P Title1

1. LADERA VS. HODGES (G.R. NO. 8027-R, VOL. 48, NO. 12, O.G.
5374, SEPTEMBER 23, 1952)
FACTS:
Hodges entered into a contract promising to sell a lot to Ladera under certain terms and conditions. One
of which is that the contract may be rescinded and annulled in case Ladera failed to make the monthly
payment 60 days after it is due.
After the execution of the contract, Ladera built a house on the lot assessed at 4,500 pesos. However,
Ladera failed to pay the agreed installments so Hodges rescinded the contract and filed an action for
ejectment.
The MTC ruled in favor of Hodges and issued an alias writ of execution. Pursuant thereto, the sheriff
levied upon all rights, interests and participation over the house. Notices of sale were posted, however,
were not published in a newspaper of general circulation.
An auction sale was then conducted but Ladera was not able to attend as she had gone to Manila. The
house was then sold to one Avelina Magno as the highest bidder. Meanwhile, Ladera sold the same lot
to one Manuel Villa and on the same day purchased the house from Magno for 200 pesos. This,
however, was not recorded.
Ladera then returned to Iloilo and learned what happened. She went to see the sheriff and represented
that the property can still be redeemed and so she gave him 230 pesos. It does not appear, however, that
it was turned over to Hodges. Thereupon, Ladera filed an action against Hodges, the sheriff, Magno and
Villa to set aside the sale and recover the house.
The lower court ruled in favor of Ladera on the ground of non-compliance based on Rule 39 of the Rules
of Court. On appeal, Hodges contends that the house, built on a lot owned by another, should be
regarded as movable or personal property. The sale of the land was also made without proper
publication required by law.
ISSUE: Was the house movable or immovable?
RULING: Immovable.
As enumerated in the Civil Code, immovable property includes lands, buildings, roads and constructions
of all kinds adhered to the soil. The law does not make any distinction whether or not the owner of the
lot was the one who built the construction.
Also, Ladera did not declare his house to be a chattel mortgage. The object of the levy or sale was real
property and its publication in a newspaper of general circulation was indespensible. Without it, the
execution sale was void.
In addition, Magno, the alleged purchaser at the auction sale, was a mere employee of Hodges and the
low bid made by her as well as the fact that she sold the house to Villa on the same day Hodges sold him
the land, proves that she was merely acting for and in behalf of Hodges.
In the sale of immovables, the lack of title of the vendor taints the rights of the subsequent purchasers.
Possession in good faith is not equivalent to title.
The principles of accession regard buildings and constructions as mere accessories to the land on which
it is built, it is logical that said accessories should partake the nature of the principal thing.
2. 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.1awphîl.nèt
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
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.
3.
Today is Monday, August 27, 2018
Custom Search
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate
Court) promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later
specified herein, of Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal
Branch VI, issued in Civil Case No. 36040, as wen as the resolution dated September 22, 1981 of the said
appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and
Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned
several receivables with the former under a Receivable Purchase Agreement. To secure the collection of
the receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials
inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the
properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to
gain entry into private respondent's premises and was not able to effect the seizure of the
aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure with the Court
of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement
of which was however subsequently restrained upon private respondent's filing of a motion for
reconsideration. After several incidents, the lower court finally issued on February 11, 1981, an order
lifting the restraining order for the enforcement of the writ of seizure and an order to break open the
premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private
respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent
and removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private
respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized by
the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of
replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new
Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from
respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff
could do to enfore the writ was to take the main drive motor of said machinery. The appellate court
rejected petitioner's argument that private respondent is estopped from claiming that the machine is
real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has
brought the case to this Court for review by writ of certiorari. It is contended by private respondent,
however, that the instant petition was rendered moot and academic by petitioner's act of returning the
subject motor drive of respondent's machinery after the Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor
drive, it made itself unequivocably clear that said action was without prejudice to a motion for
reconsideration of the Court of Appeals decision, as shown by the receipt duly signed by respondent's
representative. 1 Considering that petitioner has reserved its right to question the propriety of the Court
of Appeals' decision, the contention of private respondent that this petition has been mooted by such
return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is
real or personal property from the point of view of the parties, with petitioner arguing that it is a
personality, while the respondent claiming the contrary, and was sustained by the appellate court, which
accordingly held that the chattel mortgage constituted thereon is null and void, as contended by said
respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking
through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by
ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject
house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee, and
although this can not in itself alone determine the status of the property, it does so when combined with
other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat
the house as personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung
Yee vs. F.L. Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel
mortgage, it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the
validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject house as personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as the
appellate court did, the present case from the application of the abovequoted pronouncement. If a
house of strong materials, like what was involved in the above Tumalad case, may be considered as
personal property for purposes of executing a chattel mortgage thereon as long as the parties to the
contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason
why a machinery, which is movable in its nature and becomes immobilized only by destination or
purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped
from denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays
stress on the fact that the house involved therein was built on a land that did not belong to the owner of
such house. But the law makes no distinction with respect to the ownership of the land on which the
house is built and We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery as chattel by the private
respondent is indicative of intention and impresses upon the property the character determined by the
parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the
parties to a contract may by agreement treat as personal property that which by nature would be real
property, as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented nor
agreed that the machinery in suit be considered as personal property but was merely required and
dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at
the time of signing. This contention lacks persuasiveness. As aptly pointed out by petitioner and not
denied by the respondent, the status of the subject machinery as movable or immovable was never
placed in issue before the lower court and the Court of Appeals except in a supplemental memorandum
in support of the petition filed in the appellate court. Moreover, even granting that the charge is true,
such fact alone does not render a contract void ab initio, but can only be a ground for rendering said
contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in
court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed
that steps were taken to nullify the same. On the other hand, as pointed out by petitioner and again not
refuted by respondent, the latter has indubitably benefited from said contract. Equity dictates that one
should not benefit at the expense of another. Private respondent could not now therefore, be allowed to
impugn the efficacy of the chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned machinery
is real, not personal property, becomes very apparent. Moreover, the case of Machinery and Engineering
Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to the case at bar, the
nature of the machinery and equipment involved therein as real properties never having been disputed
nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears
more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and
set aside, and the Orders of the lower court are hereby reinstated, with costs against the private
respondent.
SO ORDERED.
4.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. L-11139 April 23, 1958
SANTOS EVANGELISTA, petitioner,
vs.
ALTO SURETY & INSURANCE CO., INC., respondent.

Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No.
8235 of the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum
of money. On the same date, he obtained a writ of attachment, which levied upon a house, built by
Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding
notice of attachment with the Office of the Register of Deeds of Manila, on June 8, 1949. In due course,
judgment was rendered in favor of Evangelista, who, on October 8, 1951, bought the house at public
auction held in compliance with the writ of execution issued in said case. The corresponding definite
deed of sale was issued to him on October 22, 1952, upon expiration of the period of redemption. When
Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that
he had leased the property from the Alto Surety & Insurance Co., Inc. — respondent herein — and that
the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale
of the same house had been issued to respondent, as the highest bidder at an auction sale held, on
September 29, 1950, in compliance with a writ of execution issued in Civil Case No. 6268 of the same
court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo
Rivera," in which judgment, for the sum of money, had been rendered in favor respondent herein, as
plaintiff therein. Hence, on June 13, 1953, Evangelista instituted the present action against respondent
and Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said house, securing
possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the sale
made, and the definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952,
respectively, precede the sale to Evangelista (October 8, 1951) and the definite deed of sale in his favor
(October 22, 1952). It, also, made some special defenses which are discussed hereafter. Rivera, in effect,
joined forces with respondent. After due trial, the Court of First Instance of Manila rendered judgment
for Evangelista, sentencing Rivera and respondent to deliver the house in question to petitioner herein
and to pay him, jointly and severally, forty pesos (P40.00) a month from October, 1952, until said
delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved said
respondent from the complaint, upon the ground that, although the writ of attachment in favor of
Evangelista had been filed with the Register of Deeds of Manila prior to the sale in favor of respondent,
Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house
in question were immovable property, although in the opinion of the Court of Appeals, it is "ostensibly a
personal property." As such, the Court of Appeals held, "the order of attachment . . . should have been
served in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of Court, reading:
The property of the defendant shall be attached by the officer executing the order in the following
manner:
(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the
person owing such debts, or having in his possession or under his control, such credits or other personal
property, or with, his agent, a copy of the order, and a notice that the debts owing by him to the
defendant, and the credits and other personal property in his possession, or under his control, belonging
to the defendant, are attached in pursuance of such order. (Emphasis ours.)
However, the Court of Appeals seems to have been of the opinion, also, that the house of Rivera should
have been attached in accordance with subsection (c) of said section 7, as "personal property capable of
manual delivery, by taking and safely keeping in his custody", for it declared that "Evangelists could not
have . . . validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession
thereof at the time he sold it at a public auction."
Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this connection,
it is not disputed that although the sale to the respondent preceded that made to Evangelists, the latter
would have a better right if the writ of attachment, issued in his favor before the sale to the respondent,
had been properly executed or enforced. This question, in turn, depends upon whether the house of
Ricardo Rivera is real property or not. In the affirmative case, the applicable provision would be
subsection (a) of section 7, Rule 59 of the Rules of Court, pursuant to which the attachment should be
made "by filing with the registrar of deeds a copy of the order, together with a description of the
property attached, and a notice that it is attached, and by leaving a copy of such order, description, and
notice with the occupant of the property, if any there be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal property,
the levy upon which must be made in conformity with subsections (c) and (e) of said section 7 of Rule
59. Hence, the main issue before us is whether a house, constructed the lessee of the land on which it is
built, should be dealt with, for purpose, of attachment, as immovable property, or as personal property.
It is, our considered opinion that said house is not personal property, much less a debt, credit or other
personal property not capable of manual delivery, but immovable property. As explicitly held, in Laddera
vs. Hodges (48 Off. Gaz., 5374), "a true building (not merely superimposed on the soil) is immovable or
real property, whether it is erected by the owner of the land or by usufructuary or lessee. This is the
doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply
supported by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal
property for purposes of said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of
New York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is
good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of
estoppel. Neither this principle, nor said view, is applicable to strangers to said contract. Much less is it in
point where there has been no contract whatsoever, with respect to the status of the house involved, as
in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a contract regarding
a house gave said property the consideration of personal property in their contract, bind the sheriff in
advertising the property's sale at public auction as personal property? It is to be remembered that in the
case at bar the action was to collect a loan secured by a chattel mortgage on the house. It is also to be
remembered that in practice it is the judgment creditor who points out to the sheriff the properties that
the sheriff is to levy upon in execution, and the judgment creditor in the case at bar is the party in whose
favor the owner of the house had conveyed it by way of chattel mortgage and, therefore, knew its
consideration as personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and, we should
not interpret them in such a way as to allow, the special consideration that parties to a contract may
have desired to impart to real estate, for example, as personal property, when they are, not ordinarily so.
