thereafter, the Government contribution to the capital of the Authority shall be
provided in the General Appropriations Act.

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is
divided into shares and x x x authorized to distribute to the holders of such shares
dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no
stockholders or voting shares. Hence, MIAA is not a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the
Corporation Code defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." A non-stock corporation must
have members. Even if we assume that the Government is considered as the sole member of
MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute
any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to
remit 20% of its annual gross operating income to the National Treasury.11 This prevents MIAA
from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry, agriculture and like chambers."
MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate
an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation. What then is the legal status of MIAA within the
National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference
is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated
within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation. Unless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality exercising not only governmental
but also corporate powers. Thus, MIAA exercises the governmental powers of eminent
domain,12 police authority13 and the levying of fees and charges.14 At the same time, MIAA
exercises "all the powers of a corporation under the Corporation Law, insofar as these powers
are not inconsistent with the provisions of this Executive Order."15

Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with
the department framework. The MIAA Charter expressly states that transforming MIAA into a
"separate and autonomous body"16 will make its operation more "financially viable."17

Many government instrumentalities are vested with corporate powers but they do not become
stock or non-stock corporations, which is a necessary condition before an agency or
instrumentality is deemed a government-owned or controlled corporation. Examples are the
Mactan International Airport Authority, the Philippine Ports Authority, the University of the
Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise
corporate powers but they are not organized as stock or non-stock corporations as required by
Section 2(13) of the Introductory Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate entities. However, they are
not government-owned or controlled corporations in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal relationship and status of
government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government
Code, which states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of the
following:

xxxx

(o) Taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities and local government units.(Emphasis and underscoring
supplied)

Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While
the 1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines and limitations as the
Congress may provide."18

When local governments invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments. The rule is that a tax is never presumed
and there must be clear language in the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies with greater force when
local governments seek to tax national government instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the
exemption. However, when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of the national
government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit
of the government itself or its agencies. In such case the practical effect of an exemption
is merely to reduce the amount of money that has to be handled by government in the
course of its operations. For these reasons, provisions granting exemptions to
government agencies may be construed liberally, in favor of non tax-liability of such
agencies.19

There is, moreover, no point in national and local governments taxing each other, unless a
sound and compelling policy requires such transfer of public funds from one government pocket
to another.

There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is
when the legislature clearly intended to tax government instrumentalities for the delivery
of essential public services for sound and compelling policy considerations. There must
be express language in the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in
the Code, local governments cannot tax national government instrumentalities. As this Court
held in Basco v. Philippine Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede, burden or

in any manner control the operation of constitutional laws enacted by Congress
to carry into execution the powers vested in the federal government. (MC Culloch
v. Maryland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local
governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire
absence of power on the part of the States to touch, in that way (taxation) at
least, the instrumentalities of the United States (Johnson v. Maryland, 254 US
51) and it can be agreed that no state or political subdivision can regulate a
federal instrumentality in such a way as to prevent it from consummating its
federal responsibilities, or even to seriously burden it in the accomplishment of
them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of
what local authorities may perceive to be undesirable activities or enterprise using the
power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc
Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of
the very entity which has the inherent power to wield it. 20

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore
owned by the State or the Republic of the Philippines. The Civil Code provides:

ARTICLE 419. Property is either of public dominion or of private ownership.

ARTICLE 420. The following things are property of public dominion:

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

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

ARTICLE 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
 ARTICLE 422. Property of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the State.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code,
like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are
owned by the State. The term "ports" includes seaports and airports. The MIAA Airport
Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil
Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned
by the State or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the
public for international and domestic travel and transportation. The fact that the MIAA
collects terminal fees and other charges from the public does not remove the character of the
Airport Lands and Buildings as properties for public use. The operation by the government of a
tollway does not change the character of the road as one for public use. Someone must pay for
the maintenance of the road, either the public indirectly through the taxes they pay the
government, or only those among the public who actually use the road through the toll fees they
pay upon using the road. The tollway system is even a more efficient and equitable manner of
taxing the public for the maintenance of public roads.

The charging of fees to the public does not determine the character of the property whether it is
of public dominion or not. Article 420 of the Civil Code defines property of public dominion as
one "intended for public use." Even if the government collects toll fees, the road is still "intended
for public use" if anyone can use the road under the same terms and conditions as the rest of
the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the
speed restrictions and other conditions for the use of the road do not affect the public character
of the road.

The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to
airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection
of such fees does not change the character of MIAA as an airport for public use. Such fees are
often termed user's tax. This means taxing those among the public who actually use a public
facility instead of taxing all the public including those who never use the particular public facility.
A user's tax is more equitable a principle of taxation mandated in the 1987 Constitution.21

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the
Philippines for both international and domestic air traffic,"22 are properties of public dominion
because they are intended for public use. As properties of public dominion, they
indisputably belong to the State or the Republic of the Philippines.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of
public dominion. As properties of public dominion, the Airport Lands and Buildings are
outside the commerce of man. The Court has ruled repeatedly that properties of public
dominion are outside the commerce of man. As early as 1915, this Court already ruled
in Municipality of Cavite v. Rojas that properties devoted to public use are outside the
commerce of man, thus:
 According to article 344 of the Civil Code: "Property for public use in provinces and in
towns comprises the provincial and town roads, the squares, streets, fountains, and
public waters, the promenades, and public works of general service supported by said
towns or provinces."

The said Plaza Soledad being a promenade for public use, the municipal council of
Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to
lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said
plaza or public place to the defendant for private use the plaintiff municipality exceeded
its authority in the exercise of its powers by executing a contract over a thing of which it
could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the
commerce of man may be the object of a contract, and plazas and streets are outside
of this commerce, as was decided by the supreme court of Spain in its decision of
February 12, 1895, which says: "Communal things that cannot be sold because they
are by their very nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion
are outside the commerce of man:

xxx Town plazas are properties of public dominion, to be devoted to public use and to
be made available to the public in general. They are outside the commerce of
man and cannot be disposed of or even leased by the municipality to private parties.
While in case of war or during an emergency, town plazas may be occupied temporarily
by private individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary occupation or use must
also cease, and the town officials should see to it that the town plazas should ever be
kept open to the public and free from encumbrances or illegal private
constructions.24 (Emphasis supplied)

The Court has also ruled that property of public dominion, being outside the commerce of man,
cannot be the subject of an auction sale.25

Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale
of any property of public dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to encumbrances, foreclosures and
auction sale. This will happen if the City of Paraaque can foreclose and compel the auction
sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.

Before MIAA can encumber26 the Airport Lands and Buildings, the President must
first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the
Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general
law governing the classification and disposition of lands of the public domain other than timber
and mineral lands,"27 provide:

SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural
Resources, the President may designate by proclamation any tract or tracts of land of
 the public domain as reservations for the use of the Republic of the Philippines or of any
of its branches, or of the inhabitants thereof, in accordance with regulations prescribed
for this purposes, or for quasi-public uses or purposes when the public interest requires
it, including reservations for highways, rights of way for railroads, hydraulic power sites,
irrigation systems, communal pastures or lequas communales, public parks, public
quarries, public fishponds, working men's village and other improvements for the public
benefit.

SECTION 88. The tract or tracts of land reserved under the provisions of Section
eighty-three shall be non-alienable and shall not be subject to occupation, entry,
sale, lease, or other disposition until again declared alienable under the
provisions of this Act or by proclamation of the President. (Emphasis and
underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings
from public use, these properties remain properties of public dominion and are inalienable.
Since the Airport Lands and Buildings are inalienable in their present status as properties of
public dominion, they are not subject to levy on execution or foreclosure sale. As long as the
Airport Lands and Buildings are reserved for public use, their ownership remains with the State
or the Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to
withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, which states:

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

x x x x. (Emphasis supplied)

There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by
law or presidential proclamation from public use, they are properties of public dominion, owned
by the Republic and outside the commerce of man.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section
48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to
hold title to real properties owned by the Republic, thus:

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

(1) For property belonging to and titled in the name of the Republic of the Philippines, by
the President, unless the authority therefor is expressly vested by law in another officer.
 (2) For property belonging to the Republic of the Philippines but titled in the name
of any political subdivision or of any corporate agency or instrumentality, by the
executive head of the agency or instrumentality. (Emphasis supplied)

In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer
because even its executive head cannot sign the deed of conveyance on behalf of the Republic.
Only the President of the Republic can sign such deed of conveyance.28

d. Transfer to MIAA was Meant to Implement a Reorganization

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and
Buildings from the Bureau of Air Transportation of the Department of Transportation and
Communications. The MIAA Charter provides:

SECTION 3. Creation of the Manila International Airport Authority. x x x x

The land where the Airport is presently located as well as the surrounding land
area of approximately six hundred hectares, are hereby transferred, conveyed and
assigned to the ownership and administration of the Authority, subject to existing
rights, if any. The Bureau of Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within one year from the promulgation
of this Executive Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through sale or through any
other mode unless specifically approved by the President of the Philippines.
(Emphasis supplied)

SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public
airport facilities, runways, lands, buildings and other property, movable or
immovable, belonging to the Airport, and all assets, powers, rights, interests and
privileges belonging to the Bureau of Air Transportation relating to airport works or
air operations, including all equipment which are necessary for the operation of crash fire
and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)

SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of
Air Transportation and Transitory Provisions. The Manila International Airport
including the Manila Domestic Airport as a division under the Bureau of Air
Transportation is hereby abolished.

x x x x.

The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic
receiving cash, promissory notes or even stock since MIAA is not a stock corporation.

The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport
Lands and Buildings to MIAA, thus:

WHEREAS, the Manila International Airport as the principal airport of the Philippines for
both international and domestic air traffic, is required to provide standards of airport
accommodation and service comparable with the best airports in the world;
 WHEREAS, domestic and other terminals, general aviation and other facilities, have to
be upgraded to meet the current and future air traffic and other demands of aviation in
Metro Manila;

WHEREAS, a management and organization study has indicated that the objectives of
providing high standards of accommodation and service within the context of a
financially viable operation, will best be achieved by a separate and autonomous
body; and

WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree

No. 1772, the President of the Philippines is given continuing authority to reorganize
the National Government, which authority includes the creation of new entities,
agencies and instrumentalities of the Government[.] (Emphasis supplied)

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA
was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The
purpose was merely to reorganize a division in the Bureau of Air Transportation into a
separate and autonomous body. The Republic remains the beneficial owner of the Airport
Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any
ownership rights over MIAA's assets adverse to the Republic.

The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be
disposed through sale or through any other mode unless specifically approved by the
President of the Philippines." This only means that the Republic retained the beneficial
ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only
the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport
Lands and Buildings, MIAA does not own the Airport Lands and Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and
Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA
Charter, the President is the only one who can authorize the sale or disposition of the Airport
Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the
Republic.

e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property
owned by the Republic of the Philippines." Section 234(a) provides:

SEC. 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;

x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits
local governments from imposing "[t]axes, fees or charges of any kind on the National
Government, its agencies andinstrumentalities x x x." The real properties owned by the
Republic are titled either in the name of the Republic itself or in the name of agencies or
instrumentalities of the National Government. The Administrative Code allows real property
owned by the Republic to be titled in the name of agencies or instrumentalities of the national
government. Such real properties remain owned by the Republic and continue to be exempt
from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of
the national government. This happens when title of the real property is transferred to an
agency or instrumentality even as the Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its tax exemption only
if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o)
of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA
the beneficial use of the Airport Lands and Buildings, such fact does not make these real
properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not
exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases
to private corporations is subject to real estate tax. In such a case, MIAA has granted the
beneficial use of such land area for a consideration to ataxable person and therefore such land
area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court
ruled:

Accordingly, we hold that the portions of the land leased to private entities as well as
those parts of the hospital leased to private individuals are not exempt from such taxes.
On the other hand, the portions of the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or non-paying, are exempt from real
property taxes.29

3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of
the Local Government Code of 1991 withdrew the tax exemption of "all persons, whether
natural or juridical" upon the effectivity of the Code. Section 193 provides:

SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in

this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under R.A. No.
6938, non-stock and non-profit hospitals and educational institutions are hereby
withdrawn upon effectivity of this Code. (Emphasis supplied)

The minority states that MIAA is indisputably a juridical person. The minority argues that since
the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is
not exempt from real estate tax. Thus, the minority declares:

It is evident from the quoted provisions of the Local Government Code that the
withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To
 repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax
exemption applies to all persons. The reference to or the inclusion of GOCCs is only
clarificatory or illustrative of the explicit provision.

The term "All persons" encompasses the two classes of persons recognized
under our laws, natural and juridical persons. Obviously, MIAA is not a natural
person. Thus, the determinative test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)

The minority posits that the "determinative test" whether MIAA is exempt from local taxation is
its status whether MIAA is a juridical person or not. The minority also insists that "Sections
193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of
exemption."

The argument of the minority is fatally flawed. Section 193 of the Local Government Code
expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in
this Code." Now, Section 133(o) of the Local Government Code expressly provides
otherwise, specifically prohibiting local governments from imposing any kind of tax on national
government instrumentalities. Section 133(o) states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. (Emphasis and underscoring supplied)

By express mandate of the Local Government Code, local governments cannot impose any kind
of tax on national government instrumentalities like the MIAA. Local governments are devoid of
power to tax the national government, its agencies and instrumentalities. The taxing powers of
local governments do not extend to the national government, its agencies and instrumentalities,
"[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The
saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of
real property owned by the Republic.

The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons
are subject to tax by local governments. The minority insists that the juridical persons exempt
from local taxation are limited to the three classes of entities specifically enumerated as exempt
in Section 193. Thus, the minority states:

x x x Under Section 193, the exemption is limited to (a) local water districts; (b)
cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-
profit hospitals and educational institutions. It would be belaboring the obvious why the
MIAA does not fall within any of the exempt entities under Section 193. (Emphasis
supplied)

The minority's theory directly contradicts and completely negates Section 133(o) of the Local
Government Code. This theory will result in gross absurdities. It will make the national
government, which itself is a juridical person, subject to tax by local governments since the
national government is not included in the enumeration of exempt entities in Section 193. Under
this theory, local governments can impose any kind of local tax, and not only real estate tax, on
the national government.

Under the minority's theory, many national government instrumentalities with juridical
personalities will also be subject to any kind of local tax, and not only real estate tax. Some of
the national government instrumentalities vested by law with juridical personalities are: Bangko
Sentral ng Pilipinas,30 Philippine Rice Research Institute,31Laguna Lake

Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development

Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39

The minority's theory violates Section 133(o) of the Local Government Code which expressly
prohibits local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish between national government
instrumentalities with or without juridical personalities. Where the law does not distinguish,
courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national
government instrumentality under Section 133(o) of the Local Government Code. Section
133(o) is the specific provision of law prohibiting local governments from imposing any kind of
tax on the national government, its agencies and instrumentalities.

Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise
provided in this Code." This means that unless the Local Government Code grants an express
authorization, local governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no power to tax the national
government, its agencies and instrumentalities. As an exception to this rule, local governments
may tax the national government, its agencies and instrumentalities only if the Local
Government Code expressly so provides.

The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of
the Code, which makes the national government subject to real estate tax when it gives the
beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government
Code provides:

SEC. 234. Exemptions from Real Property Tax The following are exempted from
payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person.

x x x. (Emphasis supplied)

Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The
exception to this exemption is when the government gives the beneficial use of the real property
to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national
government, its agencies and instrumentalities are subject to any kind of tax by local
governments. The exception to the exemption applies only to real estate tax and not to any
other tax. The justification for the exception to the exemption is that the real property, although
owned by the Republic, is not devoted to public use or public service but devoted to the private
gain of a taxable person.

The minority also argues that since Section 133 precedes Section 193 and 234 of the Local
Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:

x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an
accepted rule of construction, in case of conflict the subsequent provisions should
prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the
general exemptions attaching to instrumentalities under Section 133(o) of the Local
Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis
supplied)

The minority assumes that there is an irreconcilable conflict between Section 133 on one hand,
and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much
less has any one presenteda persuasive argument that there is such a conflict. The minority's
assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two
reasons.

First, there is no conflict whatsoever between Sections 133 and 193 because Section 193
expressly admits its subordination to other provisions of the Code when Section 193 states
"[u]nless otherwise provided in this Code." By its own words, Section 193 admits the superiority
of other provisions of the Local Government Code that limit the exercise of the taxing power in
Section 193. When a provision of law grants a power but withholds such power on certain
matters, there is no conflict between the grant of power and the withholding of power. The
grantee of the power simply cannot exercise the power on matters withheld from its power.

Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local
Government Units." Section 133 limits the grant to local governments of the power to tax, and
not merely the exercise of a delegated power to tax. Section 133 states that the taxing powers
of local governments "shall not extend to the levy" of any kind of tax on the national
government, its agencies and instrumentalities. There is no clearer limitation on the taxing
power than this.

Since Section 133 prescribes the "common limitations" on the taxing powers of local
governments, Section 133 logically prevails over Section 193 which grants local governments
such taxing powers. By their very meaning and purpose, the "common limitations" on the taxing
power prevail over the grant or exercise of the taxing power. If the taxing power of local
governments in Section 193 prevails over the limitations on such taxing power in Section 133,
then local governments can impose any kind of tax on the national government, its agencies
and instrumentalities a gross absurdity.

Local governments have no power to tax the national government, its agencies and
instrumentalities, except as otherwise provided in the Local Government Code pursuant to the
saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This exception
which is an exception to the exemption of the Republic from real estate tax imposed by local
governments refers to Section 234(a) of the Code. The exception to the exemption in Section
234(a) subjects real property owned by the Republic, whether titled in the name of the national
government, its agencies or instrumentalities, to real estate tax if the beneficial use of such
property is given to a taxable entity.

The minority also claims that the definition in the Administrative Code of the phrase
"government-owned or controlled corporation" is not controlling. The minority points out that
Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions are
not controlling when it provides:

SEC. 2. General Terms Defined. Unless the specific words of the text, or the context
as a whole, or a particular statute, shall require a different meaning:

xxxx

The minority then concludes that reliance on the Administrative Code definition is "flawed."

The minority's argument is a non sequitur. True, Section 2 of the Administrative Code
recognizes that a statute may require a different meaning than that defined in the Administrative
Code. However, this does not automatically mean that the definition in the Administrative Code
does not apply to the Local Government Code. Section 2 of the Administrative Code clearly
states that "unless the specific words x x x of a particular statute shall require a different
meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless there
is specific language in the Local Government Code defining the phrase "government-owned or
controlled corporation" differently from the definition in the Administrative Code, the definition in
the Administrative Code prevails.

The minority does not point to any provision in the Local Government Code defining the phrase
"government-owned or controlled corporation" differently from the definition in the Administrative
Code. Indeed, there is none. The Local Government Code is silent on the definition of the
phrase "government-owned or controlled corporation." The Administrative Code, however,
expressly defines the phrase "government-owned or controlled corporation." The inescapable
conclusion is that the Administrative Code definition of the phrase "government-owned or
controlled corporation" applies to the Local Government Code.

The third whereas clause of the Administrative Code states that the Code "incorporates in a
unified document the major structural, functional and procedural principles and rules of
governance." Thus, the Administrative Code is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and instrumentalities.
Unless a statute expressly provides for a different status and relationship for a specific
government unit or entity, the provisions of the Administrative Code prevail.

The minority also contends that the phrase "government-owned or controlled corporation"
should apply only to corporations organized under the Corporation Code, the general
incorporation law, and not to corporations created by special charters. The minority sees no
reason why government corporations with special charters should have a capital stock. Thus,
the minority declares:

I submit that the definition of "government-owned or controlled corporations" under the

Administrative Code refer to those corporations owned by the government or its
 instrumentalities which are created not by legislative enactment, but formed and
organized under the Corporation Code through registration with the Securities and
Exchange Commission. In short, these are GOCCs without original charters.

xxxx

It might as well be worth pointing out that there is no point in requiring a capital structure
for GOCCs whose full ownership is limited by its charter to the State or Republic. Such
GOCCs are not empowered to declare dividends or alienate their capital shares.

The contention of the minority is seriously flawed. It is not in accord with the Constitution and
existing legislations. It will also result in gross absurdities.

First, the Administrative Code definition of the phrase "government-owned or controlled

corporation" does not distinguish between one incorporated under the Corporation Code or
under a special charter. Where the law does not distinguish, courts should not distinguish.

Second, Congress has created through special charters several government-owned

corporations organized as stock corporations. Prime examples are the Land Bank of the
Philippines and the Development Bank of the Philippines. The special charter40 of the Land
Bank of the Philippines provides:

SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion
pesos, divided into seven hundred and eighty million common shares with a par value of
ten pesos each, which shall be fully subscribed by the Government, and one hundred
and twenty million preferred shares with a par value of ten pesos each, which shall be
issued in accordance with the provisions of Sections seventy-seven and eighty-three of
this Code. (Emphasis supplied)

Likewise, the special charter41 of the Development Bank of the Philippines provides:

SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall
be Five Billion Pesos to be divided into Fifty Million common shares with par value of
P100 per share. These shares are available for subscription by the National
Government. Upon the effectivity of this Charter, the National Government shall
subscribe to Twenty-Five Million common shares of stock worth Two Billion Five
Hundred Million which shall be deemed paid for by the Government with the net asset
values of the Bank remaining after the transfer of assets and liabilities as provided in
Section 30 hereof. (Emphasis supplied)

Other government-owned corporations organized as stock corporations under their special

charters are the Philippine Crop Insurance Corporation,42 Philippine International Trading
Corporation,43 and the Philippine National Bank44 before it was reorganized as a stock
corporation under the Corporation Code. All these government-owned corporations organized
under special charters as stock corporations are subject to real estate tax on real properties
owned by them. To rule that they are not government-owned or controlled corporations because
they are not registered with the Securities and Exchange Commission would remove them from
the reach of Section 234 of the Local Government Code, thus exempting them from real estate
tax.
Third, the government-owned or controlled corporations created through special charters are
those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The
first condition is that the government-owned or controlled corporation must be established for
the common good. The second condition is that the government-owned or controlled
corporation must meet the test of economic viability. Section 16, Article XII of the 1987
Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability. (Emphasis and underscoring
supplied)

The Constitution expressly authorizes the legislature to create "government-owned or controlled

corporations" through special charters only if these entities are required to meet the twin
conditions of common good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters unless they are made
to comply with the two conditions of common good and economic viability. The test of economic
viability applies only to government-owned or controlled corporations that perform economic or
commercial activities and need to compete in the market place. Being essentially economic
vehicles of the State for the common good meaning for economic development purposes
these government-owned or controlled corporations with special charters are usually organized
as stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing

governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically viable
since the government may even subsidize their entire operations. These instrumentalities are
not the "government-owned or controlled corporations" referred to in Section 16, Article XII of
the 1987 Constitution.

Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special charters corporations
that perform economic or commercial activities, such entities known as "government-owned
or controlled corporations" must meet the test of economic viability because they compete in
the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the
Philippines and similar government-owned or controlled corporations, which derive their income
to meet operating expenses solely from commercial transactions in competition with the private
sector. The intent of the Constitution is to prevent the creation of government-owned or
controlled corporations that cannot survive on their own in the market place and thus merely
drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
 MR. OPLE: Madam President, the reason for this concern is really that when the
government creates a corporation, there is a sense in which this corporation becomes
exempt from the test of economic performance. We know what happened in the past. If
a government corporation loses, then it makes its claim upon the taxpayers' money
through new equity infusions from the government and what is always invoked is the
common good. That is the reason why this year, out of a budget of P115 billion for the
entire government, about P28 billion of this will go into equity infusions to support a few
government financial institutions. And this is all taxpayers' money which could have been
relocated to agrarian reform, to social services like health and education, to augment the
salaries of grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the
"common good," this becomes a restraint on future enthusiasts for state capitalism to
excuse themselves from the responsibility of meeting the market test so that they
become viable. And so, Madam President, I reiterate, for the committee's consideration
and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the
standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the
common good.45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:

The second sentence was added by the 1986 Constitutional Commission. The
significant addition, however, is the phrase "in the interest of the common good and
subject to the test of economic viability." The addition includes the ideas that they must
show capacity to function efficiently in business and that they should not go into activities
which the private sector can do better. Moreover, economic viability is more than
financial viability but also includes capability to make profit and generate benefits not
quantifiable in financial terms.46 (Emphasis supplied)

Clearly, the test of economic viability does not apply to government entities vested with
corporate powers and performing essential public services. The State is obligated to render
essential public services regardless of the economic viability of providing such service. The non-
economic viability of rendering such essential public service does not excuse the State from
withholding such essential services from the public.

However, government-owned or controlled corporations with special charters, organized

essentially for economic or commercial objectives, must meet the test of economic viability.
These are the government-owned or controlled corporations that are usually organized under
their special charters as stock corporations, like the Land Bank of the Philippines and the
Development Bank of the Philippines. These are the government-owned or controlled
corporations, along with government-owned or controlled corporations organized under the
Corporation Code, that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code.

The MIAA need not meet the test of economic viability because the legislature did not create
MIAA to compete in the market place. MIAA does not compete in the market place because
there is no competing international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international airport of the Philippines. The
operation of an international airport requires the presence of personnel from the following
government agencies:

1. The Bureau of Immigration and Deportation, to document the arrival and departure of
passengers, screening out those without visas or travel documents, or those with hold
departure orders;

2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited
importations;

3. The quarantine office of the Department of Health, to enforce health measures against
the spread of infectious diseases into the country;

4. The Department of Agriculture, to enforce measures against the spread of plant and
animal diseases into the country;

5. The Aviation Security Command of the Philippine National Police, to prevent the entry
of terrorists and the escape of criminals, as well as to secure the airport premises from
terrorist attack or seizure;

6. The Air Traffic Office of the Department of Transportation and Communications, to

authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off
from, the airport; and

7. The MIAA, to provide the proper premises such as runway and buildings for the
government personnel, passengers, and airlines, and to manage the airport operations.

All these agencies of government perform government functions essential to the operation of an
international airport.

MIAA performs an essential public service that every modern State must provide its citizens.
MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on
passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory
or administrative fees47 and not income from commercial transactions.

MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated
within the department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds, and
enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)

The fact alone that MIAA is endowed with corporate powers does not make MIAA a
government-owned or controlled corporation. Without a change in its capital structure, MIAA
remains a government instrumentality under Section 2(10) of the Introductory Provisions of the
Administrative Code. More importantly, as long as MIAA renders essential public services, it
need not comply with the test of economic viability. Thus, MIAA is outside the scope of the
phrase "government-owned or controlled corporations" under Section 16, Article XII of the 1987
Constitution.

The minority belittles the use in the Local Government Code of the phrase "government-owned
or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The 1987
Constitution prescribes explicit conditions for the creation of "government-owned or controlled
corporations." The Administrative Code defines what constitutes a "government-owned or
controlled corporation." To belittle this phrase as "clarificatory or illustrative" is grave error.

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13)

of the Introductory Provisions of the Administrative Code because it is not organized as a stock
or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of
economic viability. MIAA is a government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax
by local governments under Section 133(o) of the Local Government Code. The exception to
the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity
under the Local Government Code. Such exception applies only if the beneficial use of real
property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus
are properties of public dominion. Properties of public dominion are owned by the State or the
Republic. Article 420 of the Civil Code provides:

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

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

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

The term "ports x x x constructed by the State" includes airports and seaports. The Airport
Lands and Buildings of MIAA are intended for public use, and at the very least intended for
public service. Whether intended for public use or public service, the Airport Lands and
Buildings are properties of public dominion. As properties of public dominion, the Airport Lands
and Buildings are owned by the Republic and thus exempt from real estate tax under Section
234(a) of the Local Government Code.

4. Conclusion

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which
governs the legal relation and status of government units, agencies and offices within the entire
government machinery, MIAA is a government instrumentality and not a government-owned or
controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a
government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or
charges of any kind" by local governments. The only exception is when MIAA leases its real
property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in
which case the specific real property leased becomes subject to real estate tax. Thus, only
portions of the Airport Lands and Buildings leased to taxable persons like private parties are
subject to real estate tax by the City of Paraaque.

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to
public use, are properties of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which
includes public airports and seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever
that the Airport Lands and Buildings are expressly exempt from real estate tax under Section
234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of
public dominion are not subject to execution or foreclosure sale.

WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court
of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878.
We DECLARE the Airport Lands and Buildings of the Manila International Airport
Authority EXEMPT from the real estate tax imposed by the City of Paraaque. We
declare VOID all the real estate tax assessments, including the final notices of real estate tax
delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the Manila
International Airport Authority, except for the portions that the Manila International Airport
Authority has leased to private parties. We also declareVOID the assailed auction sale, and all
its effects, of the Airport Lands and Buildings of the Manila International Airport Authority.

No costs.

SO ORDERED.
 HACIENDA BIGAA, INC., G.R. No. 174160
Petitioner,
Present:

- versus - CARPIO, J., Chairperson,

BRION,
DEL CASTILLO,
ABAD, and
EPIFANIO V. CHAVEZ (deceased), PEREZ, JJ.
substituted by SANTIAGO V. CHAVEZ,
Respondent. -- -
Promulgated:

April 20, 2010

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

D E C I S I O N

BRION, J.:

This petition for review on certiorari[1] challenges the Court of Appeals (CA) decision of
May 31, 2001[2] and resolution of August 2, 2006[3] in CA-G.R. SP No. 46176, affirming in
toto the judgments of both the Municipal Trial Court (MTC) of Calatagan and the Regional Trial
Court (RTC) of Batangas dismissing the complaint for forcible entry in Civil Case No. 129.

THE FACTS

We summarize below the factual antecedents of the present case based on the records
before us.

On June 5, 1996, petitioner Hacienda Bigaa, Inc. (Hacienda Bigaa) filed with the
Municipal Trial Court (MTC) of Calatagan, Batangas a complaint[4] for ejectment (forcible entry)
and damages with application for writ of preliminary injunction against respondent Epifanio V.
Chavez (Chavez), docketed as Civil Case No. 129. The complaint alleged that Chavez, by
force, strategy and/or stealth, entered on April 29, 1996 the premises of Hacienda Bigaa's
properties covered by Transfer Certificate of Title (TCT) Nos. 44695 and 56120 by cutting
through a section of the barbed wire fence surrounding the properties and destroying the lock of
one of its gates, subsequently building a house on the property, and occupying the lots without
the prior consent and against the will of Hacienda Bigaa.

The records show that the lots were originally covered by TCT No. 722 owned by
Ayala y Cia[5] and/or Alfonso, Jacobo and Enrique Zobel, with an area of 9,652.583 hectares,
known as Hacienda Calatagan. Ayala and/or the Zobels expanded TCT No. 722 to cover an
additional 2,000 hectares of land consisting, among others, of beach, foreshore and bay areas,
and navigable waters (excess areas), making it appear that these excess areas are part of
Hacienda Calatagan's TCT No. 722. The Ayalas and/or the Zobels later ordered the subdivision
of the hacienda, including these excess areas, and sold the subdivided lots to third parties.[6]

Among the buyers or transferees of the expanded and subdivided areas was Hacienda
Bigaa which caused the issuance of titles TCT Nos. 44695 and 56120 under its name
covering the purchased subdivided areas. Thus, in his answer before the MTC of Calatagan,
then defendant (now respondent) Epifanio V. Chavez alleged that then plaintiff (now petitioner)
Hacienda Bigaa is the successor-in-interest of Ayala y Cia, Hacienda Calatagan, Alfonso Zobel,
Jacobo Zobel and Enrique Zobel the original titular owners of TCT No. 722.

Portions of the same lands foreshore lands were leased out by the Republic, through
the Bureau of Fisheries, to qualified applicants in whose favor fishpond permits were
issued. The government-issued fishpond permits pertaining to lands covered by titles derived
from TCT No. 722 of Ayala y Cia and/or the Zobels, gave rise to ownership and/or possessory
disputes between the owners of Hacienda Calatagan and their privies and/or successors-in-
interest, on the one hand, and the Republic or its lessees or fishpond permittees, on the other.

Suits were filed in various courts in Batangas for the recovery of the areas in excess of
the area originally covered by TCT No. 722, which suits ultimately reached the Supreme
Court. In the Court's 1965 decisions in Dizon v. Rodriguez[7] (for quieting of title) and Republic
v. Ayala y Cia and/or Hacienda Calatagan, et al.[8] (for annulment of titles), the excess areas of
TCT No. 722 were categorically declared as unregisterable lands of the public domain such
that any title covering these excess areas are necessarily null and void. In these cases, the
Ayalas and the Zobels were found to be mere usurpers of public domain areas, and all
subdivision titles issued to them or their privies and covering these areas were invalidated; the
wrongfully registered public domain areas reverted to the Republic. In Dizon, the Court
declared as void the Zobels' TCT No. 2739 and its derivative titles covering subdivision Lots 1
and 49 areas sold to the Dizons as areas in excess of TCT No. 722 and are properly part of
the public domain. In Ayala y Cia, the Court invalidated TCT No. 9550 and all other subdivision
titles issued in favor of Ayala y Cia and/or the Zobels of Hacienda Calatagan over the areas
outside its private land covered by TCT No. 722. These areas, including the lots covered by
TCT No. 9550, reverted to public dominion.[9]

The pronouncement in the above cases led to the Court's 1988 decision in Republic v.
De los Angeles,[10] a case covering the same excess areas under a reinvindicatory claim of the
Republic aimed at recovering lands usurped by the Ayalas and the Zobels and at placing the
Republics lessees and fishpond permittees in possession. The Court effectively held that as
owner of the excess lands, the Republic has the right to place its lessees and fishpond
permittees among them Zoila de Chavez, predecessor-in-interest of Chavez in possession.
The Court invalidated TCT Nos. 3699 and 9262 for being among the other subdivision titles
declared void and ordered reverted to public dominion.

To return to the forcible entry case, then defendant (now respondent) Chavez alleged
in his answer before the MTC of Calatagan that his mother, Zoila de Chavez (who died intestate
on September 14, 1979) was a fishpond permittee/lessee under Fishpond Permit Nos. F-4572-
0 and F-24735 issued by the Bureau of Fisheries on April 21, 1959 and June 3, 1966,
respectively; that the areas covered by the permits are the same parcels of land which he
presently occupies as Zoila's successor-in-interest and which Hacienda Bigaa also claims.