Sales on execution affect the public and third persons. The regulation governing sales on execution are
for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its
character, not to the character, which the parties have given to it or desire to give it. When the rules
speak of personal property, property which is ordinarily so considered is meant; and when real property
is spoken of, it means property which is generally known as real property. The regulations were never
intended to suit the consideration that parties may have privately given to the property levied upon.
Enforcement of regulations would be difficult were the convenience or agreement of private parties to
determine or govern the nature of the proceedings. We therefore hold that the mere fact that a house
was the subject of the chattel mortgage and was considered as personal property by the parties does not
make said house personal property for purposes of the notice to be given for its sale of public auction.
This ruling is demanded by the need for a definite, orderly and well defined regulation for official and
public guidance and would prevent confusion and misunderstanding.
We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a
contract of chattel mortgage between the owner and a third person, is real property within the purview
of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture of the land, which, is
real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs.
Ceniza, et al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it
similarly affects the public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment by
Evangelista was void or ineffective, because, in the language of the Court of Appeals, "after presenting a
Copy of the order of attachment in the Office of the Register of Deeds, the person who might then be in
possession of the house, the sheriff took no pains to serve Ricardo Rivera, or other copies thereof." This
finding of the Court of Appeals is neither conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in paragraph
3 of the complaint, that he acquired the house in question "as a consequence of the levy of an
attachment and execution of the judgment in Civil Case No. 8235" of the Court of First Instance of
Manila. In his answer (paragraph 2), Ricardo Rivera admitted said attachment execution of judgment. He
alleged, however, by way a of special defense, that the title of respondent "is superior to that of plaintiff
because it is based on a public instrument," whereas Evangelista relied upon a "promissory note" which
"is only a private instrument"; that said Public instrument in favor of respondent "is superior also to the
judgment in Civil Case No. 8235"; and that plaintiff's claim against Rivera amounted only to P866, "which
is much below the real value" of said house, for which reason it would be "grossly unjust to acquire the
property for such an inadequate consideration." Thus, Rivera impliedly admitted that his house had been
attached, that the house had been sold to Evangelista in accordance with the requisite formalities, and
that said attachment was valid, although allegedly inferior to the rights of respondent, and the
consideration for the sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the
reasons stated in its special defenses" namely: (1) that by virtue of the sale at public auction, and the
final deed executed by the sheriff in favor of respondent, the same became the "legitimate owner of the
house" in question; (2) that respondent "is a buyer in good faith and for value"; (3) that respondent
"took possession and control of said house"; (4) that "there was no valid attachment by the plaintiff
and/or the Sheriff of Manila of the property in question as neither took actual or constructive possession
or control of the property at any time"; and (5) "that the alleged registration of plaintiff's attachment,
certificate of sale and final deed in the Office of Register of Deeds, Manila, if there was any, is likewise,
not valid as there is no registry of transactions covering houses erected on land belonging to or leased
from another." In this manner, respondent claimed a better right, merely under the theory that, in case
of double sale of immovable property, the purchaser who first obtains possession in good faith, acquires
title, if the sale has not been "recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the
Philippines), and that the writ of attachment and the notice of attachment in favor of Evangelista should
be considered unregistered, "as there is no registry of transactions covering houses erected on land
belonging to or leased from another." In fact, said article 1544 of the Civil Code of the Philippines,
governing double sales, was quoted on page 15 of the brief for respondent in the Court of Appeals, in
support of its fourth assignment of error therein, to the effect that it "has preference or priority over the
sale of the same property" to Evangelista.
In other words, there was no issue on whether copy of the writ and notice of attachment had been
served on Rivera. No evidence whatsoever, to the effect that Rivera had not been served with copies of
said writ and notice, was introduced in the Court of First Instance. In its brief in the Court of Appeals,
respondent did not aver, or even, intimate, that no such copies were served by the sheriff upon Rivera.
Service thereof on Rivera had been impliedly admitted by the defendants, in their respective answers,
and by their behaviour throughout the proceedings in the Court of First Instance, and, as regards
respondent, in the Court of Appeals. In fact, petitioner asserts in his brief herein (p. 26) that copies of
said writ and notice were delivered to Rivera, simultaneously with copies of the complaint, upon service
of summons, prior to the filing of copies of said writ and notice with the register deeds, and the truth of
this assertion has not been directly and positively challenged or denied in the brief filed before us by
respondent herein. The latter did not dare therein to go beyond making a statement — for the first time
in the course of these proceedings, begun almost five (5) years ago (June 18, 1953) — reproducing
substantially the aforementioned finding of the Court of Appeals and then quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue
on whether or not copies of the writ of attachment and notice of attachment had been served upon
Rivera; that the defendants had impliedly admitted-in said pleadings and briefs, as well as by their
conduct during the entire proceedings, prior to the rendition of the decision of the Court of Appeals —
that Rivera had received copies of said documents; and that, for this reason, evidently, no proof was
introduced thereon, we, are of the opinion, and so hold that the finding of the Court of Appeals to the
effect that said copies had not been served upon Rivera is based upon a misapprehension of the specific
issues involved therein and goes beyond the range of such issues, apart from being contrary to the
aforementioned admission by the parties, and that, accordingly, a grave abuse of discretion was
committed in making said finding, which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be entered
affirming that of the Court of First Instance of Manila, with the costs of this instance against respondent,
the Alto Surety and Insurance Co., Inc. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L., Endencia and Felix,
JJ., concur.
The Lawphil Project - Arellano Law Foundation
5.
Custom Search
FIRST DIVISION
G.R. No. 120098 October 2, 2001
RUBY L. TSAI, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R VILLALUZ, respondents.
x---------------------------------------------------------x
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and MAMERTO R VILLALUZ, respondents.
QUISUMBING, J.:
These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV No. 32986, affirming
the decision2 of the Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-48265. Also assailed is
respondent court's resolution denying petitioners' motion for reconsideration.
On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million peso
(P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As security for the
loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot under TCT
No. 372097, where its factory stands, and the chattels located therein as enumerated in a schedule
attached to the mortgage contract. The pertinent portions of the Real and Chattel Mortgage are quoted
below:
MORTGAGE
(REAL AND CHATTEL)
xxx xxx xxx
The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to the MORTGAGEE, . . .
certain parcel(s) of land, together with all the buildings and improvements now existing or which may
hereafter exist thereon, situated in . . .
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile Mills in favor of PBCommunications — continued)
LIST OF MACHINERIES & EQUIPMENT
A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:
Serial Numbers Size of Machines
xxx xxx xxx
B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.
xxx xxx xxx

C. Two (2) Circular Knitting Machines made in West Germany.
xxx xxx xxx
D. Four (4) Winding Machines.
xxx xxx xxx
SCHEDULE "A"
I. TCT # 372097 - RIZAL
xxx xxx xxx
II. Any and all buildings and improvements now existing or hereafter to exist on the above-
mentioned lot.
III. MACHINERIES & EQUIPMENT situated, located and/or installed on the above-mentioned lot
located at . . .
(a) Forty eight sets (48) Vayrow Knitting Machines . . .
(b) Sixteen sets (16) Vayrow Knitting Machines . . .
(c) Two (2) Circular Knitting Machines . . .

(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions, increases and accretions to above properties.
xxx xxx xxx3
On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by
a Chattel Mortgage over personal properties enumerated in a list attached thereto. These listed
properties were similar to those listed in Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX
purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings docketed as SP
Proc. No. LP-3091-P before the defunct Court of First Instance of Pasay City, Branch XXVIII. The CFI issued
an order on November 24, 1982 declaring the corporation insolvent. All its assets were taken into the
custody of the Insolvency Court, including the collateral, real and personal, securing the two mortgages
as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced
extrajudicial foreclosure proceedings against EVERTEX under Act 3135, otherwise known as "An Act to
Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages"
and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the
highest bidder and a Certificate of Sale was issued in its favor on the same date. On December 23, 1982,
another public auction was held and again, PBCom was the highest bidder. The sheriff issued a
Certificate of Sale on the same day.
On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In
November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a month.
On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for P9,000,000.00, including the
contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with
the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of subject
mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights having been
transmitted to PBCom over the assets of insolvent EVERTEX, therefore Tsai acquired no rights over such
assets sold to her, and should reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the contested
properties, which were not included in the Real and Chattel Mortgage of November 26, 1975 nor in the
Chattel Mortgage of April 23, 1979, and neither were those properties included in the Notice of Sheriff's
Sale dated December 1, 1982 and Certificate of Sale . . . dated December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting
Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were irregular and illegal because they
were not duly foreclosed nor sold at the December 15, 1982 auction sale since these were not included
in the schedules attached to the mortgage contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against the defendants:
1. Ordering the annulment of the sale executed by defendant Philippine Bank of Communications
in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it affects the personal properties listed in
par. 9 of the complaint, and their return to the plaintiff corporation through its assignee, plaintiff
Mamerto R. Villaluz, for disposition by the Insolvency Court, to be done within ten (10) days from finality
of this decision;
2. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum of
P5,200,000.00 as compensation for the use and possession of the properties in question from November
1986 to February 1991 and P100,000.00 every month thereafter, with interest thereon at the legal rate
per annum until full payment;
P50,000.00 as and for attorney's fees and expenses of litigation;
P200,000.00 by way of exemplary damages;
5. Ordering the dismissal of the counterclaim of the defendants; and
6. Ordering the defendants to proportionately pay the costs of suit.
SO ORDERED.4
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision dated
August 31, 1994, the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and reduction of
the actual damages, from P100,000.00 to P20,000.00 per month, from November 1986 until subject
personal properties are restored to appellees, the judgment appealed from is hereby AFFIRMED, in all
other respects. No pronouncement as to costs.5
Motion for reconsideration of the above decision having been denied in the resolution of April 28, 1995,
PBCom and Tsai filed their separate petitions for review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:
I
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN EFFECT MAKING A CONTRACT FOR
THE PARTIES BY TREATING THE 1981 ACQUIRED MACHINERIES AS CHATTELS INSTEAD OF REAL
PROPERTIES WITHIN THEIR EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE OR 1979 DEED OF
CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING THAT THE DISPUTED 1981
MACHINERIES ARE NOT REAL PROPERTIES DEEMED PART OF THE MORTGAGE — DESPITE THE CLEAR
IMPORT OF THE EVIDENCE AND APPLICABLE RULINGS OF THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING PETITIONER A

PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN ASSESSING PETITIONER ACTUAL
DAMAGES, ATTORNEY'S FEES AND EXPENSES OF LITIGATION — FOR WANT OF VALID FACTUAL AND
LEGAL BASIS.