Chavez likewise asserted that Hacienda Bigaa is the successor-in-interest of

Ayala y Cia, Hacienda Calatagan, Alfonso Zobel, Jacobo Zobel and Enrique Zobel who owned
land with an area of 9,652.583 hectares, covered by TCT No. 722 in the Registry of Deeds of
Batangas; that Ayala y Cia, the Zobels, or Hacienda Calatagan, illegally expanded the original
area of TCT No. 722 by 2,000 hectares; that suits were filed to recover the expanded area; that
these suits reached the Supreme Court which declared that these excess areas are part of the
public domain and ordered their reversion to the Republic; that the Supreme Court likewise
declared certain TCTs covering the subdivision lots outside the area of TCT No. 722 and issued
to transferees as null and void; therefore, Hacienda Bigaa's titles TCT Nos. 44695 and 56120
carry no probative value as they are of dubious origins and have been nullified by the
Supreme Court.[11]

Chavez further argued that the suit is barred by prior judgment in two prior cases (1)
Civil Case No. 78, a suit for unlawful detainer filed by the Zobels against Chavezs predecessor-
in-interest, Zoila de Chavez, before the then Justice of the Peace Court (now Municipal Trial
Court) of Calatagan, Batangas; and (2) Civil Case No. 653, a case ofaccion reinvindicatoria with
prayer for preliminary mandatory injunction filed by the Republic, Zoila de Chavez, and other
lessees or fishpond permittees of the Republic, against Enrique Zobel (Hacienda Bigaa's
predecessor-in-interest) before the then Court of First Instance of Batangas. This case reached
this Court as G.R. No. L-30240 entitled Republic of the Philippines v. De los Angeles, Enrique
Zobel, et al.[12] and was decided in 1988. Chavez asserts that the subject matter and the
issues involved in these cases are squarely similar and/or identical to the subject matter and
issues involved in the present forcible entry suit; the rulings in these two cases, therefore
constitute res judicata with respect to the present case.

The MTC held a preliminary conference where the parties stipulated and identified the
issues in the forcible entry case, viz: (1) who between the parties has a better right of
possession over the premises in question; (2) whether there is res judicata; and (3) whether
the parties are entitled to damages.[13] These are essentially the same basic issues that are
before us in the present petition.
The MTC, the RTC and the CAs Decision

The MTC rendered a decision[14] dismissing Hacienda Bigaa's complaint, holding that the
disputed lots form part of the areas illegally expanded and made to appear to be covered by
TCT No. 722 of Hacienda Bigaa's predecessors-in-interest (Ayala y Cia and/or the Zobels of
Hacienda Calatagan); hence, the Hacienda's title are null and void. In so ruling, the MTC
applied this Court's pronouncements in the antecedent cases of Dizon v.
Rodriguez,[15] Republic v. Ayala y Cia and/or Hacienda Calatagan, Zobel, et al.,[16] and Republic
v. De los Angeles.[17]

The MTC added that since Hacienda Bigaa did not present proof to counter Chavez's
claim that the disputed lots form part of the illegally expanded areas of Hacienda Calatagan,
these lots are deemed to be the same lots litigated in the previous cases. The MTC also found
prior possession in favor of Chavez, as revealed by the antecedent cases particularly, De los
Angeles where Chavezs mother, Zoila de Chavez, had been ousted by the Zobels from the
fishpond lots she occupied. The MTC reasoned out that Zoila could not have been ousted from
the premises had she not been in prior possession. Since Epifanio succeeded Zoila in the
possession of the property, he inherited the latters prior possession and cannot now be ousted
by Hacienda Bigaa.
 The MTC likewise rejected Hacienda Bigaa's contention that the subdivision titles
covering the disputed lots TCT Nos. 44695 and 56120 which were not specifically canceled by
the previous decisions of the Court should be given probative value. The MTC ruled that the
subsequent issuance of a certificate of title in favor of the plaintiff does not vest title on it as the
lands belong to the public domain and cannot be registered.[18] The MTC stressed that the titles
of Hacienda Bigaa were among the other subdivision titles declared void in the case of Ayala y
Cia as areas not legitimately covered by TCT No. 722 and which are therefore part of the public
domain. As ordered in the three antecedent cases of Dizon,[19] Ayala y Cia,[20] and De los
Angeles,[21] they should revert to the Republic. The MTC opined that Hacienda Bigaa has the
burden of proving that the subject lots are not part of the illegally expanded areas; Hacienda
Bigaa failed to discharge this duty when it did not present proof to controvert Chavez's
allegation that the lots covered by Haciendas TCTs are among the lots litigated in the cited
cases. The MTC reiterated the following ruling of the Court in Republic v. De los Angeles:

x x x [F]or almost 23 years now execution of the 1965 final judgment in

G.R. No. L-20950, ordering the cancellation of the subdivision titles covering the
expanded areas outside the private lands of Hacienda Calatagan, is being
frustrated by respondent Zobel, the Ayala and/or Hacienda Calatagan. As a
consequence, the mass usurpation of lands of public domain consisting of
portions of the territorial sea, the foreshore, beach and navigable water bordering
the Balayan Bay, Pagaspas Bay and the China Sea, still remain unabated. The
efforts of Ayala and Zobel to prevent execution of said final judgment are evident
from the heretofore-mentioned technical maneuvers they have resorted to.

Clearly, the burden of proof lies on respondent Zobel and other

transferees to show that his subdivision titles are not among the unlawful
expanded subdivision titles declared null and void by the said 1965
judgment. Respondent Zobel not only did not controvert the Republic's
assertion that his titles are embraced within the phrase other subdivision
titles ordered canceled but failed to show that the subdivision titles in his
name cover lands within the original area covered by Ayala's TCT No. 722
(derived from OCT No. 20) and not part of the beach, foreshore and
territorial sea belonging and ordered reverted to public dominion in the
aforesaid 1965 judgment.[22] x x x (Emphasis supplied.)

Based on the above disquisition and taking into account the consistent efforts of
Hacienda Bigaa's predecessors-in-interest in thwarting the execution of the Court's decision in
the antecedent cases, the MTC declared that the Chavezes, as the Republics
lessees/permittees, should have been in possession long ago. The MTC held:

Thus, the court holds that the land now in litigation forms part of the
public dominion which properly belongs to the State. Suffice it to say that when
the defendant [Epifanio V. Chavez] entered and occupied the same on April
 29, 1996, it was in representation of the State being the successor-in-
interest of Zoila de Chavez, a government fishpond permittee and/or
lessee. It should be recounted that Zoila de Chavez was in actual physical
possession of the land until she was ousted by Enrique Zobel by bulldozing and
flattening the area.

The recovery of this public land in favor of the State is long

overdue. Zoila de Chavez or her successor-in-interest should have been in
actual and adequate possession and occupation thereof long time ago by
virtue of the Supreme Court decisions anent the matter in 1965 which were
reiterated in 1988 had not the plaintiff and its predecessors-in-interest
succeeded in defeating the enforcement of the said decisions. To allow the
plaintiff to retain possession of these usurped public lands by ousting the
government's fishpond permittees and/or lessees such as the defendant is to
further frustrate the decisions of the Supreme Court on the matter. (Emphasis
supplied.)

The MTC finally ruled that the elements of res judicata are present. The forcible entry
case before it shared an identity of parties with Civil Case No. 78 for unlawful detainer and
Civil Case No. 653 (the Delos Angeles case) of accion reinvindicatoria because all of these
cases involve the predecessors-in-interest of the present parties. In Civil Case No. 78, the
plaintiff was Enrique Zobel, predecessor of Hacienda Bigaa, and the defendant was Zoila de
Chavez, mother and predecessor of Epifanio V. Chavez. In Civil Case No. 653 which reached
and was decided by this Court in 1988 as Republic vs. De los Angeles, Zoila de Chavez was
one of the plaintiffs and Enrique Zobel was one of the defendants.[23] The MTC also
found identity of subject matter because the forcible entry case shared with the previous
cases the same subject matter, i.e., the same lands adjudged by the Supreme Court as part of
the public domain usurped by the Zobels, et al. through their illegally expanded titles.[24] As
to identity of causes of action, the MTC held that although the previous cases were for
unlawful detainer and accion reinvindicatoria while the case before it was for forcible entry,
an identity of issues existedbecause all these cases involved conflicting claims of ownership,
occupation and possession of the property which have long been settled by the Supreme
Court. It recognized that under the concept of conclusiveness of judgment, res
judicata merely requires an identity of issue, not an absolute identity of causes of action.[25]

On October 1, 1996, Hacienda Bigaa appealed the MTC's decision to the Regional Trial
Court (RTC) of Batangas[26] which affirmed in toto the appealed decision.

On February 16, 1998, Hacienda Bigaa filed its petition for review[27] with the Court of
Appeals (CA), docketed as CA-G.R. SP No. 46716. The CA in its decision of June 1, 2001
dismissed the petition for review, totally affirming the RTC and MTC decisions. [28] Hacienda
Bigaa timely filed a motion for reconsideration. However, while the motion was pending,
Associate Justice Salvador J. Valdez, Jr., the ponente of the decision sought to be
reconsidered, retired from the Judiciary. As a result, the motion slipped into hibernation for
five years.[29]

The CA, on August 2, 2006, this time through Associate Justice Juan Q. Enriquez, Jr.,
rendered its resolution on the motion for reconsideration.[30] It denied reconsideration on the
reasoning that the grounds and arguments raised were mere iterations of those already raised
in the petition for review.

THE PETITION

Hacienda Bigaa is now before us via a petition for review under Rule 45 of the Rules of
Court to assail the CA ruling. Among other things, it argues that the CA's Resolution is patently
erroneous because the grounds and arguments raised in its motion for reconsideration were not
mere reiterations; it claims, as one of the grounds in its motion for reconsideration, that the final
determination of the scope and extent of the area allegedly in excess of that covered by TCT
No. 722 of Ayala y Cia was made only after the petition for review was filed on February 16,
1998.

In its petition, Hacienda Bigaa raises the following issues of law:

I. WHETHER THE REGISTERED OWNER OF LAND IN POSSESSION OF

A TORRENS CERTIFICATE OF TITLE MUST ENJOY THE OWNERSHIP
AND POSSESSION, AMONG OTHERS, OF THE LAND COVERED
THEREBY, WHERE THE SAID TITLE HAS NOT BEEN DECLARED
NULL AND VOID, SUCH THAT THE TITLE MUST BE GIVEN
PROBATIVE VALUE.

II. WHETHER IT IS PETITIONER HACIENDA BIGAA OR ZOILA DE

CHAVEZ (OR HER SUCCESSOR, RESPONDENT EPIFANIO V.
CHAVEZ) WHO HAS A BETTER RIGHT OF POSSESSION OVER THE
SUBJECT LOTS.

THE COURT'S RULING

We find the petition unmeritorious.

 We note at the outset that the objection on the delineation of the scope and extent of the
excess areas of TCT No. 722 came too late in the day; it is an issue that the Hacienda admits to
have raised for the first time when it sought reconsideration of the CA decision. We
significantly note, too, that this issue involves a question of fact whose determination is improper
in a Rule 45 proceeding before this Court.

Thus, to our mind, the only real questions appropriate for resolution at this stage of the
case are: (1) Do the TCTs of Hacienda Bigaa have probative value in determining the issues of
ownership and possession of the disputed lots? (2) Is Chavez as successor-in-interest of
government lessee or fishpond permittee Zoila de Chavez entitled to possession of these
lots? In these lights, the resolution of this case hinges on the question of better title who,
between the petitioner and the respondent, has the better right of possession of the disputed
lots.

Are these issues misplaced in a forcible entry case?

To answer this, we hark back to the origins of the present case a complaint
for forcible entry that the MTC of Calatagan, Batangas dismissed. Both the RTC and the CA
subsequently affirmed this dismissal. As a forcible entry suit, the threshold question presented
is: was the prior possession of the then plaintiff (now petitioner) Hacienda Bigaa over the
disputed lots sufficiently established to give it cause for the ejectment of then defendant (now
respondent) Epifanio Chavez?

We recall in this regard that the MTC issued a pre-trial order identifying the issues of (1)
who has the better right of possession; and (2) res judicata.[31] On the issue of possession, the
MTC found the need to determine the question of title or ownership in passing upon the
question of possession after Chavez raised the issue of ownership at that level. As a general
rule in forcible entry cases, ownership or title is inconsequential; the primordial issue is
possession de facto and not possession de jure. The court, however, may tackle the issue of
ownership or title, if raised, if this issue is indispensable in resolving the issue of
possession.[32] Since Chavez raised the question of ownership or title in his answer, the issue of
ownership became a material consideration in the lower court's inquiry into the character, nature
and extent of the parties claimed possession.
 The MTC tackled the issue of prior possession by taking judicial notice of our factual
determination in De los Angeles that Zobel of Hacienda Calatagan Hacienda Bigaa's
predecessor-in-interest had ousted Zoila de Chavez Chavez's predecessor-in-interest
from the lots she occupied as a holder of government-issued fishpond permits. The MTC in this
regard held

[T]he court holds that the land now in litigation forms part of the public

dominion which properly belongs to the State. Suffice it to say that when

[respondent Chavez] entered and occupied the [premises] on April 29, 1996, it

was in representation of the State being the successor-in-interest of Zoila

de Chavez, a government fishpond permittee and/or lessee. It should be

recounted thatZoila de Chavez was in actual physical possession of the land

until she was ousted by Enrique Zobel by bulldozing and flattening the

area. (Emphasis supplied.)

Zoila de Chavez's ouster from the premises became the basis of the MTCs conclusion
that she had prior possession as she could not have been ousted from the premises had she
not been in prior possession. This point was reiterated in the present petition by Chavez who
died pending the resolution of this case and has been substituted by his brother, Santiago V.
Chavez.[33] The respondents comment before us states:[34]

Of note, as hereafter shown, [in the case of Republic vs. De los Angeles,

G.R. No. L-30240, March 25, 1988], the Supreme Court explicitly recognized the

priority of possession of the respondent [Chavez] over the subject lots:

[Respondent therein] Zobel had ousted Zoila de

Chavez, a government fishpond permittee, from a portion of

subject fishpond lot described as Lot 33 of Plan Swo-30999

(also known as Lots 55 and 56 of subdivision TCT No. 3699) by

bulldozing the same, and [threatening] to eject fishpond permittees

Zoila de Chavez, Guillermo Mercado, Deogracias Mercado, and

 Rosendo Ibaez from their respective fishpond lots described as

Lots 4, 5, 6, and 7, and Lots 55 and 56, of Plan Swo-30999,

embraced in the void subdivision titles TCT No. 6399 and TCT No.

9262 claimed by said respondent. Thus, on August 2, 1967, the

Republic filed an Amended Complaint captioned Accion

Reinvindicatoria with Preliminary Injunction against respondent

Zobel and the Register of Deeds of Batangas, docketed as Civil

Case No. 653, for cancellation of Zobel's void subdivision titles

TCT No. 3699 and TCT No. 9262 and the reconveyance of the

same to the government; to place aforenamed fishpond permittees

in peaceful and adequate possession thereof; to require

respondent Zobel to pay back rentals to the Republic, and to

enjoin said respondent from usurping and exercising further acts

of dominion and ownership over the subject land of public

domain.[35](Emphasis supplied.)

This argument on the direct issue of prior possession is separate from the issue of
ownership that Chavez raised as an issue determinative of possession. The issue of ownership
shifts our determination to who, between the parties, has title and the concomitant right of
possession to the disputed lots.

The issue of possession, as it relates with the

ownership of the disputed property, has been
conclusively resolved in the antecedent cases.

As framed above, the case before us inevitably brings to memory the antecedent decided
cases touching on the ownership of the vast tract of land in Calatagan, Batangas, covered
by Transfer Certificate of Title (TCT) No. 722 in the name/s of Ayala y Cia, Alfonso Zobel,
Jacobo Zobel and Enrique Zobel and/or Hacienda Calatagan the predecessors-in-interest of
petitioner Hacienda Bigaa. We ruled in the antecedent cases of Dizon,[36] Ayala y
Cia,[37] and De los Angeles,[38] that: (1) all expanded subdivision titles issued in the name of
Ayala y Cia, the Zobels and/or Hacienda Calatagan covering areas beyond the true extent of
TCT No. 722 are null and void because they cover areas belonging to the public domain; (2)
Ayala y Cia and the Zobels of Hacienda Calatagan are mere usurpers of these public domain
areas; and that (3) these areas mustrevert to the Republic. Significantly, we declared in De
los Angeles that the Republic, as the rightful owner of the expanded areas portions of
the public domain has the right to place its lessees and permittees (among them Zoila
de Chavez) in possession of the fishpond lots whose ownership and possession were in
issue in the case.

These antecedent cases lay to rest the issues of ownership and of possession as an
attribute thereof, which we both ruled to be in favor of the Republic and its lessees or
permittees.