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN HOLDING AGAINST PETITIONER'S
ARGUMENTS ON PRESCRIPTION AND LACHES.6
In G.R. No. 120098, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED UNDER PARAGRAPH 9 OF THE
COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE OF THE 1975 DEED OF REAL ESTATE MORTGAGE
AND EXCLUDED THEM FROM THE REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE
THE PROVISION IN THE 1975 DEED THAT ALL AFTER-ACQUIRED PROPERTIES DURING THE LIFETIME OF
THE MORTGAGE SHALL FORM PART THEREOF, AND DESPITE THE UNDISPUTED FACT THAT SAID
MACHINERIES ARE BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY MORTGAGED BY
EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR REAL ESTATE TAX PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN GOOD FAITH, EXTENDED
CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS OF 1982 TOTALLED P9,547,095.28, WHO HAD
SPENT FOR MAINTENANCE AND SECURITY ON THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE
BACK TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO RETURN TO EVER THE SAID
MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT SITUATION TANTAMOUNT TO A
CASE OF UNJUST ENRICHMENT?7
The principal issue, in our view, is whether or not the inclusion of the questioned properties in the
foreclosed properties is proper. The secondary issue is whether or not the sale of these properties to
petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by treating the
1981 acquired units of machinery as chattels instead of real properties within their earlier 1975 deed of
Real and Chattel Mortgage or 1979 deed of Chattel Mortgage.8 Additionally, Tsai argues that respondent
court erred in holding that the disputed 1981 machineries are not real properties.9 Finally, she contends
that the Court of Appeals erred in holding against petitioner's arguments on prescription and laches10
and in assessing petitioner actual damages, attorney's fees and expenses of litigation, for want of valid
factual and legal basis.11
Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment
decreeing that the pieces of machinery in dispute were not duly foreclosed and could not be legally
leased nor sold to Ruby Tsai. It further argued that the Court of Appeals' pronouncement that the pieces
of machinery in question were personal properties have no factual and legal basis. Finally, it asserts that
the Court of Appeals erred in assessing damages and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted units of machinery are not "real
properties" but chattels, and, therefore, they were not part of the foreclosed real properties, rendering
the lease and the subsequent sale thereof to Tsai a nullity.12
Considering the assigned errors and the arguments of the parties, we find the petitions devoid of merit
and ought to be denied.
Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on certiorari
under Rule 45 of the Revised 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 misapprehension of facts.13 This rule is applied more stringently when the
findings of fact of the RTC is affirmed by the Court of Appeals.14
The following are the facts as found by the RTC and affirmed by the Court of Appeals that are decisive of
the issues: (1) the "controverted machineries" are not covered by, or included in, either of the two
mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel Mortgage; (2) the said
machineries were not included in the list of properties appended to the Notice of Sale, and neither were
they included in the Sheriff's Notice of Sale of the foreclosed properties.15
Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or
cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto immovable
under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does not settle the issue.
Mere nuts and bolts do not foreclose the controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real
and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the case at bar,
both the trial and the appellate courts reached the same finding that the true intention of PBCOM and
the owner, EVERTEX, is to treat machinery and equipment as chattels. The pertinent portion of
respondent appellate court's ruling is quoted below:
As stressed upon by appellees, appellant bank treated the machineries as chattels; never as real
properties. Indeed, the 1975 mortgage contract, which was actually real and chattel mortgage, militates
against appellants' posture. It should be noted that the printed form used by appellant bank was mainly
for real estate mortgages. But reflective of the true intention of appellant PBCOM and appellee EVERTEX
was the typing in capital letters, immediately following the printed caption of mortgage, of the phrase
"real and chattel." So also, the "machineries and equipment" in the printed form of the bank had to be
inserted in the blank space of the printed contract and connected with the word "building" by
typewritten slash marks. Now, then, if the machineries in question were contemplated to be included in
the real estate mortgage, there would have been no necessity to ink a chattel mortgage specifically
mentioning as part III of Schedule A a listing of the machineries covered thereby. It would have sufficed
to list them as immovables in the Deed of Real Estate Mortgage of the land and building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond question. It refers solely to
chattels. The inventory list of the mortgaged properties is an itemization of sixty-three (63) individually
described machineries while the schedule listed only machines and 2,996,880.50 worth of finished
cotton fabrics and natural cotton fabrics.16
In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the
evidence on record, we find no compelling reason to depart therefrom.
Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts the
parties from treating it as chattels to secure an obligation under the principle of estoppel. As far back as
Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal property if there is a
stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is
executed over it, as in the case at bar.
In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and
Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all
properties included therein as immovable, and (2) attached to the said contract a separate "LIST OF
MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the parties'
intention is to treat these units of machinery as chattels. A fortiori, the contested after-acquired
properties, which are of the same description as the units enumerated under the title "LIST OF
MACHINERIES & EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch as the
subject mortgages were intended by the parties to involve chattels, insofar as equipment and machinery
were concerned, the Chattel Mortgage Law applies, which provides in Section 7 thereof that: "a chattel
mortgage shall be deemed to cover only the property described therein and not like or substituted
property thereafter acquired by the mortgagor and placed in the same depository as the property
originally mortgaged, anything in the mortgage to the contrary notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have been involved in the
1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include
subject machineries with the properties enumerated in said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor.
Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod
non habet, one cannot give what one does not have.17
Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a nullity, she
is nevertheless a purchaser in good faith and for value who now has a better right than EVERTEX.
To the contrary, however, are the factual findings and conclusions of the trial court that she is not a
purchaser in good faith. Well-settled is the rule that the person who asserts the status of a purchaser in
good faith and for value has the burden of proving such assertion.18 Petitioner Tsai failed to discharge
this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full and fair price for
the same, at the time of purchase, or before he has notice of the claims or interest of some other person
in the property.19 Records reveal, however, that when Tsai purchased the controverted properties, she
knew of respondent's claim thereon. As borne out by the records, she received the letter of respondent's
counsel, apprising her of respondent's claim, dated February 27, 1987.20 She replied thereto on March
9, 1987.21 Despite her knowledge of respondent's claim, she proceeded to buy the contested units of
machinery on May 3, 1988. Thus, the RTC did not err in finding that she was not a purchaser in good
faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed properties are
located is equally unavailing. This defense refers to sale of lands and not to sale of properties situated
therein. Likewise, the mere fact that the lot where the factory and the disputed properties stand is in
PBCom's name does not automatically make PBCom the owner of everything found therein, especially in
view of EVERTEX's letter to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent reason
to disturb the consistent findings of both courts below that the case for the reconveyance of the
disputed properties was filed within the reglementary period. Here, in our view, the doctrine of laches
does not apply. Note that upon petitioners' adamant refusal to heed EVERTEX's claim, respondent
company immediately filed an action to recover possession and ownership of the disputed properties.
There is no evidence showing any failure or neglect on its part, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been done earlier. The
doctrine of stale demands would apply only where by reason of the lapse of time, it would be
inequitable to allow a party to enforce his legal rights. Moreover, except for very strong reasons, this
Court is not disposed to apply the doctrine of laches to prejudice or defeat the rights of an owner.22
As to the award of damages, the contested damages are the actual compensation, representing rentals
for the contested units of machinery, the exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid rentals
of the contested properties based on the testimony of John Chua, who testified that the P100,000.00
was based on the accepted practice in banking and finance, business and investments that the rental
price must take into account the cost of money used to buy them. The Court of Appeals did not give full
credence to Chua's projection and reduced the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof
but must actually be proven with reasonable degree of certainty, premised upon competent proof or
best evidence obtainable of the actual amount thereof.23 However, the allegations of respondent
company as to the amount of unrealized rentals due them as actual damages remain mere assertions
unsupported by documents and other competent evidence. In determining actual damages, the court
cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on competent
proof and on the best evidence obtainable regarding the actual amount of loss.24 However, we are not
prepared to disregard the following dispositions of the respondent appellate court:
. . . In the award of actual damages under scrutiny, there is nothing on record warranting the said award
of P5,200,000.00, representing monthly rental income of P100,000.00 from November 1986 to February
1991, and the additional award of P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the testimonies of Jonh (sic) Chua
and Mamerto Villaluz, is shy of what is necessary to substantiate the actual damages allegedly sustained
by appellees, by way of unrealized rental income of subject machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or projection based on what is claimed to be a
practice in business and industry. But such a testimony cannot serve as the sole basis for assessing the
actual damages complained of. What is more, there is no showing that had appellant Tsai not taken
possession of the machineries and equipments in question, somebody was willing and ready to rent the
same for P100,000.00 a month.
xxx xxx xxx
Then, too, even assuming arguendo that the said machineries and equipments could have generated a
rental income of P30,000.00 a month, as projected by witness Mamerto Villaluz, the same would have
been a gross income. Therefrom should be deducted or removed, expenses for maintenance and
repairs . . . Therefore, in the determination of the actual damages or unrealized rental income sued
upon, there is a good basis to calculate that at least four months in a year, the machineries in dispute
would have been idle due to absence of a lessee or while being repaired. In the light of the foregoing
rationalization and computation, We believe that a net unrealized rental income of P20,000.00 a month,
since November 1986, is more realistic and fair.25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of Appeals
deleted. But according to the CA, there was no clear showing that petitioners acted malevolently,
wantonly and oppressively. The evidence, however, shows otherwise.It is a requisite to award exemplary
damages that the wrongful act must be accompanied by bad faith,26 and the guilty acted in a wanton,
fraudulent, oppressive, reckless or malevolent manner.27 As previously stressed, petitioner Tsai's act of
purchasing the controverted properties despite her knowledge of EVERTEX's claim was oppressive and
subjected the already insolvent respondent to gross disadvantage. Petitioner PBCom also received the
same letters of Atty. Villaluz, responding thereto on March 24, 1987.28 Thus, PBCom's act of taking all
the properties found in the factory of the financially handicapped respondent, including those properties
not covered by or included in the mortgages, is equally oppressive and tainted with bad faith. Thus, we
are in agreement with the RTC that an award of exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the Civil Code
provides that no proof of pecuniary loss is necessary for the adjudication of exemplary damages, their
assessment being left to the discretion of the court in accordance with the circumstances of each case.29
While the imposition of exemplary damages is justified in this case, equity calls for its reduction. In
Inhelder Corporation v. Court of Appeals, G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid
down the rule that judicial discretion granted to the courts in the assessment of damages must always
be exercised with balanced restraint and measured objectivity. Thus, here the award of exemplary
damages by way of example for the public good should be reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation may be recovered when exemplary
damages are awarded.30 In our view, RTC's award of P50,000.00 as attorney's fees and expenses of
litigation is reasonable, given the circumstances in these cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of Appeals in
CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners Philippine Bank of
Communications and Ruby L. Tsai are hereby ordered to pay jointly and severally Ever Textile Mills, Inc.
the following: (1) P20,000.00 per month, as compensation for the use and possession of the properties
in question from November 198631 until subject personal properties are restored to respondent
corporation; (2) P100,000.00 by way of exemplary damages, and (3) P50,000.00 as attorney's fees and
litigation expenses. Costs against petitioners.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
Footnotes
1 Rollo, G.R. No. 120098, pp. 23-45.
2 Id. at 23-24.
3 Folder of Exhibits, pp. 5-12.
4 Rollo, G.R. No. 120098, pp. 23-24.
5 Id. at 45.
6 Rollo, G.R. No. 120098, pp. 23-25.
7 Rollo, G.R. No. 120098, pp. 9-10.
8 Rollo, G.R. No. 120098, p. 25.
9 Id., at 33.
10 Id., at 49.
11 Id., at 44.
12 Id., at 133.
13 Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385, 391-392 (1998).