The present case is a stark repetition of scenarios in these cases. The protagonists
remain virtually the same with petitioner Hacienda Bigaa taking the place of its predecessors-
in-interest Ayala y Cia and/or the Zobels of Hacienda Calatagan, and respondent Epifanio V.
Chavez taking the place of his predecessor-in-interest Zoila de Chavez whose possession was
under bona fide authority from the Republic. Considering that in this case the disputed lots are
among those litigated in the antecedent cases and the issues of ownership and possession are
again in issue, the principle of res judicata inevitably must be considered and applied, if
warranted.

The doctrine of res judicata is set forth in Section 47 of Rule 39 of the Rules of Court,
which in its relevant part reads:

Sec. 47. Effect of judgments or final orders. The effect of a judgment

or final order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:

x x x x

(b) In other cases, the judgment or final order is, with respect to the
matter directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest
by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity;
and

(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment or final
 order which appears upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary thereto.

This provision comprehends two distinct concepts of res judicata: (1) bar by former
judgment and (2) conclusiveness of judgment. Under the first concept, res judicataabsolutely
bars any subsequent action when the following requisites concur: (a) the former judgment or
order was final; (b) it adjudged the pertinent issue or issues on their merits; (c) it was rendered
by a court that had jurisdiction over the subject matter and the parties; and (d) between the first
and the second actions, there was identity of parties, of subject matter, and of causes of
action.[39]

Where no identity of causes of action but only identity of issues exists, res judicata comes
under the second concept i.e., under conclusiveness of judgment. Under this concept, the
rule bars the re-litigation of particular facts or issues involving the same parties even if raised
under different claims or causes of action.[40] Conclusiveness ofjudgment finds application when
a fact or question has been squarely put in issue, judicially passed upon, and adjudged in a
former suit by a court of competent jurisdiction. The fact or question settled by final judgment or
order binds the parties to that action (and persons in privity with them or their successors-in-
interest), and continues to bind them while the judgment or order remains standing and
unreversed by proper authority on a timely motion or petition; the conclusively settled fact or
question furthermore cannot again be litigated in any future or other action between the same
parties or their privies and successors-in-interest, in the same or in any other court of concurrent
jurisdiction, either for the same or for a different cause of action. Thus, only the identities
of parties and issues are required for the operation of the principle
of conclusiveness of judgment.[41]
While conclusiveness of judgment does not have the same barring effect as that of a bar
by former judgment that proscribes subsequent actions, the former nonetheless estops the
parties from raising in a later case the issues or points that were raised and controverted, and
were determinative of the ruling in the earlier case.[42] In other words, the dictum laid down in
the earlier final judgment or order becomes conclusive and continues to be binding between the
same parties, their privies and successors-in-interest, as long as the facts on which that
judgment was predicated continue to be the facts of the case or incident before the court in a
later case; the binding effect and enforceability of that earlier dictum can no longer be re-
litigated in a later case since the issue has already been resolved and finally laid to rest in the
earlier case.[43]
 a. Identity of Parties

As already stated above, the parties to the present case are virtually the same as those
in the antecedent cases. Specifically in De los Angeles, the parties were Enrique Zobel, the
predecessor-in-interest of petitioner Hacienda Bigaa, and Zoila de Chavez, the mother and
predecessor-in-interest of Chavez.

b. Identity of Subject Matter

Hacienda Bigaa and Chavez are litigating the same properties subject of the antecedent
cases inasmuch as they claim better right of possession to parcels of land covered by
subdivision titles derived from Hacienda Calatagan's TCT No. 722 and by government-issued
fishpond permits. Specifically in De los Angeles, the Zobels and Zoila de Chavez litigated the
disputed lots covered by subdivision titles in Zobels name and by fishpond permits the Republic
issued in favor of de Chavez.

In ruling that the subject lots are the same lots litigated in the previously decided cases,
the courts below based their findings on De los Angeles that in turn was guided by our rulings
in Dizon and Ayala y Cia. For emphasis, we reiterate our ruling in De los Angeles: all areas
the Ayalas and/or the Zobels made to appear to be covered by TCT No. 722 are owned by
the Republic because they form part of the public domain; specifically, portions of the
navigable water or of the foreshores of the bay converted into fishponds are parts of the
public domain that cannot be sold by the Ayalas and/or the Zobels to third parties.
In his answer before the MTC, Chavez asserted that the areas covered by the fishpond
permits of Zoila de Chavez are the same parcels of land that he now occupies as Zoila's
successor-in-interest. Given the rulings in the antecedent cases that Chavez invoked, Hacienda
Bigaa never bothered to object to or to rebut this allegation to show that the presently disputed
lots are not part of the expanded areas that, apart from the specifically described titles, Ayala y
Cia described as other subdivision titles covering unregisterable lands of the public domain
that must revert to the Republic.[44] Hacienda Bigaa should have objected as we held
in De los Angeles that the onus is on Ayala and the Zobels Hacienda Bigaas
predecessors-in-interest to show that their titles do not cover the expanded areas
whose titles were declared null and void.[45] We find no cogent reason to depart from our
past rulings in the antecedent cases, and from the ruling of the courts below in this case that the
lots claimed by Hacienda Bigaa are the same lots covered by our rulings in the antecedent
cases.
 c. Identity of Issues

This case and the antecedent cases all involve the issue of ownership or better right
of possession. In Ayala y Cia, we affirmed an RTC decision that decreed:
WHEREFORE, judgment is hereby rendered as follows:

(a) Declaring as null and void Transfer Certificate of Title No. T-9550 (or
Exhibit 24) of the Register of Deeds of the Province of Batangas and other
subdivision titles issued in favor of Ayala y Cia and;or Hacienda de Calatagan
over the areas outside its private land covered by TCT No. 722, which, including
the lots in T-9550 (lots 360, 362, 363 and 182) are hereby reverted to public
dominion.[46] (Emphasis supplied, italics in the original.)

Consequently, lots and their titles derived from the Ayalas and the Zobels TCT No. 722 not
shown to be within the original coverage of this title are conclusively public domain areas and
their titles will be struck down as nullities.
Thus, De los Angeles[47] effectively annulled the subdivision titles disputed in the case for
being among the other subdivision titles declared void for covering public domain areas, and
ordered their reversion to the Republic. De los Angeles recognized, too, the right of the
Republic's lessees and public fishpond permittees (among them Zoila de Chavez, mother
and predecessor-in-interest of Chavez) to possess the fishpond lots in question because
they derive their right of possession from the Republic the rightful owner of these lots.

We reject, based on these discussions, Hacienda Bigaa's position that there could be
no res judicata in this case because the present suit is for forcible entry while the antecedent
cases adverted were based on different causes of action i.e., quieting of title, annulment of
titles and accion reinvindicatoria. For, res judicata, under the concept of conclusiveness of
judgment, operates even if no absolute identity of causes of action exists. Res judicata, in its
conclusiveness of judgment concept, merely requires identity of issues. We thus agree with the
uniform view of the lower courts the MTC, RTC and the CA on the application of res
judicata to the present case.

Hacienda Bigaa's Titles

Carry No Probative Value

Hacienda Bigaa contends that the rulings in the antecedent cases on the nullity of its
subdivision titles should not apply to the present case because the titles TCT Nos. 44695 and
56120 have not been specifically declared void by court order and must be given probative
value. It likewise posits that Chavez failed to introduce evidence before the MTC that the land
subject matter of the suit is the same land covered by the decision of the Supreme Court in the
antecedent cases.

We reject this contention in light of our holding in the Ayala y Cia and De los
Angeles cases that apart from those expressly litigated and annulled, all other subdivision
titles over the excess areas of Hacienda Calatagan must be nullified for covering unregisterable
lands of the public domain that must revert to the Republic.[48] To reiterate,lots and their titles
derived from the Ayalas and the Zobels TCT No. 722 not shown to be within the original
coverage of this title are conclusively public domain areas and their titles will be struck
down as nullities. What could have saved Hacienda Bigaa, as successor-in-interest of the
Ayalas and the Zobels, is competent evidence that the subdivision titles in its possession do not
fall within the excess areas of TCT No. 722 that are null and void because they are lands of the
public domain. Hacienda Bigaa however failed to discharge this burden.

Therefore, the Court of Appeals, citing Ayala y Cia and De los Angeles, correctly held that

x x x [S]uffice it to state that as heretofore shown, the Supreme Court took

cognizance of the fact that Zoila de Chavez's fishpond permit is within the land

covered by the cited decision. Moreover, the Supreme Court has shifted the

burden of proof in this regard to Zobel or Ayala y Cia when it declared

that, Clearly, the burden of proof lies on respondent Zobel and other

transferees to show that his subdivision titles are not among the unlawful

expanded subdivision titles declared null and void by the said 1965

judgment.[49] (Emphasis supplied.)

In any event, Hacienda Bigaa can never have a better right of possession over the
subject lots above that of the Republic because the lots pertain to the public domain. All lands
of the public domain are owned by the State the Republic. Thus, all attributes of ownership,
including the right to possess and use these lands, accrue to the Republic. Granting Hacienda
Bigaa the right to possess the subject premises would be equivalent to condoning an illegal
act by allowing it to perpetuate an affront and an offense against the State i.e., occupying
and claiming as its own lands of public dominion that are not susceptible of private ownership
and appropriation.[50] Hacienda Bigaa like its predecessors-in-interests, the Ayalas and the
Zobels is a mere usurper in these public lands. The registration in Hacienda Bigaa's name of
the disputed lots does not give it a better right than what it had prior to the registration; [51] the
issuance of the titles in its favor does not redeem it from the status of a usurper. We so held
in Ayala y Cia and we reiterated this elementary principle of law in De los Angeles.[52] The
registration of lands of the public domain under the Torrens system, by itself, cannot convert
public lands into private lands.[53]

As our last word, we find it particularly relevant to state here that we issued on October
6, 2008 a Resolution in relation with the execution of our decision in the antecedent cases
of Ayala y Cia and De los Angeles.[54] In this Resolution, we emphasized that the decision we
consistently affirmed ordered the following: (1) the nullification of all subdivision titles that
were issued in favor of Ayala y Cia and/or Hacienda Calatagan (and their successors-in-
interest) over the areas outside its private land covered by TCT No. 722; and (2) the
declaration that all lands or areas covered by these nullified titles are reverted to the
public domain. This should write finis to Hacienda Bigaas claim that its titles are beyond the
reach of our decision in the antecedent cases.

In sum, we find no reversible errors of law in the appealed decision of the Court of
Appeals.

WHEREFORE, we DENY the present petition and AFFIRM the Court of Appeals decision
of May 31, 2001 and resolution of August 2, 2006. We accordinglyDISMISS WITH
FINALITY the complaint for forcible entry in Civil Case No. 129 before the Municipal Trial Court
of Calatagan.

SO ORDERED.
 PIO MODESTO and CIRILA RIVERA- G.R. No. 189859
MODESTO,
Petitioners, Present:
*
NACHURA, J.,
**
- versus - BRION, Acting Chairperson,
VILLARAMA, JR.,
***
MENDOZA, and
CARLOS URBINA, substituted by the SERENO, JJ.
heirs of OLYMPIA MIGUEL VDA. DE
URBINA (Surviving Spouse) and
children, namely: ESCOLASTICA M. Promulgated:
URBINA, ET AL.,
Respondents. October 18, 2010
x----------------------------------------------------------------------------------------x

RESOLUTION

BRION, J.:

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

FACTUAL ANTECEDENTS

Civil Case No. 53483

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

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

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

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

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

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

LMB Conflict No. 110

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

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

The Modestos also alleged that they filed an unnumbered sales application for Lot 356
with the LMB, based on their actual occupancy of the property, pursuant to Proclamations 2476
and 172, on February 10, 1993.
 On January 31, 2008, the LMB denied with finality the Modestos unnumbered
sales application/protest against Urbinas application, in turn upholding Urbinas
Miscellaneous Sales Application.

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

THE COURT OF APPEALS DECISION

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

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

THE PETITION

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

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

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

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

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

THE MOTION FOR RECONSIDERATION

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

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

The order also noted that Urbina failed to comply with the requirements of an applicant
for ownership of the property, as set forth in Memorandum No. 119, the implementing guidelines
of Proclamation No. 172.
 Responding to this motion, the respondents, in their Comment dated May 31, 2010,
reiterated that the petitioners are estopped from assailing Urbinas possessory rights over the
property after they entered into a negotiated sales contract with him over the subject
property. They also accused the Modestos of employing dilatory tactics in filing the present
motion.

THE RULING

We GRANT the motion for reconsideration.

Procedural issue

An accion publiciana is an ordinary civil proceeding to determine the better right of

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

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

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

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

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

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

Jurisdiction of the Court

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

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

On the issue of possessory rights

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

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

On the other hand, the Modestos anchored their right to possess the same on
their actual possession of the property. They also questioned the legality of Urbinas
Miscellaneous Sales Application, and his tax declarations over the property, arguing that since
these were obtained when the land was still not alienable and disposable, they could not be the
source of any legal rights.
 After reviewing the records of this case, we find the reasoning of the Modestos to be
more in accord with applicable laws and jurisprudence.

The February 19, 2010 LMB Order

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

Movants [the Modestos] have anchored their Motion for Reconsideration

on three (3) assigned errors, to wit:

I. THIS OFFICE ERRED IN ITS FINDINGS THAT THE AREA IS NOT

COVERED BY PROCLAMATION NO. 172, AS IMPLEMENTED BY
MEMORANDUM ORDER NO. 119;

II. THIS OFFICE ERRED IN ITS FINDINGS THAT CARLOS T. URBINA

WAS IN ACTUAL, ADVERSE, PUBLIC AND CONTINUOUS
POSSESSION OF THE PROPERTY IN QUESTION;

III. THIS OFFICE ERRED IN NOT HOLDING THAT A NEW SURVEY OF

THE AREA IN QUESTION SHOULD BE DONE AND CONDUCTED TO
DETERMINE THE TRUE BOUNDARIES OF THE PROPERTY IN
QUESTION VIS--VIS THE CLAIMS OF EACH PARTY.

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

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

findings:

The Miscellaneous Sales Application filed by Carlos

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

After a judicious evaluation of the arguments raised in the instant motion,

and taking into account the findings and recommendations of Special Investigator
Danilo Lim as contained in his Report, this Office finds the same to be not
entirely without merit.

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

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

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

(1) He/She must be a bona fide resident of the proclaimed areas. To be

considered a bona fide resident, the applicant must have the following
qualifications:

a) A Filipino citizen of legal age and/or a head of the family;

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

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

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

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

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

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

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

Possession prior to October 16, 1987

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

Accordingly, even if we recognize that Urbina had been in possession of the property as
early as July 21, 1966, when he filed his Miscellaneous Sales Application, his occupation was
unlawful and could not be the basis of possessory rights, in keeping with Section 88 of the
Public Land Act, that states:
Section 88. The tract or tracts of land reserved under the provisions of section
eighty-three shall be non-alienable and shall not be subject to occupation, entry,
sale, lease, or other disposition until again declared alienable under the
provisions of this Act or by proclamation of the President.

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

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

Possession after October 16, 1987

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

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

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

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

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

On the finding of estoppel

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

Through estoppel, an admission or representation is rendered conclusive upon the

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

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

WHEREFORE, premises considered, we GRANT the motion and REINSTATE the

petition. Consequently, we REVERSE and SET ASIDE the Decision dated January 26, 2009
and Resolution dated October 5, 2009 of the Court of Appeals in CA-G.R. CV No.
68007. We DISMISS the complaint for Recovery of Possession filed by Carlos T. Urbina for
lack of merit.
SO ORDERED.
MANUEL ALMAGRO joined by his spouse, G.R. Nos. 175806 and 175810
ELIZABETH ALMAGRO,
Petitioners,

- versus -

SALVACION C. KWAN, WILLIAM C. KWAN,

VICTORIA C. KWAN, assisted by her
husband, JOSE A. ARBAS, and CECILIA C.
KWAN,
Respondents.
x------------------------x
MARGARITA PACHORO, DRONICA G.R. No. 175849
ORLINA, PIO TUBAT, JR., ANDRES
TUBAT, EDUVIGIS KISKIS, ELSA
Present:
BIALBER, NOELA TUBAT, ELSA
TUBAT, and ROGELIO DURAN,
CARPIO, J., Chairperson,
Petitioners, NACHURA,
LEONARDO-DE CASTRO,*
PERALTA, and
- versus - MENDOZA, JJ.

WILLIAM C. KWAN, SALVACION C.

KWAN, VICTORIA C. KWAN, assisted
by her husband, JOSE A. ARBAS, and
CECILIA C. KWAN,
Respondents.
Promulgated:

October 20, 2010

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

DECISION

CARPIO, J.:

This is a consolidation of two separate petitions for review,[1] assailing the 4 April 2006
Decision[2] and the 31 October 2006 Resolution[3] of the Court of Appeals in CA-G.R. SP Nos.
71237 and 71437.
 This case involves Lot No. 6278-M, a 17,181 square meter parcel of land covered by TCT
No. T-11397. Lot No. 6278-M is located at Maslog, Sibulan, Negros Oriental and is registered in
the name of spouses Kwan Chin and Zosima Sarana. Respondents are the legitimate children
of spouses Kwan Chin and Zosima Sarana, who both died intestate on 2 November 1986 and
23 January 1976, respectively, in Dumaguete City. Upon the death of their parents, respondents
inherited Lot No. 6278-M through hereditary succession.

On 18 September 1996, respondents filed with the Municipal Trial Court (MTC) an action
for recovery of possession and damages against spouses Rogelio and Lourdes Duran,
spouses Romulo Vinalver and Elsa Vinalver,[4] spouses Marte[5] Bati-on and Liz E. Bati-on,
spouses Pablo Deciar and Marlyn Deciar, spouses Salvador Palongpalong and Bienvenida
Palongpalong, spouses Sabas Kiskis and Eduvigis Kiskis, spouses Pio Tubat, Jr. and Encarnita
Tubat, spouses Andres Tubat and Leonides Tubat, spouses George Tubat and Noela Tubat,
spouses Dodong Go and Alice Go, spouses Delano Bangay and Maria Bangay,[6] spouses
Simeon Pachoro and Margarita Pachoro, spouses Cepriano[7] Tubat and Elsa Tubat, spouses
Jovito Remolano and Editha Orlina Remolano, spouses Nelson Miravalles and Erlene
Miravalles, Dronica Orlina,[8] Clarita Barot Lara, Conchita Orlina, Antonia Malahay and the
Philippine National Police (PNP),[9] Agan-an, Sibulan, Negros Oriental. Subsequently, spouses
Manuel Almagro and Elizabeth Almagro intervened as successors-in-interest of spouses Delano
Bangay and Maria Bangay.

During pre-trial, the parties agreed to refer the case to the Chief of the Land Management
Services Division, PENRO-DENR, Dumaguete City, to conduct a verification survey of Lot No.
6278-M. When the PENRO personnel failed to conduct the verification survey, the court and the
parties designated Geodetic Engineer Jorge Suasin, Sr. (Engr. Suasin) as joint commissioner to
do the task. Engr. Suasin conducted the verification and relocation survey of Lot No. 6278-M on
12-13 September 2000 in the presence of the parties, some of their lawyers, and the MTC Clerk
of Court. Thereafter, Engr. Suasin submitted a written report with the following findings:

WRITTEN REPORT

Comes now, the undersigned Geodetic Engineer Jorge S. Suasin, Sr., to

this Honorable Court, most respectfully submit the following written report of the
verification and relocation survey of the lot 6278-M located at Maslog, Sibulan,
Negros Oriental with T.C.T. No. T-11397 owned by Salvacion G. Kwan, et al.

A. That a big portion of the lot is submerged under the sea and only a small
portion remain as dry land.
B. That some of the defendants have constructed their buildings or houses inside
the dry land while others have constructed outside or only a small portion of their
buildings or houses are on the said dry land.

The defendants and their buildings or houses are as follows:

1. Sps. Rogelio Duran . . . . . . . . . . . . . . . . . . . . . . . . . inside

2. Sps. Romulo Vinalver. . . . . . . . . . . . . . . . . . . . . . . inside
3. Sps. Marto Bati-on . . . . . . . . . . . . . . . . . . . . . . . . . inside
4. Sps. Salvador Palongpalong . . . . . . . . . . . . . . . . . . inside
5. Sps. Pablo Deciar . . . . . . . . . . . . . . . . . . . . . . . . . . inside
6. Sps. Sabas Kiskis . . . . . . . . . . . . . . . . . . . . . . . . . . .inside
7. Sps. Pio Tubat, Jr. . . . . . . . . . . . . . . . . . . . . . . . 2 houses, the
first
house a portion,
and the
second
one
- inside
8. Sps. Andres Tubat . . . . . . . . . . . . . . . . . . . . . . . . . . inside
9. Sps. George Tubat . . . . . . . . . . . . . . . . . . . . . . . . . . portion
10. Sps. Dodong Go . . . . . . . . . . . . . . . . . . . . . . . . . . inside
11. Sps. Delano Bangay-Almagro . . . . . . . . . . . . . . . . portion
12. Sps. Simeon Pachoro . . . . . . . . . . . . . . . . . . . . . . . inside
13. Sps. Cipriano Tubat . . . . . . . . . . . . . . . . . . . . . . . . inside
14. Sps. Jovito Remolano . .. . . . . . . . . . . . . . . . . . . . . inside
15. Sps. Nelson Miravalles . . . . . . . . . . . . . . . . . . . . . cottage and
house -
outside
16. Monica Orlina . . . . . . . . . . . . . . . . . . . . . . . . . . . . cottage inside
and house -
portion
17. Clarita Barot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . outside
18. Conchita Orlina . . . . . . . . . . . . . . . . . . . . . . . . . . . outside
19. Antonia Malahay . . . . . . . . . . . . . . . . . . . . . . . . . . outside

The verification and relocation survey was executed last September 12-
13, 2000 with the presence of both parties and of the Clerk of Court. The cost of
the survey was FIFTEEN THOUSAND PESOS (P15,000) shouldered by the
plaintiffs and the defendants equally.

Enclosed are a blue print of the sketch plan and a xerox copy of the land
title of the said lot.

Respectfully submitted by:

(Sgd) JORGE SUASIN, SR.

Geodetic Engineer[10]
 After the court admitted Engr. Suasin's report and the pleadings of the parties,
respondents filed a motion for judgment on the pleadings, which the MTC granted.

In its Judgment dated 11 May 2001, the MTC dismissed the complaint on the ground that
the remaining dry portion of Lot No. 6278-M has become foreshore land and should be returned
to the public domain. The MTC explained:

The term foreshore refers to that part of the land adjacent to the sea
which is alternately covered and left dry by the ordinary flow of the tides.
Foreshore lands refers to the strip of land that lies between the high and low
water marks and that is alternately wet and dry according to the flow of the tide.
The term foreshore land clearly does not include submerged lands.

From these definitions, it is safe to conclude that the remaining dry portion
of Lot No. 6278-M is now foreshore land. A big portion of the said lot is presently
underwater or submerged under the sea. When the sea moves towards the estate
and the tide invades it, the invaded property becomes foreshore land and passes
to the realm of public domain. The subject land, being foreshore land, should
therefore be returned to the public domain. Besides, Article 420 of the Civil Code
provides:

Art. 420. The following thin[g]s 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;

Plaintiff cannot use the doctrine of indefeasibility of their Torrens title, as

property in question is clearly foreshore land. At the time of its registration,
property was along the shores. In fact, it is bounded by the Taon Strait on the
NW along lines 2-3-4. The property was of public dominion and should not have
been subject of registration. The survey showed that the sea had advanced and
the waves permanently invaded a big portion of the property making the land part
of the shore or the beach. The remaining dry land is foreshore and therefore
should be returned to the public domain.[11]

Respondents appealed to the Regional Trial Court (RTC). The RTC conducted ocular
inspections of Lot No. 6278-M on two separate dates: on 5 October 2001 during low tide and
on 15 October 2001 when the high tide registered 1.5 meters. All the parties and their lawyers
were notified before the two ocular inspections were conducted. During the ocular inspections,
in which some parties and their lawyers were present, the RTC observed that the small portion
referred to by Engr. Suasin as dry land in his report actually remained dry even during high
tide.[12] Thus, the RTC concluded that the disputed remaining portion of Lot No. 6278-M is not
foreshore land. The RTC stated:

It is the Court's considered view that the small portion of plaintiff's

property which remains as dry land is not within the scope of the well-settled
definition of foreshore and foreshore land as mentioned above. For one thing, the
small dry portion is not adjacent to the sea as the term adjacent as defined in
Webster's Dictionary means contiguous or touching one another or lying next to.
Secondly, the small dry portion is not alternately wet and dry by the ordinary flow
of the tides as it is dry land. Granting, as posited by defendants, that at certain
times of the year, said dry portion is reached by the waves, then that is not
anymore caused by the ordinary flow of the tide as contemplated in the above
definition. The Court then finds that the testimony of Engr. Suasin dovetails with
the import and meaning of foreshore and foreshore land as defined above.

Anent the case of Republic vs. Court of Appeals, 281 SCRA 639, also
cited in the appealed judgment, the same has a different factual milieu. Said case
involves a holder of a free patent on a parcel of land situated at Pinagtalleran,
Caluag, Quezon who mortgaged and leased portions thereof within the
prescribed five-year period from the date of issuance of the patent. It was
established in said case that the land subject of the free patent is five (5) to six (6)
feet deep under water during high tide and two (2) feet deep at low tide. Such is
not the situation of the remaining small dry portion which plaintiffs seek to
recover in the case at bar.[13]

On 8 January 2002, the RTC rendered its Decision,[14] the dispositive portion of which
reads:

WHEREFORE, all told and circumspectly considered, the appealed

judgment is hereby reversed and set aside insofar as it states that plaintiffs are
not entitled to recover possession of the property in question.
Plaintiffs-appellants have the right to recover possession of the remaining
small dry portion of the subject property in question. It is further ordered to
remand this case to the court of origin for the reception of further evidence to
determine who among the defendants-appellees are builders or possessors in
good faith and who are not and once determined, to apply accordingly the
pertinent laws and jurisprudence on the matter.

SO ORDERED.[15]

Petitioners moved for reconsideration, which the RTC denied in its Order[16] dated 6 May
2002.
 Petitioners filed separate petitions for review with the Court of Appeals, alleging that the
disputed portion of Lot No. 6278-M is no longer private land but has become foreshore land
and is now part of the public domain.

The Ruling of the Court of Appeals

On 4 April 2006, the Court of Appeals promulgated its decision, affirming with modification
the RTC Decision. The dispositive portion of the Court of Appeals Decision[17] reads:

WHEREFORE, the instant petitions for review are DENIED. And the
Decision dated January 8, 2002 of Branch 38 of the Regional Trial Court of
Dumaguete City is hereby AFFIRMED with MODIFICATION as regards the
dispositive portion only. Based on the written report of Geodetic Engr. Suasin
categorically indentifying who among herein petitioners are illegally occupying a
portion of Lot No. 6278-M, the following petitioners are ordered to vacate the
premises and/or remove the houses and/or cottages constructed on Lot
No. 6278-M within thirty (30) days from finality of judgment, namely: 1)Sps.
Rogelio Duran, 2) Sps. Romulo Vinalver, 3) Sps. Marto Bati-on, 4) Sps.
Salvador Palongpalong, 5) Sps. Pablo Deciar, 6) Sps. Sabas Kiskis, 7) Sps. Pio
Tubat, Jr. (first house portion, second house inside), 8) Sps. Andres Tubat,
9) George Tubat (portion), 10) Sps. Dodong Go, 11) Sps. Delano Bangay-
Almagro (portion), 12) Sps. Simeon Pachoro, 13) Sps. Cipriano Tubat, 14) Sps.
Jovito Remolano and 15) Monica Orlina (cottageinside and house portion).

Costs against petitioners.

SO ORDERED.[18]

In modifying the RTC Decision, the Court of Appeals explained:

Lastly, the argument that the RTC decision was vague and indefinite is
utterly bereft of merit. We have found no reversible error in the appreciation of
the facts and in the application of the law by the RTC which will warrant the
reversal of the questioned decision. However, litigation must end and terminate
sometime and somewhere, and it is essential to the administration of justice that
the issues or causes therein should be laid to rest. Hence, in keeping with this
principle, We modify the assailed decision insofar as the dispositive portion is
concerned. It is our considered view that there is no longer a need to determine
who among the petitioners are builders in good faith or not considering that it has
been established in the MTC that they knew all along that the subject lot is a
titled property. As such, petitioners should vacate and/or demolish the houses
and/or cottages they constructed on Lot No. 6278-M as stated in the written
report of Geodetic Engineer Jorge S. Suasin, Sr. Remanding this case to the
court of origin would not only unduly prolong the resolution of the issues of this
case, but would also subject the parties to unnecessary expenses.[19]
 Hence, these consolidated petitions.

The Issue

The primary issue in this case is whether the disputed portion of Lot No. 6278-M is still
private land or has become foreshore land which forms part of the public domain.

The Ruling of the Court

We find the petitions without merit.

Petitioners contend that the disputed portion of Lot No. 6278-M is already foreshore land.
In fact, most of them allegedly have foreshore lease permits from the Department of
Environment and Natural Resources (DENR) on the said foreshore land.

However, petitioners failed to present evidence to prove their claim that they are holders
of foreshore lease permits from the DENR. Thus, the RTC Order dated 6 May 2002 stated:

Defendants-appellees have been harping that they have been granted

foreshore leases by DENR. However, this is merely lip service and not
supported at all by concrete evidence. Not even an iota of evidence was
submitted to the lower court to show that defendants-appellees herein have
been granted foreshore leases.[20]

Although the MTC concluded that the subject land is foreshore land, we find such
conclusion contrary to the evidence on record.

It is undisputed that the subject land is part of Lot No. 6278-M, which is covered by TCT
No. T-11397, registered in the name of respondents' parents, Kwan Chin and Zosimo Sarana.
In fact, as found by the Court of Appeals, even the Provincial Environment and Natural
Resources Officer (PENRO) declared in May 1996 that Lot No. 6278-M is a private property
covered by a Torrens Title and that petitioners should vacate the disputed property or make
other arrangements with respondents.[21]
 Furthermore, from the report of Engr. Suasin, the geodetic engineer designated by the
court and the parties as joint commissioner to conduct the survey, it can be clearly gleaned that
the contested land is the small portion of dry land of Lot No. 6278-M. Even in his testimony,
Engr. Suasin was adamant in stating that the remaining portion of Lot No. 6278-M is not
foreshore because it is already dry land and is away from the shoreline.[22] Because of this
apparent contradiction between the evidence and the conclusion of the MTC, the RTC
conducted ocular inspection twice, during low tide and high tide, and observed that the disputed
portion of Lot No. 6278-M actually remained dry land even during high tide. Thus, the RTC
concluded that the said land is not foreshore land. On appeal, the Court of Appeals adopted the
findings and conclusion of the RTC that the disputed land is not foreshore land and that it
remains as private land owned by respondents.

We are in accord with the conclusion of the Court of Appeals and the RTC that the
disputed land is not foreshore land. To qualify as foreshore land, it must be shown that the land
lies between the high and low water marks and is alternately wet and dry according to the flow
of the tide.[23] The land's proximity to the waters alone does not automatically make it a
foreshore land.[24]

Thus, in Republic of the Philippines v. Lensico,[25] the Court held that although the two
corners of the subject lot adjoins the sea, the lot cannot be considered as foreshore land since it
has not been proven that the lot was covered by water during high tide.

Similarly in this case, it was clearly proven that the disputed land remained dry even
during high tide. Indeed, all the evidence supports the conclusion that the disputed portion of Lot
No. 6278-M is not foreshore land but remains private land owned by respondents.

WHEREFORE, we DENY the petitions. We AFFIRM the 4 April 2006 Decision and the
31 October 2006 Resolution of the Court of Appeals in CA-G.R. SP Nos. 71237 and 71437.

SO ORDERED.
 JOSE FERNANDO, JR., ZOILO G.R. No. 161030
FERNANDO, NORMA FERNANDO
BANARES, ROSARIO FERNANDO
TANGKENCGO, HEIRS OF TOMAS Present:
FERNANDO, represented by ALFREDO
V. FERNANDO, HEIRS OF GUILLERMO
FERNANDO, represented by Ronnie H. CORONA, C.J.,
Fernando, HEIRS OF ILUMINADA
Chairperson,
FERNANDO, represented by Benjamin
Estrella and HEIRS OF GERMOGENA LEONARDO-DE CASTRO,
FERNANDO,
BERSAMIN,
Petitioners,
DEL CASTILLO, and
VILLARAMA, JR., JJ.
- versus -

LEON ACUNA, HERMOGENES

FERNANDO, HEIRS OF SPOUSES
ANTONIO FERNANDO AND FELISA
CAMACHO, represented by
HERMOGENES FERNANDO,
Respondents.

Promulgated:

September 14, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure seeking to reverse and set aside the Decision[1] dated November 24, 2003 of the
Court of Appeals in CA-G.R. CV No. 75773, entitled Jose Fernando, Jr., et al. v. Heirs of
Germogena Fernando, et al., which reversed and set aside the Decision[2]dated May 16, 2002
of Branch 84, Regional Trial Court (RTC) of Malolos, Bulacan in Civil Case No. 256-M-97.

At the heart of this controversy is a parcel of land covered by Original Certificate of Title
(OCT) No. RO-487 (997)[3] registered in the names of Jose A. Fernando, married to Lucila Tinio,
and Antonia A. Fernando, married to Felipe Galvez, and located in San Jose, Baliuag,
Bulacan. When they died intestate, the property remained undivided. Petitioners herein
namely, Jose Fernando, Jr., Zoilo Fernando, Norma Fernando Banares, Rosario Fernando
Tangkencgo, the heirs of Tomas Fernando, the heirs of Guillermo Fernando, the heirs of
Iluminada Fernando and the heirs of Germogena Fernando are the heirs and successors-in-
interest of the deceased registered owners. However, petitioners failed to agree on the division
of the subject property amongst themselves, even after compulsory conciliation before the
Barangay Lupon.