14 Manlapaz. Court of Appeals, 147 SCRA 236, 239 (1987).
15 Rollo, G.R No. 120109, pp. 62-63.
16 Rollo, G.R. No. 120098, pp. 68-69.
17 Segura vs. Segura, 165 SCRA 368,375 (1988); Noel vs. Court of Appeals, G.R. No. 59550, 240 SCRA
78,88 (1995).
18 Mathay v. Court of Appeals, 295 SCRA 556, 575 (1998).
19 Diaz-Duarte vs. Ong, 298 SCRA 388, 397 (1998).
20 Exhibit "U", Folder of Exhibits, p.64.
21 Exhibit "V", Id., at 66.
22 Noel vs. Court of Appeals, 240 SCRA 78,90 (1995).
23 Ace Hailers Corporation v. CA, et al., G.R No. 127934, August 23, 2000, p. 11.
24 Barzaga vs. Court of Appeals, 268 SCRA 105, 113-114 (1997).
25 Rollo G.R. No. 120109, pp. 43-44.

26 "J" Marketing Corp. vs. Sia, Jr., 285 SCRA 580, 583-584 (1998).
27 Cervantes vs. Court of Appeals, 304 SCRA 25, 33 (1997).
28 Exhibit "X", Folder of Exhibits, p. 69.
29 Art. 2216. Civil Code. — No proof of pecuniary loss is necessary in order that moral, nominal,
temperate liquidated or exemplary damages may be adjudicated. The assessment of such damages,
except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.
30 Vital-Gozon v. Court of Appeals, 292 SCRA 124, 147 (1998).
31 The time when PBCom leased the disputed properties to Tsai. CA Rollo, p. 34.
6.
THIRD DIVISION
[G.R. No. 137705. August 22, 2000]

SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC.,
respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be considered as personal or
movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper
subject of a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision[1] of the Court of
Appeals (CA)[2] in CA-GR SP No. 47332 and its February 26, 1999 Resolution[3] denying reconsideration.
The decretal portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated
March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction
issued on June 15, 1998 is hereby LIFTED.[4]
In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon City (Branch 218)[6] issued a
Writ of Seizure.[7] The March 18, 1998 Resolution[8] denied petitioners Motion for Special Protective
Order, praying that the deputy sheriff be enjoined from seizing immobilized or other real properties in
(petitioners) factory in Cainta, Rizal and to return to their original place whatever immobilized
machineries or equipments he may have removed.[9]
The Facts
The undisputed facts are summarized by the Court of Appeals as follows:[10]

On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with the
RTC-QC a complaint for [a] sum of money (Annex E), with an application for a writ of replevin docketed
as Civil Case No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of
replevin (Annex B) directing its sheriff to seize and deliver the machineries and equipment to PCI Leasing
after 5 days and upon the payment of the necessary expenses.
On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized
one machinery with [the] word that he [would] return for the other machineries.
On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power
of the court to control the conduct of its officers and amend and control its processes, praying for a
directive for the sheriff to defer enforcement of the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still
personal and therefore still subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined
in Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that
to give effect to the agreement would be prejudicial to innocent third parties. They further stated that
PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which
the alleged agreement [were] embodied [were] totally sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the
remaining properties. He was able to take two more, but was prevented by the workers from taking the
rest.
On April 7, 1998, they went to [the CA] via an original action for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject machines were personal
property, and that they had only been leased, not owned, by petitioners. It also ruled that the words of
the contract are clear and leave no doubt upon the true intention of the contracting parties. Observing
that Petitioner Goquiolay was an experienced businessman who was not unfamiliar with the ways of the
trade, it ruled that he should have realized the import of the document he signed. The CA further held:
Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case
below, since the merits of the whole matter are laid down before us via a petition whose sole purpose is
to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing the
assailed Order and Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being enforced by one, and [its]
validity is attacked by the other a matter x x x which respondent court is in the best position to
determine.
Hence, this Petition.[11]
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of
immobilization.
B. Whether or not the contract between the parties is a loan or a lease.[12]
In the main, the Court will resolve whether the said machines are personal, not immovable, property
which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will also address
briefly the procedural points raised by respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was being filed under Rule
45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded Judge
Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion finds support in the very
title of the Petition, which is Petition for Review on Certiorari.[13]
While Judge Laqui should not have been impleaded as a respondent,[14] substantial justice requires that
such lapse by itself should not warrant the dismissal of the present Petition. In this light, the Court
deems it proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ
issued by the RTC, because they were in fact real property. Serious policy considerations, they argue,
militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal
property only.[15] Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order
and the corresponding writ of replevin describing the personal property alleged to be wrongfully
detained and requiring the sheriff forthwith to take such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
meet the needs of the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence, although each of them was movable or personal
property on its own, all of them have become immobilized by destination because they are essential and
principal elements in the industry.[16] In that sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code.[17]
Be that as it may, we disagree with the submission of the petitioners that the said machines are not
proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be considered as
personal.[18] After agreeing to such stipulation, they are consequently estopped from claiming
otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the
truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the parties to treat a house as a
personal property because it had been made the subject of a chattel mortgage. The Court ruled:
x x x. Although there is no specific statement referring to the subject house as personal property, yet by
ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming otherwise.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills[20] also held
that the machinery used in a factory and essential to the industry, as in the present case, was a proper
subject of a writ of replevin because it was treated as personal property in a contract. Pertinent portions
of the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be
considered as personal property for purposes of executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel mortgage.
In the present case, the Lease Agreement clearly provides that the machines in question are to be
considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:[21]
12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building thereon, or attached in any
manner to what is permanent.
Clearly then, petitioners are estopped from denying the characterization of the subject machines as
personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed personal
property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned.
[22] Hence, while the parties are bound by the Agreement, third persons acting in good faith are not
affected by its stipulation characterizing the subject machinery as personal.[23] In any event, there is no
showing that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.[24] Submitting
documents supposedly showing that they own the subject machines, petitioners also argue in their
Petition that the Agreement suffers from intrinsic ambiguity which places in serious doubt the intention
of the parties and the validity of the lease agreement itself.[25] In their Reply to respondents Comment,
they further allege that the Agreement is invalid.[26]
These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the
civil action pending before the RTC. A resolution of these questions, therefore, is effectively a resolution
of the merits of the case. Hence, they should be threshed out in the trial, not in the proceedings
involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy under Rule 60 was that
questions involving title to the subject property questions which petitioners are now raising -- should be
determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60 was
either to post a counter-bond or to question the sufficiency of the plaintiffs bond. They were not
allowed, however, to invoke the title to the subject property. The Court ruled:
In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of
seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon therefor,
as in proceedings on preliminary attachment or injunction, and thereby put at issue the matter of the
title or right of possession over the specific chattel being replevied, the policy apparently being that said
matter should be ventilated and determined only at the trial on the merits.[28]
Besides, these questions require a determination of facts and a presentation of evidence, both of which
have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.[29]
Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on
record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC
proceedings, which had ironically been instituted by respondent. Accordingly, it must be presumed valid
and binding as the law between the parties.
Makati Leasing and Finance Corporation[30] is also instructive on this point. In that case, the Deed of
Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed
because respondent had allegedly been required to sign a printed form of chattel mortgage which was in
a blank form at the time of signing. The Court rejected the argument and relied on the Deed, ruling as
follows:
x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab
initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article
1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the
mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be seized, then its workers would be
out of work and thrown into the streets.[31] They also allege that the seizure would nullify all efforts to
rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and
jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come true,
should not be blamed on this Court, but on the petitioners for failing to avail themselves of the remedy
under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states:
SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicants bond, or of
the surety or sureties thereon, he cannot immediately require the return of the property, but if he does
not so object, he may, at any time before the delivery of the property to the applicant, require the return
thereof, by filing with the court where the action is pending a bond executed to the applicant, in double
the value of the property as stated in the applicants affidavit for the delivery thereof to the applicant, if
such delivery be adjudged, and for the payment of such sum to him as may be recovered against the
adverse party, and by serving a copy bond on the applicant.
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs
against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
[1] Rollo, pp. 177-180.
[2] Penned by Justice Romeo A. Brawner (Division acting chairman), with the concurrence of Justices Eloy
R. Bello Jr. and Martin S. Villarama Jr.
[3] Rollo, p. 189.
[4] CA Decision, p. 3; rollo, p. 179.
[5] Rollo, p. 356.
[6] Presided by Judge Hilario L. Laqui.
[7] Rollo, pp. 23-24.
[8] Rollo, pp. 78-79.

[9] Motion for Special Protective Order, pp. 3-4; rollo, pp. 76-77.
[10] CA Decision, pp. 1-2; rollo, pp. 177-178.
[11] The case was deemed submitted for resolution on October 21, 1999, upon receipt by this Court of
the petitioners Memorandum signed by Atty. Victor Basilio N. De Leon of Antonio R. Bautista & Partners.
Respondents Memorandum, which was signed by Atty. Amador F. Brioso Jr. of Perez & Calima Law
Offices, had been filed earlier on September 29, 1999.
[12] Petitioners Memorandum, p. 3; rollo, p. 376.
[13] Section 1, Rule 45 of the Rules of Court.
[14] Section 4 (a) of Rule 45 provides that the petition shall state the full name of the parties, without
impleading the lower courts or judges thereof either as petitioners or respondents.
[15] BA Finance v. CA, 258 SCRA 102, July 5, 1996; Filinvest Credit v. CA, 248 SCRA 549, September 27,
1995; Machinery Engineering Supply v. CA, 96 Phil. 70, October 29, 1954.
[16] Mindanao Bus Co. v. City Assessor and Treasurer, 6 SCRA 197, September 29, 1962, per Labrador, J.
See also Vitug, Compendium of Civil Law and Jurisprudence, 1986 ed., pp. 99-100.
[17] Peoples Bank & Trust Co. v. Dahican Lumber, 20 SCRA 84, May 16, 1967; Burgos v. Chief of Staff, 133
SCRA 800, December 26, 1984; Davao Sawmill Co. v. Castillo, 61 Phil. 709, August 7, 1935.
[18] Chua Peng Hian v. CA, 133 SCRA 572, December 19, 1984; Standard Oil Co. v. Jaranillo, 44 Phil. 630,
March 16, 1923; Luna v. Encarnacion, 91 Phil. 531, June 30, 1952; Manarang v. Ofilada, 99 Phil. 109, May
18, 1956; Peoples Bank & Trust Co. v. Dahican Lumber, supra.
[19] 41 SCRA 143, 153, September 30, 1971, per Reyes, JBL, J.
[20] 122 SCRA 296, 300, May 16, 1983, per De Castro, J.
[21] Rollo, p. 262.
[22] Evangelista v. Alto Surety and Insurance Co., 103 Phil. 401, April 23, 1958; Navarro v. Pineda, 9 SCRA
631, November 30, 1963.
[23] Vitug, supra, pp. 100-101.