Thus, petitioners, except for the heirs of Germogena Fernando, filed a Complaint[4] for
partition on April 17, 1997 against the heirs of Germogena Fernando. In the Complaint,
plaintiffs alleged, among others, that they and defendants are common descendants and
compulsory heirs of the late spouses Jose A. Fernando and Lucila Tinio, and the late spouses
Antonia A. Fernando and Felipe Galvez. They further claimed that their predecessors-in-
interest died intestate and without instructions as to the disposition of the property left by them
covered by OCT No. RO-487 (997). There being no settlement, the heirs are asking for their
rightful and lawful share because they wish to build up their homes or set up their business in
the respective portions that will be allotted to them. In sum, they prayed that the subject
property be partitioned into eight equal parts, corresponding to the hereditary interest of each
group of heirs.
 In their Answer[5] filed on May 20, 1997, defendants essentially admitted all of the
allegations in the complaint. They alleged further that they are not opposing the partition and
even offered to share in the expenses that will be incurred in the course of the proceedings.

In his Complaint in Intervention[6] filed on January 12, 1998, respondent Leon Acuna
(Acuna) averred that in the Decision[7] dated November 29, 1929 of the Cadastral Court of
Baliuag, Bulacan, the portion of the property identified as Lot 1303 was already adjudicated to:
(a) Antonio Fernando, married to Felisa Camacho; (b) spouses Jose Martinez and Gregoria
Sison; (c) spouses Ignacio de la Cruz and Salud Wisco; and (d) Jose Fernando, married to
Lucila Tinio, the petitioners predecessor-in-interest. He likewise claimed that in a 1930
Decision of the Cadastral Court, the portion identified as Lot 1302 was also already adjudicated
to other people as well.

Respondent Acuna further alleged that Salud Wisco, through her authorized attorney-in-
fact, Amador W. Cruz, sold her lawful share denominated as Lot 1303-D with an area of 3,818
square meters to Simeon P. Cunanan,[8] who in turn sold the same piece of land to him as
evidenced by a Deed of Sale.[9] He also belied petitioners assertion that the subject property
has not been settled by the parties after the death of the original owners in view of the
Decision[10] dated July 30, 1980 of the Court of First Instance (CFI) of Baliuag, Bulacan, in LRC
Case No. 80-389 which ordered the Register of Deeds of Bulacan to issue the corresponding
certificates of title to the claimants of the portion of the subject property designated as Lot
1302.[11] Norma Fernando, one of the petitioners in the instant case, even testified in LRC Case
No. 80-389. According to respondent Acuna, this circumstance betrayed bad faith on the part of
petitioners in filing the present case for partition.

Respondent Acuna likewise averred that the action for partition cannot prosper since the
heirs of the original owners of the subject property, namely Rosario, Jose Jr., Norma, Tomas,
Guillermo, Leopoldo, Hermogena, Illuminada and Zoilo, all surnamed Fernando, and Lucila
Tinio, purportedly had already sold their respective one-tenth (1/10) share each in the subject
property to Ruperta Sto. Domingo Villasenor for the amount of P35,000.00 on January 25, 1978
as evidenced by a Kasulatan sa Bilihang Patuluyan.[12] He added that he was in possession of
the original copy of OCT No. RO-487 (997) and that he had not commenced the issuance of
new titles to the subdivided lots because he was waiting for the owners of the other portions of
the subject property to bear their respective shares in the cost of titling.

Subsequently, a Motion for Intervention[13] was filed on June 23, 1998 by respondent
Hermogenes Fernando (Hermogenes), for himself and on behalf of the heirs of the late
spouses, Antonio A. Fernando and Felisa Camacho. According to him, in the July 30, 1980
Decision of the CFI of Bulacan, their predecessors-in-interest had already been adjudged
owners of Lots 1302-A, 1302-F, 1302-G,[14] 1302-H and 1302-J of OCT No. RO-487 (997) and
any adverse distribution of the properties would cause respondents damage and prejudice. He
would also later claim, in his Answer-in-Intervention,[15] that the instant case is already barred
by res judicata and, should be dismissed.

In the interest of substantial justice, the trial court allowed the respondents to intervene
in the case.

The plaintiffs and defendants jointly moved to have the case submitted for judgment on
the pleadings on May 7, 1999.[16] However, the trial court denied said motion in a
Resolution[17] dated August 23, 1999 primarily due to the question regarding the ownership of
the property to be partitioned, in light of the intervention of respondents Acuna and Hermogenes
who were claiming legal right thereto.

In their Manifestation[18] filed on April 12, 2000, petitioners affirmed their execution of a
Deed of Sale in favor of Ruperta Sto. Domingo Villasenor in 1978, wherein they sold to her
1,000 square meters from Lot 1303 for the sum of 35,000.00.

After the pre-trial conference, trial ensued. On September 19, 2000, petitioner Elizabeth
Alarcon testified that they (plaintiffs) are not claiming the entire property covered by OCT No.
RO-487 (997) but only the area referred to as Lot 1303 and Sapang Bayan. She also admitted
that Lot 1302 had already been divided into ten (10) sublots and allocated to various
owners pursuant to the July 30, 1980 Decision of the CFI of Baliuag, Bulacan and these owners
already have their own titles. She likewise claimed that the entire area consisting of Lot 1303
and Sapang Bayan is based on the subdivision plan of Lot 1303. She admitted that plaintiffs
predecessor-in-interest was only allocated a portion of Lot 1303 based on the said
plan. However, she claimed that the November 29, 1929 Decision subdividing Lot 1303 was
never implemented nor executed by the parties.[19]

Petitioner Norma Fernando testified on October 3, 2000 that she is one of the children of
Jose A. Fernando and Lucila Tinio. She affirmed that plaintiffs were only claiming Lot 1303
and Sapang Bayan. She also testified that Sapang Bayan was supposedly included in Lot 1302
and was previously a river until it dried up. Unlike Lot 1302, the rest of the property was
purportedly not distributed. She likewise averred that she is aware of a November 29, 1929
Decision concerning the distribution of Lot 1303 issued by the cadastral court but insisted that
the basis of the claims of the petitioners over Lot 1303 is the title in the name of her ascendants
and not said Decision.[20]

On November 16, 2000, as previously directed by the trial court and agreed to by the
parties, counsel for respondent Hermogenes prepared and submitted an English translation of
the November 29, 1929 Decision. The same was admitted and marked in evidence as Exhibit
X[21] as a common exhibit of the parties. The petitioners also presented Alfredo Borja, the
Geodetic Engineer who conducted a relocation survey of the subject property.

After plaintiffs rested their case, respondent Hermogenes testified on December 7,

2000. In his testimony, he claimed to know the plaintiffs and defendants as they were allegedly
his relatives and neighbors. He confirmed that according to the November 29, 1929 Decision,
portions of Lot 1303 was designated as Lots 1303-A, 1303-B, 1303-C and 1303-D which were
adjudicated to certain persons, including Jose Fernando, while the rest of Lot 1303 was
adjudicated to his parents, Antonio A. Fernando married to Felisa Camacho. According to
respondent Hermogenes, his familys tenant and the latters children occupied the portion of Lot
1303 allotted to his (Hermogenes) parents while the rest of Lot 1303 was occupied by the
persons named in the said November 29, 1929 Decision. He admitted, however, that nobody
among the purported possessors of Lot 1303 registered the lots assigned to them in the
Decision.[22]

On January 18, 2001, respondent Hermogenes presented a witness, Engineer Camilo

Vergara who testified that the subject land is divided into Lots 1302 and 1303 with a creek
dividing the two lots known as Sapang Bayan. He also identified a Sketch Plan numbered as
PSD-45657 and approved on November 11, 1955.[23] During the hearing on January 30, 2001,
respondent Hermogenes made an oral offer of his evidence and rested his case. On the same
date, respondent Acuna, in lieu of his testimony, offered for the parties to simply stipulate on the
due execution and authenticity of the Deeds of Sale dated April 6, 1979 and December 28,
1980, showing the transfer of Lot 1303-D from Salud Wisco to Simeon Cunanan
and subsequently to respondent Acuna. When counsel for plaintiffs and defendants agreed to
the stipulation, albeit objecting to the purpose for which the deeds of sale were offered, the trial
court admitted Acunas exhibits and Acuna rested his case.[24]

On February 15, 2001, plaintiffs recalled Norma Fernando as a rebuttal witness. In her
rebuttal testimony, she identified the tax declaration[25] over the said property in the name of
Jose A. Fernando; an official receipt[26] dated October 3, 1997 issued by the Office of the
Treasurer of the Municipality of Baliuag, Bulacan for payment of real property taxes from 1991
to 1997; and a real property tax clearance[27] dated October 6, 1997, to show that plaintiffs have
allegedly been paying the real property taxes on the entire property covered by OCT No. RO-
487 (997). However, she further testified that they were now willing to pay taxes only over the
portion with an area of 44,234 square meters, which is included in their claim.[28]

In a Decision dated May 16, 2002, the trial court ruled that plaintiffs and defendants
(petitioners herein) were indeed the descendants and successors-in-interest of the registered
owners, Jose A. Fernando (married to Lucila Tinio) and Antonia Fernando (married to Felipe
Galvez), of the property covered by OCT No. RO-487 (997). After finding that the parties
admitted that Lot 1302 was already distributed and titled in the names of third persons per the
July 30, 1980 Decision of the CFI of Baliuag, Bulacan the trial court proceeded to rule on the
allocation of Lot 1303 and Sapang Bayan.

With respect to Lot 1303, the trial court found that the November 29, 1929 Decision of
the Cadastral Court, adjudicating said lot to different persons and limiting Jose Fernandos
share to Lot 1303-C, was never implemented nor executed despite the lapse of more than thirty
years. Thus, the said decision has already prescribed and can no longer be executed. The trial
court ordered the reversion of Lot 1303 to the ownership of spouses Jose A. Fernando and
Lucila Tinio and spouses Antonia A. Fernando and Felipe Galvez under OCT No. RO-487 (997)
and allowed the partition of Lot 1303 among petitioners as successors-in-interest of said
registered owners. Excluded from the partition, however, were the portions of the property
which petitioners admitted had been sold or transferred to Ruperta Sto. Domingo Villasenor and
respondent Acuna.

As for the ownership of Sapang Bayan, the trial court found that the same had not been
alleged in the pleadings nor raised as an issue during the pre-trial conference. Also, according
to the trial court, the parties failed to clearly show whether Sapang Bayan was previously a dry
portion of either Lot 1302 or Lot 1303. Neither was there any proof that Sapang Bayan was a
river that just dried up or that it was an accretion which the adjoining lots gradually received
from the effects of the current of water. It was likewise not established who were the owners of
the lots adjoining Sapang Bayan. The trial court concluded that none of the parties had clearly
and sufficiently established their claims over Sapang Bayan.

The dispositive portion of the May 16, 2002 Decision of the trial court reads:

WHEREFORE, all the foregoing considered, judgment is hereby rendered

ordering the reversion of Lot 1303, except the portions allotted to Acuna and
Ruperta Sto. Domingo Villasenor, to the ownership of Jose Fernando and Lucia
Tinio and Antonia Fernando and Felipe Galvez under OCT No. 997 and
 thereafter allowing the partition of said Lot 1303 among the plaintiffs and the
defendants as successors-in-interest of Jose and Lucia as well as Antonia and
Felipe after the settlement of any inheritance tax, fees, dues and/or obligation
chargeable against their estate.[29]

All the parties, with the exception of respondent Acuna, elevated this case to the Court
of Appeals which rendered the assailed November 24, 2003 Decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, the decision dated May 16, 2002, of

the Regional Trial Court of Malolos, Bulacan, Third Judicial Region, Branch 84, in
Civil Case No. 256-M-97, is hereby REVERSED and SET ASIDE and the
complaint dated April 17, 1997 filed by plaintiffs-appellants is dismissed. Costs
against plaintiffs-appellants.[30]

Hence, plaintiffs and defendants in the court a quo elevated the matter for our review
through the instant petition.

Petitioner raises the following issues for consideration:

1. Whether or not the ownership of Lot 1303 and the Sapang Bayan portion of the
piece of land covered by O.C.T. No. RO-487 (997) or Plan Psu-39080 should revert
to the descendants and heirs of the late spouses Jose Fernando and Lucila Tinio
and Antonia Fernando, married to Felipe Galvez;

2. Whether or not a title registered under the Torrens system, as the subject original
certificate of title is the best evidence of ownership of land and is a notice against the
world.[31]

The petition is without merit.

Petitioners based their claims to the disputed areas designated as Lot 1303 and Sapang
Bayan on their ascendants title, OCT No. RO-487 (997), which was issued on February 26,
1927 in the name of Jose A. Fernando married to Lucila Tinio and Antonia A. Fernando married
to Felipe Galvez. The Court now rules on these claims in seriatim.

Petitioners claim with respect to Lot 1303

As the records show, in the November 29, 1929 Decision of the Cadastral Court of
Baliuag, Bulacan (in Cadastral Record No. 14, GLRO Cad. Record No. 781) which was written
in Spanish, Lot 1303 had already been divided and adjudicated to spouses Jose A. Fernando
and Lucila Tinio; spouses Antonia A. Fernando and Felipe Galvez; spouses Antonio A.
Fernando and Felisa Camacho; spouses Jose Martinez and Gregoria Sison; and spouses
Ignacio de la Cruz and Salud Wisco from whom respondent Acuna derived his title. The English
translation of the said November 29, 1929 Decision was provided by respondent Hermogenes
and was adopted by all the parties as a common exhibit designated as Exhibit X. The agreed
English translation of said Decision reads:

Lot No. 1303 This lot is decreed in record No. 448, G.L.R.O. Record
No. 25414 and actually with Original Certificate No. 997 (exhibited today) in the
name of Jose A. Fernando and Antonia A. Fernando, who now pray that said lot
be subdivided in accordance with the answers recorded in the instant cadastral
record, and the sketch, Exh. A, which is attached to the records.

A part or portion of the lot has been claimed by Antonio A. Fernando, of

legal age, married to Felisa Camacho; another portion by the spouses Jose
Martinez and Gregoria Sison; another portion by Antonia A. Fernando, of legal
age, married to Felipe Galvez; another portion by Jose A. Fernando, of legal age,
married to Lucila Tinio; and another portion by the spouses Ignacio de la Cruz
and Salud Wisco, both of legal age. The part claimed by the spouses Jose A.
Martinez and Gregoria Sison is Lot 1303-A of Exh. A; the part claimed by Antonia
A. Fernando is Lot 1303-B of said exhibit; the part claimed by Jose A. Fernando
is Lot 1303-C of said exhibit, and the part claimed by the spouses Ignacio de la
Cruz and Salud Wisco is Lot 1303-D of the aforementioned Exhibit.

The subdivision of said lot is hereby ordered, separating from the same
the portions that correspond to each of the claimants, which portions are known
as Lots 1303-A, 1303-B, 1303-C, and 1303-D in the sketch, Exh. A, and once
subdivided, are adjudicated in favor of the spouses, Jose Martinez and Gregoria
Sison, of legal age, Lot No. 1303-A, in favor of Antonia A. Fernando, of legal age,
married to Felipe Galvez, Lot No. 1303-B; in favor of Jose A. Fernando, of legal
age, married to Lucila Tinio, Lot 1303-C; in favor of the spouses Ignacio de la
Cruz and Salud Wisco, of legal age, Lot 1303-D; and the rest of Lot 1303 is
 adjudged in favor of Antonio A. Fernando married to Felisa Camacho. It is
likewise ordered that once the subdivision plan is approved, the same be
forwarded by the Director of Lands to this Court for its final decision.

It is ordered that the expense for mentioned subdivision, shall be for the
account of the spouses Jose Martinez and Gregoria Sison, Antonia A. Fernando,
Jose A. Fernando, the spouses Ignacio de la Cruz and Salud Wisco, and Antonio
A. Fernando.[32]

From the foregoing, it would appear that petitioners ascendants themselves petitioned
for the cadastral court to divide Lot 1303 among the parties to the 1929 case and they were only
allocated Lots 1303-B and 1303-C. Still, as the trial court noted, the November 29, 1929
Decision was never fully implemented in the sense that the persons named therein merely
proceeded to occupy the lots assigned to them without having complied with the other directives
of the cadastral court which would have led to the titling of the properties in their
names. Nonetheless, it is undisputed that the persons named in the said November 29, 1929
Decision and, subsequently, their heirs and assigns have since been in peaceful and
uncontested possession of their respective lots for more than seventy (70) years until the filing
of the suit for partition on April 17, 1997 by petitioners which is the subject matter of this
case. Respondent Hermogenes, who testified that petitioners were his relatives and neighbors,
further affirmed before the trial court that the persons named in the November 29, 1929
Decision took possession of their respective lots:

ATTY. VENERACION:

Q This Jose A. Fernando married to Lucila Tinio, you testified earlier are the
parents of the plaintiffs. Did they take possession of lot 1303-C?

A Yes, sir. They took possession.

Q Did they take possession of the other lots?

A No. Yes, the portion

Q The other lots in the name of the other persons. Did they take possession
of that?

A Yes, they took took possession of the other No, sir.

Q I am asking you whether they took possession, the children

ATTY. SANTIAGO:

The questions are already answered, your Honor.

ATTY. VENERACION:

What is the answer?

ATTY. SANTIAGO:

Its in the record.

COURT:

The persons named in the Decision already took possession of the lots
allotted to them as per that Decision. So that was already answered.
Anything else?

ATTY. VENERACION;

No more question, Your Honor.[33]

 It is noteworthy that petitioners do not dispute that the November 29, 1929 Decision of
the cadastral court already adjudicated the ownership of Lot 1303 to persons other than the
registered owners thereof. Petitioners would, nonetheless, claim that respondents purported
failure to execute the November 29, 1929 Decision over Lot 1303 (i.e., their failure to secure
their own titles) meant that the entire Lot 1303 being still registered in the name of their
ascendants rightfully belongs to them. This is on the theory that respondents right to have the
said property titled in their names have long prescribed.

On this point, we agree with the appellate court.

Section 47 of Presidential Decree No. 1529, otherwise known as the Property

Registration Decree, states that [n]o title to registered land in derogation of the title of the
registered owner shall be acquired by prescription or adverse possession. Thus, the Court has
held that the right to recover possession of registered land is imprescriptible because
possession is a mere consequence of ownership.[34]

However, in Heirs of Anacleto B. Nieto v. Municipality of Meycauayan, Bulacan,[35] the

Court had recognized the jurisprudential thread regarding the exception to the foregoing
doctrine that while it is true that a Torrens title is indefeasible and imprescriptible, the registered
landowner may lose his right to recover possession of his registered property by reason of
laches.

Thus, in Heirs of Batiog Lacamen v. Heirs of Laruan,[36] the Court had held that while a
person may not acquire title to the registered property through continuous adverse possession,
in derogation of the title of the original registered owner, the heir of the latter, however, may lose
his right to recover back the possession of such property and the title thereto, by reason of
laches.

In the more recent case of Bartola M. Vda. De Tirona v. Encarnacion,[37] we similarly

held that while jurisprudence is settled on the imprescriptibility and indefeasibility of a Torrens
title, there is equally an abundance of cases where we unequivocally ruled that registered
owners may lose their right to recover possession of property through the equitable principle of
laches.

Laches means the failure or neglect for an unreasonable and unexplained length of time
to do that which, by observance of due diligence, could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting the presumption
that the party entitled to assert his right either has abandoned or declined to assert it. Laches
thus operates as a bar in equity.[38] The essential elements of laches are: (a) conduct on the
part of the defendant, or of one under whom he claims, giving rise to the situation complained
of; (b) delay in asserting complainants rights after he had knowledge of defendants acts and
after he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that the
complainant will assert the right on which he bases his suit; and (d) injury or prejudice to the
defendant in the event the relief is accorded to the complainant.[39]

In view of respondents decades long possession and/or ownership of their respective

lots by virtue of a court judgment and the erstwhile registered owners inaction and neglect for
an unreasonable and unexplained length of time in pursuing the recovery of the land, assuming
they retained any right to recover the same, it is clear that respondents possession may no
longer be disturbed. The right of the registered owners as well as their successors-in-interest to
recover possession of the property is already a stale demand and, thus, is barred by laches.

In the same vein, we uphold the finding of the Court of Appeals that the title of
petitioners ascendants wrongfully included lots belonging to third persons.[40] Indeed,
petitioners ascendants appeared to have acknowledged this fact as they were even the ones
that prayed for the cadastral court to subdivide Lot 1303 as evident in the November 29, 1929
Decision. We concur with the Court of Appeals that petitioners ascendants held the property
erroneously titled in their names under an implied trust for the benefit of the true owners. Article
1456 of the Civil Code provides:

ART. 1456. If property is acquired through mistake or fraud, the person

obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.

As aptly observed by the appellate court, the party thus aggrieved has the right to
recover his or their title over the property by way of reconveyance while the same has not yet
passed to an innocent purchaser for value.[41] As we held in Medizabel v. Apao,[42] the essence
of an action for reconveyance is that the certificate of title is respected as incontrovertible. What
is sought is the transfer of the property, in this case its title, which has been wrongfully or
erroneously registered in another person's name, to its rightful owner or to one with a better
right. It is settled in jurisprudence that mere issuance of the certificate of title in the name of any
person does not foreclose the possibility that the real property may be under co-ownership with
persons not named in the certificate or that the registrant may only be a trustee or that other
parties may have acquired interest subsequent to the issuance of the certificate of title. [43]

We cannot subscribe to petitioners argument that whatever rights or claims respondents

may have under the November 29, 1929 Decision has prescribed for their purported failure to
fully execute the same. We again concur with the Court of Appeals in this regard. An action for
reconveyance of registered land based on implied trust prescribes in ten (10) years, the point of
reference being the date of registration of the deed or the date of the issuance of the certificate
of title over the property. However, this Court has ruled that the ten-year prescriptive period
applies only when the person enforcing the trust is not in possession of the property. If a person
claiming to be its owner is in actual possession of the property, the right to seek reconveyance,
which in effect seeks to quiet title to the property, does not prescribe. The reason is that the
one who is in actual possession of the land claiming to be its owner may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his right.[44]

Petitioners claim with respect to Sapang Bayan

As for the issue of the ownership of Sapang Bayan, we sustain the appellate court
insofar as it ruled that petitioners failed to substantiate their ownership over said area. However,
we find that the Court of Appeals erred in ruling that the principle of accretion is applicable. The
said principle is embodied in Article 457 of the Civil Code which states that [t]o the owners of
lands adjoining the banks of rivers belong the accretion which they gradually receive from the
effects of the current of the waters. We have held that for Article 457 to apply the following
requisites must concur: (1) that the deposit be gradual and imperceptible; (2) that it be made
through the effects of the current of the water; and (3) that the land where accretion takes place
is adjacent to the banks of rivers.[45] The character of the Sapang Bayan property was not
shown to be of the nature that is being referred to in the provision which is an accretion known
as alluvion as no evidence had been presented to support this assertion.

In fact from the transcripts of the proceedings, the parties could not agree how Sapang
Bayan came about. Whether it was a gradual deposit received from the river current or a dried-
up creek bed connected to the main river could not be ascertained.

Even assuming that Sapang Bayan was a dried-up creek bed, under Article 420,
paragraph 1[46] and Article 502, paragraph 1[47] of the Civil Code, rivers and their natural beds
are property of public dominion. In the absence of any provision of law vesting ownership of the
dried-up river bed in some other person, it must continue to belong to the State.
 We ruled on this issue in Republic v. Court of Appeals,[48] to wit:

The lower court cannot validly order the registration of Lots 1 and 2 in the
names of the private respondents. These lots were portions of the bed of the
Meycauayan river and are therefore classified as property of the public domain
under Article 420 paragraph 1 and Article 502, paragraph 1 of the Civil Code of
the Philippines. They are not open to registration under the Land Registration
act. The adjudication of the lands in question as private property in the names of
the private respondents is null and void.[49]

Furthermore, in Celestial v. Cachopero,[50] we similarly ruled that a dried-up creek bed is

property of public dominion:

A creek, like the Salunayan Creek, is a recess or arm extending from a

river and participating in the ebb and flow of the sea. As such, under Articles
420(1) and 502(1) of the Civil Code, the Salunayan Creek, including its natural
bed, is property of the public domain which is not susceptible to private
appropriation and acquisitive prescription. And, absent any declaration by the
government, that a portion of the creek has dried-up does not, by itself, alter its
inalienable character.[51]

Therefore, on the basis of the law and jurisprudence on the matter, Sapang
Bayan cannot be adjudged to any of the parties in this case.

WHEREFORE, premises considered, the petition is hereby DENIED. The

assailed Decision dated November 24, 2003 of the Court of Appeals in CA-G.R. CV No. 75773
is hereby AFFIRMED. Costs against petitioners.
 SO ORDERED.

ART. 421
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 120652 February 11, 1998

EUGENIO DE LA CRUZ, petitioner,

vs.
COURT OF APPEALS, and CRISTINA MADLANGSAKAY VILLANUEVA, respondents.

ROMERO, J.:

The oft-debated issue of ownership based on acquisitive prescription submits itself before the Court
anew, involving a four hundred and seven (407) square meter residential lot located at Barangay
San Jose, Bulacan, Bulacan. Petitioner Eugenio De La Cruz claims to be the owner and actual
possessor of the lot, having possessed and occupied it openly, publicly, notoriously, adversely
against the whole world, and in the concept of an owner, for more than thirty years, 1 at the
commencement of this controversy on September 28, 1987. Private respondent Cristina Madlangsakay
Villanueva is a purchaser of the same lot from the Ramos brothers, Rogelio and Augusto, Jr., who claim
to be successors-in-interest of a previous possessor of the same.

In October 1959, petitioner contracted a loan from the parents of private respondent, Anastacio
Sakay and Lourdes Manuel, is the amount of one thousand pesos (P1,000.00), mortgaging the
disputed land as security. Sometime in 1973, the land became the subject of an application for
registration under the Land Registration Act (Act No. 496) 2 by the Ramos brothers. They insisted that,
under said Act, they had a better claim than petitioner, being successors-in-interest of a previous
possessor of the land. Petitioner seasonably opposed the application which, after trial, was denied on the
ground that the land, not having been reclassified for other purposes, remained part of the forest reserve,
hence, inalienable. 3 Consequently, the opposition was dismissed. Shortly thereafter, the brothers
successfully pursued the reclassification of the land and were granted ownership of the same. It was after
this occurrence that private respondent came to purchase the disputed land from the Ramoses.

Oblivious of the Ramoses' success in claiming the land, petitioner was later surprised to learn that its
ownership had been bestowed upon them, and that it was subsequently sold to private respondent.
Petitioner, as plaintiff in Civil Case No. 520-M-87, entitled "Eugenio De La Cruz versus Cristina
Madlangsakay Villanueva," filed a complaint on September 28, 1987 for reconveyance with
damages against private respondent, defendant therein. The complaint was dismissed.
On appeal, plaintiff-appellant elucidated that an uncle of his had given the land to his mother, after
having purchased it from a Cecilio Espiritu in 1930. 4 He sought a reversal of the decision of the lower
court, praying for a reconveyance of the land in his favor. The appealed decision was affirmed in toto by
the appellate court. A motion for reconsideration, for lack of merit, did not prosper.

The persistent petitioner, filing this petition for review, opined that the questioned decision of the trial
court was incompatible with the ruling in Republic vs. Court of Appeals and Miguel Marcelo, et
al., 5 where this Court held that the primary right of a private individual who possessed and cultivated the
land in good faith, much prior to its classification, must be recognized and should not be prejudiced by
after-events which could not have been anticipated. 6 He relies on the equitable principle of estoppel,
alleging that, by virtue of the contract of mortgage, private respondent and her parents thereby tacitly
acknowledged him as the true and lawful owner of the mortgaged property. As such, they are estopped
from claiming for themselves the disputed land. He prays for the reconveyance of the lot in his favor;
moral damages in the amount of ten thousand pesos (P10,000.00); exemplary damages of like amount;
and attorney's fees of twenty thousand pesos (P20,000.00), plus one thousand pesos (P1,000.00) per
court appearance and the costs of the suit. 7

This petition cannot be given due course.

The several decades when petitioner possessed and occupied the land in question may not be
considered in his favor after all. "In an action for reconveyance, what is sought is the transfer of the
property which has been wrongfully or erroneously registered in another person's name, to its rightful
and legal owner, or to one with a better right. This (sic) is what reconveyance is all about." 8

The crucial point for resolution is this: Is petitioner vested with a better right over the residential lot to
which he devoted an abundance of time, effort and resources in fencing and cultivating the same? It
is sad that even the magnanimous compassion of this Court cannot offer him any spark of
consolation for his assiduous preservation and enhancement of the property.

We answer in the negative.

Unfortunately for him, Republic vs. Court of Appeals and Miguel Marcelo, et al. 9 is inapplicable in the
present case. In said case, the disputed land was classified after the possession and cultivation in good
faith of the applicant. The Court stated that "the primary right of a private individual who possessed and
cultivated the land in good faith much prior to such classification must be recognized and should not be
prejudiced by after-events which could not have been anticipated." 10Land Classification Project No. 3 was
certified by the Director of Lands on December 22, 1924, whereas the possession thereof commenced as
early as 1909. 11 Petitioner therein was not deprived of his possessory rights by the subsequent
classification of the land. Although the classification of lands is a government prerogative which it may opt
to exercise to the detriment of another, still, private interests regarding the same are not prejudiced and
the processor in good faith is respected in his right not be disturbed. This was the auspicious situation of
petitioner in the abovecited case.

Here, petitioner possessed and occupied the land after it had been declared by the Government as
part of the forest zone. In fact, the land remained part of the forest reserve until such time that it was
reclassified into alienable or disposable land at the behest of the Ramoses. As succinctly stated by
this Court in Director of Lands vs. Court of Appeals, 12 a positive act of the Government is needed to
declassify land which is classified as forest, and to convert in into alienable or disposable land for other
purposes. Until such lands have been properly declared to be available for other purposes, there is no
disposable land to speak of. 13 Absent the fact of declassification prior to the possession and cultivation in
good faith by petitioner, the property occupied by him remained classified as forest or timberland, which
he could not have acquired by prescription. 14
Clearly, the effort to apply Republic vs. Court of Appeals and Miguel Marcelo, et al. in the case at bar
is futile. No similarity of facts or events exist which would merit its application to the case presented
by petitioner.

Neither may the rewards of prescription be successfully invoked by petitioner, as it is an iron-clad

dictum that prescription can never lie against the Government. The lengthy occupation of the
disputed land by petitioner cannot be counted in his favor, as it remained part of the patrimonial
property of the State, which property, as stated earlier, is inalienable and indisposable. Under Article
1113 of the Civil Code:

All things which are within the commerce of men are susceptible of prescription, unless
otherwise provided.Property of the State or any of its subdivisions not patrimonial in
character shall not be the object of prescription. (Emphasis supplied).

Further, jurisprudence is replete with cases which iterate that forest lands or forest reserves are not
capable of private appropriation, and possession thereof, however long, cannot convert them into
private property. 15Possession of the residential lot by petitioner, whether spanning decades or centuries,
could never ripen into ownership. This Court is constrained to abide by the latin maxim "(d)ura lex, sed
lex." 16

The fact that the disputed land was used for a dual private purpose, namely, as a residential lot and
as part of the ricemill business of private respondent's parents, is immaterial. As held in Heirs of
Jose Amunategui vs. Director of Forestry, 17 the classification of forest land, or any land for that matter,
is descriptive of its legal nature or status, and does not have to be descriptive of what the land actually
looks like.

Recourse to the principle of estoppel must likewise fail. Petitioner invokes this principle in light of the
contract of mortgage between him and the parents of private respondent. While it is true that the
mortgagees, having entered into a contract with petitioner as mortgagor, are estopped from
questioning the latter's ownership of the mortgaged property and his concomitant capacity to
alienate or encumber the same, 18 it must be considered that, in the first place, petitioner did not possess
such capacity to encumber the land at the time for the stark reason that it had been classified as a forest
land and remained a part of the patrimonial property of the State. Assuming, without admitting, that the
mortgagees cannot subsequently question the fact of ownership of petitioner after having dealt with him in
that capacity, still, petitioner was never vested with the proprietary power to encumber the property. In
fact, even if the mortgagees continued to acknowledge petitioner as the owner of the disputed land, in the
eyes of the law, the latter can never be presumed to be owner.

WHEREFORE, considering the foregoing, we are bound by the findings of the appellate court and
are constrained to AFFIRM the same in toto. No pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., Kapunan, Francisco and Purisima, JJ., concur.

ART. 422

G.R. No. L40474 August 29, 1975

CEBU OXYGEN & ACETYLENE CO., INC., petitioner,

vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial District, and
JOSE L. ESPELETA, Assistant Provincial Fiscal, Province of Cebu, representing the
Solicitor General's Office and the Bureau of Lands, respondents.

Jose Antonio R Conde for petitioner.

Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General Octavio
R. Ramirez and Trial Attorney David R. Hilario for respondents. .

CONCEPCION, Jr., J.:

This is a petition for the review of the order of the Court of First Instance of Cebu dismissing
petitioner's application for registration of title over a parcel of land situated in the City of Cebu.

The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu
City. On September 23, 1968, the City Council of Cebu, through Resolution No. 2193, approved
on October 3, 1968, declared the terminal portion of M. Borces Street, Mabolo, Cebu City, as an
abandoned road, the same not being included in the City Development Plan. 1 Subsequently, on
December 19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the
Acting City Mayor to sell the land through a public bidding. 2 Pursuant thereto, the lot was
awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of
Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner
for a total consideration of P10,800.00. 3 By virtue of the aforesaid deed of absolute sale, the
petitioner filed an application with the Court of First instance of Cebu to have its title to the land
registered. 4

On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the
application on the ground that the property sought to be registered being a public road intended
for public use is considered part of the public domain and therefore outside the commerce of
man. Consequently, it cannot be subject to registration by any private individual. 5

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the
petitioner's application for registration of title. 6 Hence, the instant petition for review.