[24] Petitioners Memorandum, p. 8; rollo, p. 381.
[25] Petition, p. 10; rollo, p. 12.
[26] Reply, p. 7; rollo, p. 301.
[27] 209 SCRA 553, 567, June 8, 1992, per Narvasa, CJ.
[28] Ibid.
[29] See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.
[30] Supra, p. 301.

[31] Petition, p. 16; rollo, p. 18.
7.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. L-64261 December 26, 1984
JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI SORIANO and J. BURGOS MEDIA SERVICES, INC.,
petitioners,
vs.
THE CHIEF OF STAFF, ARMED FORCES OF THE PHILIPPINES, THE CHIEF, PHILIPPINE CONSTABULARY, THE
CHIEF LEGAL OFFICER, PRESIDENTIAL SECURITY COMMAND, THE JUDGE ADVOCATE GENERAL, ET AL.,
respondents.
Lorenzo M. Tañada, Wigberto E. Tañada, Martiniano Vivo, Augusto Sanchez, Joker P. Arroyo, Jejomar
Binay and Rene Saguisag for petitioners.
The Solicitor General for respondents.
ESCOLIN, J.:
Assailed in this petition for certiorari prohibition and mandamus with preliminary mandatory and
prohibitory injunction is the validity of two [2] search warrants issued on December 7, 1982 by
respondent Judge Ernani Cruz-Pano, Executive Judge of the then Court of First Instance of Rizal [Quezon
City], under which the premises known as No. 19, Road 3, Project 6, Quezon City, and 784 Units C & D,
RMS Building, Quezon Avenue, Quezon City, business addresses of the "Metropolitan Mail" and "We
Forum" newspapers, respectively, were searched, and office and printing machines, equipment,
paraphernalia, motor vehicles and other articles used in the printing, publication and distribution of the
said newspapers, as well as numerous papers, documents, books and other written literature alleged to
be in the possession and control of petitioner Jose Burgos, Jr. publisher-editor of the "We Forum"
newspaper, were seized.
Petitioners further pray that a writ of preliminary mandatory and prohibitory injunction be issued for the
return of the seized articles, and that respondents, "particularly the Chief Legal Officer, Presidential
Security Command, the Judge Advocate General, AFP, the City Fiscal of Quezon City, their
representatives, assistants, subalterns, subordinates, substitute or successors" be enjoined from using
the articles thus seized as evidence against petitioner Jose Burgos, Jr. and the other accused in Criminal
Case No. Q- 022782 of the Regional Trial Court of Quezon City, entitled People v. Jose Burgos, Jr. et al. 1
In our Resolution dated June 21, 1983, respondents were required to answer the petition. The plea for
preliminary mandatory and prohibitory injunction was set for hearing on June 28, 1983, later reset to
July 7, 1983, on motion of the Solicitor General in behalf of respondents.
At the hearing on July 7, 1983, the Solicitor General, while opposing petitioners' prayer for a writ of
preliminary mandatory injunction, manifested that respondents "will not use the aforementioned
articles as evidence in the aforementioned case until final resolution of the legality of the seizure of the
aforementioned articles. ..." 2 With this manifestation, the prayer for preliminary prohibitory injunction
was rendered moot and academic.
Respondents would have this Court dismiss the petition on the ground that petitioners had come to this
Court without having previously sought the quashal of the search warrants before respondent judge.
Indeed, petitioners, before impugning the validity of the warrants before this Court, should have filed a
motion to quash said warrants in the court that issued them. 3 But this procedural flaw notwithstanding,
we take cognizance of this petition in view of the seriousness and urgency of the constitutional issues
raised not to mention the public interest generated by the search of the "We Forum" offices, which was
televised in Channel 7 and widely publicized in all metropolitan dailies. The existence of this special
circumstance justifies this Court to exercise its inherent power to suspend its rules. In the words of the
revered Mr. Justice Abad Santos in the case of C. Vda. de Ordoveza v. Raymundo, 4 "it is always in the
power of the court [Supreme Court] to suspend its rules or to except a particular case from its operation,
whenever the purposes of justice require it...".
Respondents likewise urge dismissal of the petition on ground of laches. Considerable stress is laid on
the fact that while said search warrants were issued on December 7, 1982, the instant petition
impugning the same was filed only on June 16, 1983 or after the lapse of a period of more than six [6]
months.
Laches is failure or negligence 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 a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 5
Petitioners, in their Consolidated Reply, explained the reason for the delay in the filing of the petition
thus:
Respondents should not find fault, as they now do [p. 1, Answer, p. 3, Manifestation] with the fact that
the Petition was filed on June 16, 1983, more than half a year after the petitioners' premises had been
raided.
The climate of the times has given petitioners no other choice. If they had waited this long to bring their
case to court, it was because they tried at first to exhaust other remedies. The events of the past eleven
fill years had taught them that everything in this country, from release of public funds to release of
detained persons from custody, has become a matter of executive benevolence or largesse
Hence, as soon as they could, petitioners, upon suggestion of persons close to the President, like Fiscal
Flaminiano, sent a letter to President Marcos, through counsel Antonio Coronet asking the return at least
of the printing equipment and vehicles. And after such a letter had been sent, through Col. Balbino V.
Diego, Chief Intelligence and Legal Officer of the Presidential Security Command, they were further
encouraged to hope that the latter would yield the desired results.
After waiting in vain for five [5] months, petitioners finally decided to come to Court. [pp. 123-124, Rollo]
Although the reason given by petitioners may not be flattering to our judicial system, We find no ground
to punish or chastise them for an error in judgment. On the contrary, the extrajudicial efforts exerted by
petitioners quite evidently negate the presumption that they had abandoned their right to the
possession of the seized property, thereby refuting the charge of laches against them.
Respondents also submit the theory that since petitioner Jose Burgos, Jr. had used and marked as
evidence some of the seized documents in Criminal Case No. Q- 022872, he is now estopped from
challenging the validity of the search warrants. We do not follow the logic of respondents. These
documents lawfully belong to petitioner Jose Burgos, Jr. and he can do whatever he pleases with them,
within legal bounds. The fact that he has used them as evidence does not and cannot in any way affect
the validity or invalidity of the search warrants assailed in this petition.
Several and diverse reasons have been advanced by petitioners to nullify the search warrants in
question.
1. Petitioners fault respondent judge for his alleged failure to conduct an examination under oath or
affirmation of the applicant and his witnesses, as mandated by the above-quoted constitutional
provision as wen as Sec. 4, Rule 126 of the Rules of Court .6 This objection, however, may properly be
considered moot and academic, as petitioners themselves conceded during the hearing on August 9,
1983, that an examination had indeed been conducted by respondent judge of Col. Abadilla and his
witnesses.
2. Search Warrants No. 20-82[a] and No. 20- 82[b] were used to search two distinct places: No. 19, Road
3, Project 6, Quezon City and 784 Units C & D, RMS Building, Quezon Avenue, Quezon City, respectively.
Objection is interposed to the execution of Search Warrant No. 20-82[b] at the latter address on the
ground that the two search warrants pinpointed only one place where petitioner Jose Burgos, Jr. was
allegedly keeping and concealing the articles listed therein, i.e., No. 19, Road 3, Project 6, Quezon City.
This assertion is based on that portion of Search Warrant No. 20- 82[b] which states:
Which have been used, and are being used as instruments and means of committing the crime of
subversion penalized under P.D. 885 as amended and he is keeping and concealing the same at 19 Road
3, Project 6, Quezon City.
The defect pointed out is obviously a typographical error. Precisely, two search warrants were applied for
and issued because the purpose and intent were to search two distinct premises. It would be quite
absurd and illogical for respondent judge to have issued two warrants intended for one and the same
place. Besides, the addresses of the places sought to be searched were specifically set forth in the
application, and since it was Col. Abadilla himself who headed the team which executed the search
warrants, the ambiguity that might have arisen by reason of the typographical error is more apparent
than real. The fact is that the place for which Search Warrant No. 20- 82[b] was applied for was 728 Units
C & D, RMS Building, Quezon Avenue, Quezon City, which address appeared in the opening paragraph of
the said warrant. 7 Obviously this is the same place that respondent judge had in mind when he issued
Warrant No. 20-82 [b].
In the determination of whether a search warrant describes the premises to be searched with sufficient
particularity, it has been held "that the executing officer's prior knowledge as to the place intended in
the warrant is relevant. This would seem to be especially true where the executing officer is the affiant
on whose affidavit the warrant had issued, and when he knows that the judge who issued the warrant
intended the building described in the affidavit, And it has also been said that the executing officer may
look to the affidavit in the official court file to resolve an ambiguity in the warrant as to the place to be
searched." 8
3. Another ground relied upon to annul the search warrants is the fact that although the warrants
were directed against Jose Burgos, Jr. alone, articles b belonging to his co-petitioners Jose Burgos, Sr.,
Bayani Soriano and the J. Burgos Media Services, Inc. were seized.
Section 2, Rule 126 of the Rules of Court, enumerates the personal properties that may be seized under
a search warrant, to wit:
Sec. 2. Personal Property to be seized. — A search warrant may be issued for the search and seizure of
the following personal property:
[a] Property subject of the offense;
[b] Property stolen or embezzled and other proceeds or fruits of the offense; and
[c] Property used or intended to be used as the means of committing an offense.
The above rule does not require that the property to be seized should be owned by the person against
whom the search warrant is directed. It may or may not be owned by him. In fact, under subsection [b]
of the above-quoted Section 2, one of the properties that may be seized is stolen property. Necessarily,
stolen property must be owned by one other than the person in whose possession it may be at the time
of the search and seizure. Ownership, therefore, is of no consequence, and it is sufficient that the person
against whom the warrant is directed has control or possession of the property sought to be seized, as
petitioner Jose Burgos, Jr. was alleged to have in relation to the articles and property seized under the
warrants.
4. Neither is there merit in petitioners' assertion that real properties were seized under the disputed
warrants. Under Article 415[5] of the Civil Code of the Philippines, "machinery, receptables, 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" are considered immovable property. In Davao Sawmill Co. v. Castillo9 where this legal provision
was invoked, this Court ruled that machinery which is movable by nature becomes immobilized when
placed by the owner of the tenement, property or plant, but not so when placed by a tenant,
usufructuary, or any other person having only a temporary right, unless such person acted as the agent
of the owner.
In the case at bar, petitioners do not claim to be the owners of the land and/or building on which the
machineries were placed. This being the case, the machineries in question, while in fact bolted to the
ground remain movable property susceptible to seizure under a search warrant.
5. The questioned search warrants were issued by respondent judge upon application of Col. Rolando N.
Abadilla Intelligence Officer of the P.C. Metrocom.10 The application was accompanied by the Joint
Affidavit of Alejandro M. Gutierrez and Pedro U. Tango, 11 members of the Metrocom Intelligence and
Security Group under Col. Abadilla which conducted a surveillance of the premises prior to the filing of
the application for the search warrants on December 7, 1982.
It is contended by petitioners, however, that the abovementioned documents could not have provided
sufficient basis for the finding of a probable cause upon which a warrant may validly issue in accordance
with Section 3, Article IV of the 1973 Constitution which provides:
SEC. 3. ... and no search warrant or warrant of arrest shall issue except upon probable cause to be
determined by the judge, or such other responsible officer as may be authorized by law, after
examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or things to be seized.
We find petitioners' thesis impressed with merit. Probable cause for a search is defined as such facts and
circumstances which would lead a reasonably discreet and prudent man to believe that an offense has
been committed and that the objects sought in connection with the offense are in the place sought to be
searched. And when the search warrant applied for is directed against a newspaper publisher or editor in
connection with the publication of subversive materials, as in the case at bar, the application and/or its
supporting affidavits must contain a specification, stating with particularity the alleged subversive
material he has published or is intending to publish. Mere generalization will not suffice. Thus, the broad
statement in Col. Abadilla's application that petitioner "is in possession or has in his control printing
equipment and other paraphernalia, news publications and other documents which were used and are
all continuously being used as a means of committing the offense of subversion punishable under
Presidential Decree 885, as amended ..." 12 is a mere conclusion of law and does not satisfy the
requirements of probable cause. Bereft of such particulars as would justify a finding of the existence of
probable cause, said allegation cannot serve as basis for the issuance of a search warrant and it was a
grave error for respondent judge to have done so.
Equally insufficient as basis for the determination of probable cause is the statement contained in the
joint affidavit of Alejandro M. Gutierrez and Pedro U. Tango, "that the evidence gathered and collated by
our unit clearly shows that the premises above- mentioned and the articles and things above-described
were used and are continuously being used for subversive activities in conspiracy with, and to promote
the objective of, illegal organizations such as the Light-a-Fire Movement, Movement for Free Philippines,
and April 6 Movement." 13
In mandating that "no warrant shall issue except upon probable cause to be determined by the judge, ...
after examination under oath or affirmation of the complainant and the witnesses he may produce; 14
the Constitution requires no less than personal knowledge by the complainant or his witnesses of the
facts upon which the issuance of a search warrant may be justified. In Alvarez v. Court of First Instance,
15 this Court ruled that "the oath required must refer to the truth of the facts within the personal
knowledge of the petitioner or his witnesses, because the purpose thereof is to convince the committing
magistrate, not the individual making the affidavit and seeking the issuance of the warrant, of the
existence of probable cause." As couched, the quoted averment in said joint affidavit filed before
respondent judge hardly meets the test of sufficiency established by this Court in Alvarez case.
Another factor which makes the search warrants under consideration constitutionally objectionable is
that they are in the nature of general warrants. The search warrants describe the articles sought to be
seized in this wise:
1] All printing equipment, paraphernalia, paper, ink, photo (equipment, typewriters, cabinets,
tables, communications/recording equipment, tape recorders, dictaphone and the like used and/or
connected in the printing of the "WE FORUM" newspaper and any and all documents communication,
letters and facsimile of prints related to the "WE FORUM" newspaper.
2] Subversive documents, pamphlets, leaflets, books, and other publication to promote the
objectives and piurposes of the subversive organization known as Movement for Free Philippines, Light-
a-Fire Movement and April 6 Movement; and,
3] Motor vehicles used in the distribution/circulation of the "WE FORUM" and other subversive
materials and propaganda, more particularly,
1] Toyota-Corolla, colored yellow with Plate No. NKA 892;
2] DATSUN pick-up colored white with Plate No. NKV 969
3] A delivery truck with Plate No. NBS 524;

4] TOYOTA-TAMARAW, colored white with Plate No. PBP 665; and,
5] TOYOTA Hi-Lux, pick-up truck with Plate No. NGV 427 with marking "Bagong Silang."
In Stanford v. State of Texas 16 the search warrant which authorized the search for "books, records,
pamphlets, cards, receipts, lists, memoranda, pictures, recordings and other written instruments
concerning the Communist Party in Texas," was declared void by the U.S. Supreme Court for being too
general. In like manner, directions to "seize any evidence in connectionwith the violation of SDC 13-3703
or otherwise" have been held too general, and that portion of a search warrant which authorized the
seizure of any "paraphernalia which could be used to violate Sec. 54-197 of the Connecticut General
Statutes [the statute dealing with the crime of conspiracy]" was held to be a general warrant, and
therefore invalid. 17 The description of the articles sought to be seized under the search warrants in
question cannot be characterized differently.
In the Stanford case, the U.S. Supreme Courts calls to mind a notable chapter in English history: the era
of disaccord between the Tudor Government and the English Press, when "Officers of the Crown were
given roving commissions to search where they pleased in order to suppress and destroy the literature of
dissent both Catholic and Puritan Reference herein to such historical episode would not be relevant for it
is not the policy of our government to suppress any newspaper or publication that speaks with "the
voice of non-conformity" but poses no clear and imminent danger to state security.
As heretofore stated, the premises searched were the business and printing offices of the "Metropolitan
Mail" and the "We Forum newspapers. As a consequence of the search and seizure, these premises were
padlocked and sealed, with the further result that the printing and publication of said newspapers were
discontinued.
Such closure is in the nature of previous restraint or censorship abhorrent to the freedom of the press
guaranteed under the fundamental law, 18 and constitutes a virtual denial of petitioners' freedom to
express themselves in print. This state of being is patently anathematic to a democratic framework
where a free, alert and even militant press is essential for the political enlightenment and growth of the
citizenry.
Respondents would justify the continued sealing of the printing machines on the ground that they have
been sequestered under Section 8 of Presidential Decree No. 885, as amended, which authorizes "the
sequestration of the property of any person, natural or artificial, engaged in subversive activities against
the government and its duly constituted authorities ... in accordance with implementing rules and
regulations as may be issued by the Secretary of National Defense." It is doubtful however, if
sequestration could validly be effected in view of the absence of any implementing rules and regulations
promulgated by the Minister of National Defense.
Besides, in the December 10, 1982 issue of the Daily Express, it was reported that no less than President
Marcos himself denied the request of the military authorities to sequester the property seized from
petitioners on December 7, 1982. Thus:
The President denied a request flied by government prosecutors for sequestration of the WE FORUM
newspaper and its printing presses, according to Information Minister Gregorio S. Cendana.
On the basis of court orders, government agents went to the We Forum offices in Quezon City and took a
detailed inventory of the equipment and all materials in the premises.
Cendaña said that because of the denial the newspaper and its equipment remain at the disposal of the
owners, subject to the discretion of the court. 19
That the property seized on December 7, 1982 had not been sequestered is further confirmed by the
reply of then Foreign Minister Carlos P. Romulo to the letter dated February 10, 1983 of U.S.
Congressman Tony P. Hall addressed to President Marcos, expressing alarm over the "WE FORUM " case.
20 In this reply dated February 11, 1983, Minister Romulo stated:
2. Contrary to reports, President Marcos turned down the recommendation of our authorities to
close the paper's printing facilities and confiscate the equipment and materials it uses. 21
IN VIEW OF THE FOREGOING, Search Warrants Nos. 20-82[a] and 20-82[b] issued by respondent judge
on December 7, 1982 are hereby declared null and void and are accordingly set aside. The prayer for a
writ of mandatory injunction for the return of the seized articles is hereby granted and all articles seized
thereunder are hereby ordered released to petitioners. No costs.
SO ORDERED.
Fernando, C.J., Teehankee, Makasiar, Concepcion, Jr., Melencio-Herrera, Plana, Relova, Gutierrez, Jr., De
la Fuente and Cuevas, JJ., concur.
Aquino, J., took no part.
Separate Opinions
ABAD SANTOS, J., concurring
I am glad to give my concurrence to the ponencia of Mr. Justice Escolin At the same time I wish to state
my own reasons for holding that the search warrants which are the subject of the petition are utterly
void.
The action against "WE FORUM" was a naked suppression of press freedom for the search warrants were
issued in gross violation of the Constitution.
The Constitutional requirement which is expressed in Section 3, Article IV, stresses two points, namely:
"(1) that no warrant shall issue but upon probable cause, to be determined by the judge in the manner
set forth in said provision; and (2) that the warrant shall particularly describe the things to be seized."
(Stonehill vs. Diokno, 126 Phil. 738, 747: 20 SCRA 383 [1967].)
Any search warrant is conducted in disregard of the points mentioned above will result in wiping "out
completely one of the most fundamental rights guaranteed in our Constitution, for it would place the
sanctity of the domicile and the privacy of communication and correspondence at the mercy of the
whims caprice or passion of peace officers." (Ibid, p. 748.)
The two search warrants were issued without probable cause. To satisfy the requirement of probable
cause a specific offense must be alleged in the application; abstract averments will not suffice. In the
case at bar nothing specifically subversive has been alleged; stated only is the claim that certain objects
were being used as instruments and means of committing the offense of subversion punishable under
P.D. No. 885, as amended. There is no mention of any specific provision of the decree. I n the words of
Chief Justice C Concepcion, " It would be legal heresy of the highest order, to convict anybody" of
violating the decree without reference to any determinate provision thereof.
The search warrants are also void for lack of particularity. Both search warrants authorize Col. Rolando
Abadilla to seize and take possession, among other things, of the following:
Subversive documents, pamphlets, leaflets, books and other publication to promote the objectives and
purposes of the subversive organizations known as Movement for Free Philippines, Light-a-Fire
Movement and April 6 Movement.
The obvious question is: Why were the documents, pamphlets, leaflets, books, etc. subversive? What did
they contain to make them subversive? There is nothing in the applications nor in the warrants which
answers the questions. I must, therefore, conclude that the warrants are general warrants which are
obnoxious to the Constitution.
In point of fact, there was nothing subversive published in the WE FORUM just as there is nothing
subversive which has been published in MALAYA which has replaced the former and has the same
content but against which no action has been taken.
Conformably with existing jurisprudence everything seized pursuant to the warrants should be returned
to the owners and all of the items are subject to the exclusionary rule of evidence.
Teehankee, J., concur.
Separate Opinions
ABAD SANTOS, J., concurring
I am glad to give my concurrence to the ponencia of Mr. Justice Escolin At the same time I wish to state
my own reasons for holding that the search warrants which are the subject of the petition are utterly
void.
The action against "WE FORUM" was a naked suppression of press freedom for the search warrants were
issued in gross violation of the Constitution.
The Constitutional requirement which is expressed in Section 3, Article IV, stresses two points, namely:
"(1) that no warrant shall issue but upon probable cause, to be determined by the judge in the manner
set forth in said provision; and (2) that the warrant shall particularly describe the things to be seized."
(Stonehill vs. Diokno, 126 Phil. 738, 747: 20 SCRA 383 [1967].)
Any search warrant is conducted in disregard of the points mentioned above will result in wiping "out
completely one of the most fundamental rights guaranteed in our Constitution, for it would place the
sanctity of the domicile and the privacy of communication and correspondence at the mercy of the
whims caprice or passion of peace officers." (Ibid, p. 748.)