For the resolution of this case, the petitioner poses the following questions:

(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31,
paragraph 34, give the City of Cebu the valid right to declare a road as
abandoned? and
 (2) Does the declaration of the road, as abandoned, make it the patrimonial
property of the City of Cebu which may be the object of a common contract?

(1) The pertinent portions of the Revised Charter of Cebu City provides:

Section 31. Legislative Powers. Any provision of law and executive order to the
contrary notwithstanding, the City Council shall have the following legislative
powers:

xxx xxx xxx

(34) ...; to close any city road, street or alley, boulevard, avenue, park or square.
Property thus withdrawn from public servitude may be used or conveyed for any
purpose for which other real property belonging to the City may be lawfully used
or conveyed.

From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city
road or street. In the case of Favis vs. City of Baguio, 7 where the power of the city Council of
Baguio City to close city streets and to vacate or withdraw the same from public use was
similarly assailed, this court said:

5. So it is, that appellant may not challenge the city council's act of withdrawing a
strip of Lapu-Lapu Street at its dead end from public use and converting the
remainder thereof into an alley. These are acts well within the ambit of the power
to close a city street. The city council, it would seem to us, is the authority
competent to determine whether or not a certain property is still necessary for
public use.

Such power to vacate a street or alley is discretionary. And the discretion will not
ordinarily be controlled or interfered with by the courts, absent a plain case of
abuse or fraud or collusion. Faithfulness to the public trust will be presumed. So
the fact that some private interests may be served incidentally will not invalidate
the vacation ordinance.

(2) Since that portion of the city street subject of petitioner's application for registration of title
was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial
property which can be the object of an ordinary contract.

Article 422 of the Civil Code expressly provides that "Property of public dominion, when no
longer intended for public use or for public service, shall form part of the patrimonial property of
the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and
unequivocal terms, states that: "Property thus withdrawn from public servitude may be used or
conveyed for any purpose for which other real property belonging to the City may be lawfully
used or conveyed."

Accordingly, the withdrawal of the property in question from public use and its subsequent sale
to the petitioner is valid. Hence, the petitioner has a registerable title over the lot in question.
WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land
Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set aside, and the respondent court is
hereby ordered to proceed with the hearing of the petitioner's application for registration of title.

SO ORDERED.
 G.R. No. 171304
ART. 423 424

Present:

IN THE MATTER OF
REVERSION/RECALL OF
RECONSTITUTED OCT NO. 0-116 YNARES-SANTIAGO, J.,
DECREE NO. 3999 OF LOT4239; Chairperson,
DECREE NO. 59327; OCT NO. 388; IN AUSTRIA-MARTINEZ,
THE TARLAC REGISTRY OF DEEDS
HEIRS OF THE LATE SPS. TIMOTEA CARPIO MORALES,
L. PALAGANAS, WIFE OF RAMON CHICO-NAZARIO, and
PARAGAS, ET AL.; GLORIFICADOR
D. PALAGANAS; ROSELYN E. REYES, JJ.
MENDOZA and DANILO M. MARCELO,
representing in this act as Attorneys-
in-Fact,
Petitioners,

- versus - Promulgated:

REGISTRY OF DEEDS -TARLAC CITY;

RTC-BR. 67 PANIQUI, TARLAC;
andMUNICIPALITY OF PANIQUI
TARLAC,
Respondents.

October 10, 2007

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

DECISION

CHICO-NAZARIO, J.:
 This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
the reversal of (1) the 29 April 2005 Resolution[1] of the Court of Appeals in CA-G.R. SP UDK
No. 5314, which dismissed petitioners Petition for Annulment of Judgment and (2) the 5 August
2005 Resolution[2] of the appellate court which denied petitioners Motion for
Reconsideration. The Petition for Annulment of Judgment filed by the petitioners with the Court
of Appeals was, in turn, directed against the 29 October 1993 Decision[3] of the Regional Trial
Court (RTC) of Tarlac, Branch 67, in Land Case No. 274-P93, which ordered the reconstitution
of the Original Certificates of Title (OCTs) in the name of the Municipality of Paniqui, Tarlac over
the subject property.

The factual and procedural antecedents of the case are as follows:

Sometime in 1910, officials of the Municipal Government of Paniqui, headed by Maximo

Parazo, built a school, a public market, and a cemetery on an untitled parcel of
land. Thereafter, OCTs No. R0-532 (O-116) and No. 388 were issued on 17 February
1911 and 7 June 1915, respectively, in the name of the Municipal Government of Paniqui, by
virtue of the judicial confirmation of its title to the subject property. OCTs No. R0-532 (O-116)
and No. 388 covered the property being claimed by petitioners.

On 29 October 1993, pursuant to a Verified Petition for Reconstitution filed by the

Municipality of Paniqui, represented by Mayor Cesar E. Cuchapin, the RTC issued a Decision
resolving that OCTs No. R0-532 (O-116) and No. 388 were indeed lost, and ordering the
cancellation and the reconstitution of the same as Transfer Certificates of Title (TCTs) No.
259969, No. 259970, No. 260900, No. 260901, No. 260902, No. 260903, and No. 336772 of the
Registry of Deeds of Tarlac City, registered in the name of theMunicipality of Paniqui.

On 3 February 2005, the Municipality of Paniqui demolished its old Public Market in
order to build a new one. Around this time, a former Board Member of the municipality
inadvertently showed a close friend of the petitioners the cancelled OCTs No. RO-532 (O-116)
and No. 338 covering the lot where the public market is located. The said OCTs allegedly
named the petitioners ascendants as the former owners of the subject property.

On 28 March 2005, petitioners filed the Petition for Annulment of Judgment[4] with the
Court of Appeals, praying for the cancellation of the TCTs and for the reconveyance in their
favor of the title to the parcels of land.
 Petitioners based their petition on the claim that their alleged ascendants were the
original pioneers/settlers/occupants of the land in question since 1843 as its indigenous
inhabitants. In 1910, however, officials of the Municipal Government of Paniqui, headed by
Maximo Parazo, ordered the occupants of the land to vacate their property so that the
municipality could build thereon a school, a public market, and a cemetery. According to
petitioners, their ascendants were not given a chance or opportunity to appear or answer and
present their side at the cadastral proceedings involving the subject properties, from which
resulted the issuance of the OCTs in the name of the Municipality of Paniqui.

On 29 April 2005, the Court of Appeals issued the first assailed Resolution, wherein it
dismissed the Petition for Annulment of Judgment on the following grounds:

1. The Petition was not verified, contrary to Section 4, Rule 47 of the Rules of Court;

2. The attached copy of the assailed RTC Decision is a mere photocopy and not a
certified true copy, also contrary to Section 4, Rule 47 of the Rules of Court;

3. The corresponding Special Powers of Attorney of the alleged Attorneys-in-Fact

were not attached; and

4. Petitioners failed to indicate the material dates pertinent to the filing of the Petition,
hence, failing to prove that the same was brought within four years from the
discovery of the extrinsic fraud alleged in the assailed 29 October 1993 Decision,
contrary to Section 3, Rule 47 of the Rules of Court.

Petitioners filed a Motion for Reconsideration of the dismissal of their Petition, attaching
thereto the following:

1. a copy of page 7 of the Petition containing the Verification of the same[5];

2. a photocopy of the assailed 29 October 1993 RTC Decision[6];

3. Special Power of Attorney of petitioners Conrado Rivera and Perseveranda

Domingo, appointing and constituting Glorificador D. Palaganas, Roselynne E.
Mendoza, and Danilo M. Marcelo as their Attorneys-in-Fact[7]; and

4. Special Power of Attorney of petitioners Jose Velasquez, Demetria de Vera and

Luz P. Labutong, appointing and constituting Paciano P. Paragas and Benedicto P.
Manuel as their Attorneys-in-Fact.[8]
 The Court of Appeals, noting that the attached copy of the assailed RTC Decision is still
only a photocopy of a certified xerox copy, held that even if the technicalities were brushed
aside, the Petition would still be dismissed for lack of substantial merit, for the following reasons:

1. Petitioners failed to show that they are the real parties-in-interest authorized to
institute the Petition for Annulment of Judgment. The Petition did not establish that
the petitioners are truly the successors-in-interest of the individuals indicated in the
technical descriptions of OCT No. R0-532 (0-116) and OCT No. 388. Although the
surnames appearing in the technical descriptions are the same as those of some of
the petitioners, there was no allegation of how the alleged original inhabitants and
the petitioners were related nor was any proof thereof presented;

2. Petitioners failed to allege fraud in connection with the proceedings in Land Case
No. 274-P93 which culminated in the rendition of the assailed Decision dated 29
October 1993 by the RTC. The fraud averred by the petitioners was allegedly
committed in the cadastral proceedings for the judicial confirmation of title to the
subject property conducted on 17 February 1911, 7 June 1915 and 20 September
1917, and not in the rendition of the judgment dated 29 October 1993 by the RTC in
Land Case No. 274-P93 which petitioners seek to annul; and

3. The claim of petitioners had already been barred by laches. Although petitioners
discovered their supposed right to the disputed property only recently, their alleged
ascendants should have instituted an action against the Municipal Government of
Paniqui, Tarlac, or against Maximo Parazo for the purportedly unlawful taking of the
property way back in the 1920s. The petitioners make no allegation as to any action
taken by the alleged ascendants to recover the subject property.

The Motion for Reconsideration thus having been denied for lack of merit, petitioners
filed the present Petition for Review on Certiorari.

Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the annulment of a
judgment may "be based only on the grounds of extrinsic fraud and lack of jurisdiction."[9]

A perusal of the records of the case reveals that petitioners did not allege, much less
prove, either extrinsic fraud or lack of jurisdiction by the RTC in Land Case No. 274-
P93. Petitioners claim was that municipal officials ordered their alleged ascendants to vacate
the subject property way back in 1910 to build a school, a public market and a cemetery
thereon, and that the municipality was subsequently issued OCTs after a judicial confirmation of
its title in 1911 and 1915. Petitioners allege that their ascendants were defrauded when they
were not given a chance or opportunity to appear or answer and present their side at the
cadastral proceedings involving the subject property. It is apparent that what petitioners are
actually challenging are the cadastral proceedings in which the OCTs over the subject property
were issued in the name of the Municipality of Paniqui. Their Petition was, however, directed
against the Decision of the RTC 78 years later decreeing reconstitution of said OCTs.

Even if we consider that the petition for annulment was, in effect, filed against the 1911
and 1915 judicial decrees confirming the title of the Municipality of Paniqui over the subject
property, as petitioners imply in their Memorandum, their petition must still be dismissed.

Petitioners failed to prove either extrinsic fraud or lack of jurisdiction, the grounds for a
petition for annulment of judgment, even with respect to the 1911 and 1915 Decrees.

There is extrinsic fraud when the unsuccessful party had been prevented from exhibiting
fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away
from court, or where the defendant never had knowledge of the suit, being kept in ignorance by
the acts of the plaintiff.[10] Petitioners presented no proof to substantiate their allegation that
their ascendants were not given a chance or opportunity to appear or answer and present their
side at the cadastral proceedings involving the subject property.

Likewise, petitioners presented neither any evidence nor any legal argument in support
of their claim of lack of jurisdiction of the court which took cognizance of the cadastral
proceedings in which the OCTs over the subject property were issued in the name of
the Municipality of Paniqui.

In order to cover up for the lack of evidence to prove the grounds for an annulment of
judgment, petitioners relied on an erroneous interpretation of a very old case. Citing the 1906
case, Nicolas v. Jose,[11] petitioners claim that extrinsic fraud and lack of jurisdiction are shown
by the mere fact that a municipality had a real property devoted to public use registered in its
name.[12]

In Nicolas, the then Municipality of Cavite sought to be inscribed as the owner of a

certain track of land situated within said municipality. Finding that the property in question is a
public square, this Court, applying a provision in the Spanish Civil Code, held that:
 The evidence shows, and the court below so found, that at the time the
Kiosko Cafe and the theater were built, they were built upon a public street or
square known as the Paseo Plaza de la Soledad.

xxxx

The question remains as to whether the municipality is entitled to have

the land upon which the Kiosko Caf stands registered in its name. Article 344 of
the Civil Code is as follows:

Property for public use in provinces and in towns comprises the

provincial and town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by the said towns or
provinces.

All other property possessed by either is patrimonial, and shall be

governed by the provisions of this code, unless otherwise prescribed in special
laws.

The land in question, upon which this Kiosko Caf stands, being
dedicated to public use, we do not think it is subject to inscription by the
municipality. Article 25 of the regulations for the execution of the Mortgage Law
prohibits the inscription of public streets in the old registry. Public streets are
not bienes patrimoniales of the municipality so long as they are destined to public
use.[13]

Properties of local government units under the Spanish Civil Code were limited to
properties for public use and patrimonial property.[14] The same is still true under the 1950 Civil
Code which governs us today. The principle has remained constant: property for public use can
be used by everybody, even by strangers or aliens, in accordance with its nature; but nobody
can exercise over it the rights of a private owner.[15] As aptly held by this court in The Province
of Zamboanga del Norte v. City of Zamboanga[16]:

The Civil Code classification is embodied in its Arts. 423 and 424 which
provide:
 "ART. 423. The property of provinces, cities and municipalities, is divided
into property for public use and patrimonial property. "

"ART. 424. Property for public use, in the provinces, cities, and
municipalities, consists of the provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public
service paid for by said provinces, cities, or municipalities.

"All other property possessed by any of them is patrimonial and shall be

governed by this Code, without prejudice to the provisions of special laws."

Applying the above cited norm, all the properties in question, except the
two (2) lots used as High School playgrounds, could be considered as
patrimonial properties of the former Zamboanga province. Even the capitol site,
the hospital and leprosarium sites, and the school sites will be considered
patrimonial for they are not for public use. They would not fall under the phrase
"public works for public service" for it has been held that under the ejusdem
generis rule, such public works must be for free and indiscriminate use by
anyone, just like the preceeding enumerated properties in the first paragraph of
Art. 424. The playgrounds, however, would fit into this category.[17]

While this Court in Province of Zamboanga del Norte ended up using the Municipal
Corporation Law classification instead of that of the Civil Code classification,[18]Nicolas has
settled the application of the Civil Code classification with respect to the provision of the then-in-
effect regulations for the execution of the Mortgage Law.

In the case at bar, a school, a public market, and a cemetery were built upon the subject
property. Unlike a public square as that in Nicolas or a playground as that in
theProvince of Zamboanga del Norte, schools, public markets and cemeteries are not for the
free and indiscriminate use of everyone. The determination of the persons allowed to study in
such schools, or put up stalls in the public market, or bury their dead in public cemeteries are
regulated by the government. As such, the subject property is, under the Civil Code
classification, patrimonial property, and the Municipality may have the same registered in its
name.
 As neither extrinsic fraud nor lack of jurisdiction had been proven by petitioners, we hold
that the Court of Appeals was correct in dismissing petitioners Petition for Annulment of
Judgment.

We likewise affirm the finding of the Court of Appeals that the claim of petitioners had
already been barred by laches. Laches is defined as failure or neglect for an unreasonable and
unexplained length of time to do that which, by exercising due diligence, could or should have
been done earlier. It is negligence or omission to assert a right within a reasonable time,
warranting the presumption that the party entitled to assert it has either abandoned or declined
to assert it.[19]

The recent discovery by petitioners of their supposed right to the disputed property
notwithstanding, petitioners alleged ascendants should have instituted an action against the
Municipal Government of Paniqui or against Maximo Parazo for the allegedly unlawful taking of
the property way back in the 1920s. As asserted by petitioners themselves,
the Municipality of Paniqui had openly taken over the property and exercised rights over the
same. The period of the omission of petitioners purported predecessors-in-interest since the
taking of the property in 1910 up to the filing of the petition is certainly an unreasonable
time. Being the purported successors-in-interest of the former owners of the subject property,
petitioners merely stepped into the shoes of their predecessors-in-interest, and are bound by
their actions and inactions.[20]

This brings us to the final reason for the denial of the present petition. The records of
the case are bereft of any proof on the part of petitioners that they are indeed the successors-in-
interest of the supposed former owners of the subject property. Bearing the same surnames as
the individuals indicated in the technical descriptions of the OCTs being reconstituted is woefully
inadequate to prove their relationship. As petitioners failed to establish that they are the
descendants of the supposed former owners of the subject property, the case at bar cannot be
prosecuted in their name, as they are not the real parties-in-interest as provided in Section 2,
Rule 3 of the Rules of Court.

A real party-in-interest is one who stands to be benefited or injured by the judgment in

the suit, or the party entitled to the avails of the suit. By real interest is meant a present
substantial interest, as distinguished from a mere expectancy; or a future, contingent,
subordinate, or consequential interest.[21] Rule 3, Section 2, of the Rules of Court provides
explicitly that every action must be prosecuted and defended in the name of the real party-in-
interest. Petitioners failure to prove such real interest constrained the Court of Appeals to
dismiss the petition.
 WHEREFORE, the Petition is DENIED. The 29 April 2005 Resolution of the Court of
Appeals dismissing petitioners Petition for Annulment of Judgment in CA-G.R. SP UDK No.
5314 and the 5 August 2005 Resolution of the same court denying petitioners Motion for
Reconsideration are AFFIRMED.

SO ORDERED.