The two search warrants were issued without probable cause. To satisfy the requirement of probable
cause a specific offense must be alleged in the application; abstract averments will not suffice. In the
case at bar nothing specifically subversive has been alleged; stated only is the claim that certain objects
were being used as instruments and means of committing the offense of subversion punishable under
P.D. No. 885, as amended. There is no mention of any specific provision of the decree. I n the words of
Chief Justice C Concepcion, " It would be legal heresy of the highest order, to convict anybody" of
violating the decree without reference to any determinate provision thereof.
The search warrants are also void for lack of particularity. Both search warrants authorize Col. Rolando
Abadilla to seize and take possession, among other things, of the following:
Subversive documents, pamphlets, leaflets, books and other publication to promote the objectives and
purposes of the subversive organizations known as Movement for Free Philippines, Light-a-Fire
Movement and April 6 Movement.
The obvious question is: Why were the documents, pamphlets, leaflets, books, etc. subversive? What did
they contain to make them subversive? There is nothing in the applications nor in the warrants which
answers the questions. I must, therefore, conclude that the warrants are general warrants which are
obnoxious to the Constitution.
In point of fact, there was nothing subversive published in the WE FORUM just as there is nothing
subversive which has been published in MALAYA which has replaced the former and has the same
content but against which no action has been taken.
Conformably with existing jurisprudence everything seized pursuant to the warrants should be returned
to the owners and all of the items are subject to the exclusionary rule of evidence.
Teehankee, J., concur.
Footnotes
1 Petition, P. 44, Rollo.
2 Manifestation and Opposition, p. 75, Rollo.
3 Templo v. Dela Cruz, 60 SCRA 295.
4 463 Phil. 275.
5 Tijam v. Sibonghanoy, 23 SCRA 29.
6 Sec. 4, Rule 126, Rules of Court provides:
Sec. 4. Examination of the Applicant. — The municipal or city judge must, before issuing the warrant,
personally examine on oath or affirmation the complainant and any witnesses he may produce and take
their deposition in writing and attach them to the record, in addition to any affidavits presented to them.
7 The opening paragraph of Search Warrant No. 20- 82 [b] reads:
"It appearing to the satisfaction of the undersigned after examination under oath of Maj. Alejandro M.
Gutierrez and Lt. Pedro U. Tango, that there are good and sufficient reason to believe that Jose Burgos, Jr.
Publisher-Editor of "WE FORUM" with office address at 784 Units C & D, RMS Building, Quezon Avenue,
Quezon City, has in his possession and control at said address the following; ... :
8 68 Am. Jur. 2d., 729.
9 61 Phil. 709. Annex "C", Petition, pp. 51-52,

10 Rollo.
11 Annex "B", Petition, pp. 53-54, Rollo.
12 Annex "C", Petition, p. 51, Rollo.
13 Annex "D", Petition, p. 54, Rollo.
14 Sec. 3, Art. IV, 1973 Constitution.
15 64 Phil. 33.
18 Sec. 9. Art. IV of the Constitution
19 Annex "K", Consolidated Reply, p. 175, Rollo.
20 Annex "L", Consolidated Reply, p. 178, Rollo.
21 Annex "M", Consolidated Reply, p. 179, Rollo.

8.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. Nos. L-10817-18 February 28, 1958
ENRIQUE LOPEZ, petitioner,
vs.
VICENTE OROSA, JR., and PLAZA THEATRE, INC., respondents.
Nicolas Belmonte and Benjamin T. de Peralta for petitioner.
Tolentino & Garcia and D. R. Cruz for respondent Luzon Surety Co., Inc. Jose B. Macatangay for
respondent Plaza Theatre, Inc.
FELIX, J.:
Enrique Lopez is a resident of Balayan, Batangas, doing business under the trade name of Lopez-Castelo
Sawmill. Sometime in May, 1946, Vicente Orosa, Jr., also a resident of the same province, dropped at
Lopez' house and invited him to make an investment in the theatre business. It was intimated that Orosa,
his family and close friends were organizing a corporation to be known as Plaza Theatre, Inc., that would
engage in such venture. Although Lopez expressed his unwillingness to invest of the same, he agreed to
supply the lumber necessary for the construction of the proposed theatre, and at Orosa's behest and
assurance that the latter would be personally liable for any account that the said construction might
incur, Lopez further agreed that payment therefor would be on demand and not cash on delivery basis.
Pursuant to said verbal agreement, Lopez delivered the lumber which was used for the construction of
the Plaza Theatre on May 17, 1946, up to December 4 of the same year. But of the total cost of the
materials amounting to P62,255.85, Lopez was paid only P20,848.50, thus leaving a balance of
P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a piece of land with an area of
679.17 square meters formerly owned by Vicente Orosa, Jr., and was acquired by the corporation on
September 25, 1946, for P6,000. As Lopez was pressing Orosa for payment of the remaining unpaid
obligation, the latter and Belarmino Rustia, the president of the corporation, promised to obtain a bank
loan by mortgaging the properties of the Plaza Theatre., out of which said amount of P41,771.35 would
be satisfied, to which assurance Lopez had to accede. Unknown to him, however, as early as November,
1946, the corporation already got a loan for P30,000 from the Philippine National Bank with the Luzon
Surety Company as surety, and the corporation in turn executed a mortgage on the land and building in
favor of said company as counter-security. As the land at that time was not yet brought under the
operation of the Torrens System, the mortgage on the same was registered on November 16, 1946,
under Act No. 3344. Subsequently, when the corporation applied for the registration of the land under
Act 496, such mortgage was not revealed and thus Original Certificate of Title No. O-391 was
correspondingly issued on October 25, 1947, without any encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due him caused Vicente Orosa, Jr. to
execute on March 17, 1947, an alleged "deed of assignment" of his 420 shares of stock of the Plaza
Theater, Inc., at P100 per share or with a total value of P42,000 in favor of the creditor, and as the
obligation still remained unsettled, Lopez filed on November 12, 1947, a complaint with the Court of
First Instance of Batangas (Civil Case No. 4501 which later became R-57) against Vicente Orosa, Jr. and
Plaza Theater, Inc., praying that defendants be sentenced to pay him jointly and severally the sum of
P41,771.35, with legal interest from the firing of the action; that in case defendants fail to pay the same,
that the building and the land covered by OCT No. O-391 owned by the corporation be sold at public
auction and the proceeds thereof be applied to said indebtedness; or that the 420 shares of the capital
stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said plaintiff be sold at public auction
for the same purpose; and for such other remedies as may be warranted by the circumstances. Plaintiff
also caused the annotation of a notice of lis pendens on said properties with the Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed separate answers, the first denying that the
materials were delivered to him as a promoter and later treasurer of the corporation, because he had
purchased and received the same on his personal account; that the land on which the movie house was
constructed was not charged with a lien to secure the payment of the aforementioned unpaid obligation;
and that the 420 shares of stock of the Plaza Theatre, Inc., was not assigned to plaintiff as collaterals but
as direct security for the payment of his indebtedness. As special defense, this defendant contended that
as the 420 shares of stock assigned and conveyed by the assignor and accepted by Lopez as direct
security for the payment of the amount of P41,771.35 were personal properties, plaintiff was barred
from recovering any deficiency if the proceeds of the sale thereof at public auction would not be
sufficient to cover and satisfy the obligation. It was thus prayed that he be declared exempted from the
payment of any deficiency in case the proceeds from the sale of said personal properties would not be
enough to cover the amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set up the same line of defense by alleging
that the building materials delivered to Orosa were on the latter's personal account; and that there was
no understanding that said materials would be paid jointly and severally by Orosa and the corporation,
nor was a lien charged on the properties of the latter to secure payment of the same obligation. As
special defense, defendant corporation averred that while it was true that the materials purchased by
Orosa were sold by the latter to the corporation, such transactions were in good faith and for valuable
consideration thus when plaintiff failed to claim said materials within 30 days from the time of removal
thereof from Orosa, lumber became a different and distinct specie and plaintiff lost whatever rights he
might have in the same and consequently had no recourse against the Plaza Theatre, Inc., that the claim
could not have been refectionary credit, for such kind of obligation referred to an indebtedness incurred
in the repair or reconstruction of something already existing and this concept did not include an entirely
new work; and that the Plaza Theatre, Inc., having been incorporated on October 14, 1946, it could not
have contracted any obligation prior to said date. It was, therefore, prayed that the complaint be
dismissed; that said defendant be awarded the sum P 5,000 for damages, and such other relief as may
be just and proper in the premises.
The surety company, in the meantime, upon discovery that the land was already registered under the
Torrens System and that there was a notice of lis pendens thereon, filed on August 17, 1948, or within
the 1-year period after the issuance of the certificate of title, a petition for review of the decree of the
land registration court dated October 18, 1947, which was made the basis of OCT No. O-319, in order to
annotate the rights and interests of the surety company over said properties (Land Registration Case No.
17 GLRO Rec. No. 296). Opposition thereto was offered by Enrique Lopez, asserting that the amount
demanded by him constituted a preferred lien over the properties of the obligors; that the surety
company was guilty of negligence when it failed to present an opposition to the application for
registration of the property; and that if any violation of the rights and interest of said surety would ever
be made, same must be subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October 30, 1952, the lower Court, after
making an exhaustive and detailed analysis of the respective stands of the parties and the evidence
adduced at the trial, held that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc., were jointly
liable for the unpaid balance of the cost of lumber used in the construction of the building and the
plaintiff thus acquired the materialman's lien over the same. In making the pronouncement that the lien
was merely confined to the building and did not extend to the land on which the construction was made,
the trial judge took into consideration the fact that when plaintiff started the delivery of lumber in May,
1946, the land was not yet owned by the corporation; that the mortgage in favor of Luzon Surety
Company was previously registered under Act No. 3344; that the codal provision (Art. 1923 of the old
Spanish Civil Code) specifying that refection credits are preferred could refer only to buildings which are
also classified as real properties, upon which said refection was made. It was, however, declared that
plaintiff's lien on the building was superior to the right of the surety company. And finding that the Plaza
Theatre, Inc., had no objection to the review of the decree issued in its favor by the land registration
court and the inclusion in the title of the encumbrance in favor of the surety company, the court a quo
granted the petition filed by the latter company. Defendants Orosa and the Plaza Theatre, Inc., were thus
required to pay jointly the amount of P41,771.35 with legal interest and costs within 90 days from notice
of said decision; that in case of default, the 420 shares of stock assigned by Orosa to plaintiff be sold at
public auction and the proceeds thereof be applied to the payment of the amount due the plaintiff, plus
interest and costs; and that the encumbrance in favor of the surety company be endorsed at the back of
OCT No. O-391, with notation I that with respect to the building, said mortgage was subject to the
materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as it declared that the obligation of
therein defendants was joint instead of solidary, and that the lien did not extend to the land, but same
was denied by order the court of December 23, 1952. The matter was thus appealed to the Court of
appeals, which affirmed the lower court's ruling, and then to this Tribunal. In this instance, plaintiff-
appellant raises 2 issues: (1) whether a materialman's lien for the value of the materials used in the
construction of a building attaches to said structure alone and does not extend to the land on which the
building is adhered to; and (2) whether the lower court and the Court of Appeals erred in not providing
that the material mans liens is superior to the mortgage executed in favor surety company not only on
the building but also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any question against the part of the
decision sentencing defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so
We will not take up or consider anything on that point. Appellant, however, contends that the lien
created in favor of the furnisher of the materials used for the construction, repair or refection of a
building, is also extended to the land which the construction was made, and in support thereof he relies
on Article 1923 of the Spanish Civil Code, pertinent law on the matter, which reads as follows:
ART. 1923. With respect to determinate real property and real rights of the debtor, the following are
preferred:
xxx xxx xxx
5. Credits for refection, not entered or recorded, with respect to the estate upon which the refection was
made, and only with respect to other credits different from those mentioned in four preceding
paragraphs.
It is argued that in view of the employment of the phrase real estate, or immovable property, and
inasmuch as said provision does not contain any specification delimiting the lien to the building, said
article must be construed as to embrace both the land and the building or structure adhering thereto.
We cannot subscribe to this view, for while it is true that generally, real estate connotes the land and the
building constructed thereon, it is obvious that the inclusion of the building, separate and distinct from
the land, in the enumeration of what may constitute real properties1 could mean only one thing — that
a building is by itself an immovable property, a doctrine already pronounced by this Court in the case of
Leung Yee vs. Strong Machinery Co., 37 Phil., 644. Moreover, and in view of the absence of any specific
provision of law to the contrary, a building is an immovable property, irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked by appellant reveals that the law gives
preference to unregistered refectionary credits only with respect to the real estate upon which the
refection or work was made. This being so, the inevitable conclusion must be that the lien so created
attaches merely to the immovable property for the construction or repair of which the obligation was
incurred. Evidently, therefore, the lien in favor of appellant for the unpaid value of the lumber used in
the construction of the building attaches only to said structure and to no other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the materialman's lien could be charged only to the
building for which the credit was made or which received the benefit of refection, the lower court was
right in, holding at the interest of the mortgagee over the land is superior and cannot be made subject to
the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations, the decision appealed from is hereby
affirmed, with costs against appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.
and Endencia, JJ., concur.
Footnotes
1 Article 415 of the new Civil Code (Art. 334 of the old) enumerates what are considered immovable
property, among which are land, buildings, roads and constructions of all kinds adhered to the soil.
9.
Custom Search
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-32917 July 18, 1988
JULIAN S. YAP, petitioner,
vs.
HON. SANTIAGO O. TAÑADA, etc., and GOULDS PUMPS INTERNATIONAL (PHIL.), INC., respondents.
Paterno P. Natinga for private respondent.
NARVASA, J.:
The petition for review on certiorari at bar involves two (2) Orders of respondent Judge Tañada 1 in Civil
Case No. 10984. The first, dated September 16, 1970, denied petitioner Yap's motion to set aside
execution sale and to quash alias writ of execution. The second, dated November 21, 1970, denied Yap's
motion for reconsideration. The issues concerned the propriety of execution of a judgment claimed to be
"incomplete, vague and non-final," and the denial of petitioner's application to prove and recover
damages resulting from alleged irregularities in the process of execution.
The antecedents will take some time in the telling. The case began in the City Court of Cebu with the
filing by Goulds Pumps International (Phil.), Inc. of a complaint 2 against Yap and his wife 3 seeking
recovery of P1,459.30 representing the balance of the price and installation cost of a water pump in the
latter's premises. 4 The case resulted in a judgment by the City Court on November 25, 1968, reading as
follows:
When this case was called for trial today, Atty. Paterno Natinga appeared for the plaintiff Goulds and
informed the court that he is ready for trial. However, none of the defendants appeared despite notices
having been served upon them.
Upon petition Atty. Natinga, the plaintiff is hereby allowed to present its evidence ex-parte.
After considering the evidence of the plaintiff, the court hereby renders judgment in favor of the plaintiff
and against the defendant (Yap), ordering the latter to pay to the former the sum of Pl,459.30 with
interest at the rate of 12% per annum until fully paid, computed from August 12, 1968, date of the filing
of the complaint; to pay the sum of P364.80 as reasonable attorney's fees, which is equivalent " to 25%
of the unpaid principal obligation; and to pay the costs, if any.
Yap appealed to the Court of First Instance. The appeal was assigned to the sala of respondent Judge
Tañada. For failure to appear for pre-trial on August 28, 1968, this setting being intransferable since the
pre-trial had already been once postponed at his instance, 5 Yap was declared in default by Order of
Judge Tañada dated August 28, 1969, 6 reading as follows:
When this case was called for pre-trial this morning, the plaintiff and counsel appeared, but neither the
defendants nor his counsel appeared despite the fact that they were duly notified of the pre-trial set this
morning. Instead he filed an Ex-Parte Motion for Postponement which this Court received only this
morning, and on petition of counsel for the plaintiff that the Ex-Parte Motion for Postponement was not
filed in accordance with the Rules of Court he asked that the same be denied and the defendants be
declared in default; .. the motion for the plaintiff being well- grounded, the defendants are hereby
declared in default and the Branch Clerk of Court ..is hereby authorized to receive evidence for the
plaintiff and .. submit his report within ten (10) days after reception of evidence.
Goulds presented evidence ex parte and judgment by default was rendered the following day by Judge
Tañada requiring Yap to pay to Goulds (1) Pl,459.30 representing the unpaid balance of the pump
purchased by him; (2) interest of 12% per annum thereon until fully paid; and (3) a sum equivalent to
25% of the amount due as attorney's fees and costs and other expenses in prosecuting the action. Notice
of the judgment was served on Yap on September 1, 1969. 7
On September 16, 1969 Yap filed a motion for reconsideration. 8 In it he insisted that his motion for
postponement should have been granted since it expressed his desire to explore the possibility of an
amicable settlement; that the court should give the parties time to arrive at an amicable settlement
failing which, he should be allowed to present evidence in support of his defenses (discrepancy as to the
price and breach of warranty). The motion was not verified or accompanied by any separate affidavit.
Goulds opposed the motion. Its opposition 9 drew attention to the eleventh-hour motion for
postponement of Yap which had resulted in the cancellation of the prior hearing of June 30, 1969
despite Goulds' vehement objection, and the re-setting thereof on August 28, 1969 with intransferable
character; it averred that Yap had again sought postponement of this last hearing by another eleventh-
hour motion on the plea that an amicable settlement would be explored, yet he had never up to that
time ever broached the matter, 10 and that this pattern of seeking to obtain last-minute postponements
was discernible also in the proceedings before the City Court. In its opposition, Goulds also adverted to
the examination made by it of the pump, on instructions of the City Court, with a view to remedying the
defects claimed to exist by Yap; but the examination had disclosed the pump's perfect condition. Yap's
motion for reconsideration was denied by Order dated October 10, 1969, notice of which was received
by Yap on October 4, 1969. 11
On October 15, 1969 Judge Tañada issued an Order granting Goulds' Motion for Issuance of Writ of
Execution dated October 14, 1969, declaring the reasons therein alleged to be meritorious. 12 Yap
forthwith filed an "Urgent Motion for Reconsideration of Order" dated October 17, 1969, 13 contending
that the judgment had not yet become final, since contrary to Goulds' view, his motion for
reconsideration was not pro forma for lack of an affidavit of merit, this not being required under Section
1 (a) of Rule 37 of the Rules of Court upon which his motion was grounded. Goulds presented an
opposition dated October 22, 1969. 14 It pointed out that in his motion for reconsideration Yap had
claimed to have a valid defense to the action, i.e., ".. discrepancy as to price and breach of seller's
warranty," in effect, that there was fraud on Goulds' paint; Yap's motion for reconsideration should
therefore have been supported by an affidavit of merit respecting said defenses; the absence thereof
rendered the motion for reconsideration fatally defective with the result that its filing did not interrupt
the running of the period of appeal. The opposition also drew attention to the failure of the motion for
reconsideration to specify the findings or conclusions in the judgment claimed to be contrary to law or
not supported by the evidence, making it a pro forma motion also incapable of stopping the running of
the appeal period. On October 23, 1969, Judge Tañada denied Yap's motion for reconsideration and
authorized execution of the judgment.15 Yap sought reconsideration of this order, by another motion
dated October 29, 1969. 16 This motion was denied by Order dated January 26, 1970. 17 Again Yap
moved for reconsideration, and again was rebuffed, by Order dated April 28, 1970. 18
In the meantime the Sheriff levied on the water pump in question, 19 and by notice dated November 4,
1969, scheduled the execution sale thereof on November 14, 1969. 20 But in view of the pendency of
Yap's motion for reconsideration of October 29, 1969, suspension of the sale was directed by Judge
Tañada in an order dated November 6, 1969.21
Counsel for the plaintiff is hereby given 10 days time to answer the Motion, dated October 29, 1969,
from receipt of this Order and in the meantime, the Order of October 23, 1969, insofar as it orders the
sheriff to enforce the writ of execution is hereby suspended.
It appears however that a copy of this Order was not transmitted to the Sheriff "through oversight,
inadvertence and pressure of work" of the Branch Clerk of Court. 22 So the Deputy Provincial Sheriff
went ahead with the scheduled auction sale and sold the property levied on to Goulds as the highest
bidder. 23 He later submitted the requisite report to the Court dated November 17, 1969, 24 as well as
the "Sheriffs Return of Service" dated February 13, 1970, 25 in both of which it was stated that execution
had been "partially satisfied." It should be observed that up to this time, February, 1970, Yap had not
bestirred himself to take an appeal from the judgment of August 29, 1969.
On May 9, 1970 Judge Tañada ordered the issuance of an alias writ of execution on Gould's ex parte
motion therefor. 26 Yap received notice of the Order on June 11. Twelve (1 2) days later, he filed a
"Motion to Set Aside Execution Sale and to Quash Alias Writ of Execution." 27 As regards the original,
partial execution of the judgment, he argued that —
1) "the issuance of the writ of execution on October 16, 1969 was contrary to law, the judgment
sought to be executed not being final and executory;" and
2) "the sale was made without the notice required by Sec. 18, Rule 39, of the New Rules of Court,"
i.e., notice by publication in case of execution sale of real property, the pump and its accessories being
immovable because attached to the ground with character of permanency (Art. 415, Civil Code).
And with respect to the alias writ, he argued that it should not have issued because —
1) "the judgment sought to be executed is null and void" as "it deprived the defendant of his day in
court" and "of due process;"
2) "said judgment is incomplete and vague" because there is no starting point for computation of
the interest imposed, or a specification of the "other expenses incurred in prosecuting this case" which
Yap had also been ordered to pay;
3) "said judgment is defective because it contains no statement of facts but a mere recital of the
evidence; and
4) "there has been a change in the situation of the parties which makes execution unjust and
inequitable" because Yap suffered damages by reason of the illegal execution.
Goulds filed an opposition on July 6, 1970. Yap's motion was thereafter denied by Order dated
September 16, 1970. Judge Tañada pointed out that the motion had "become moot and academic" since
the decision of August 29, 1969, "received by the defendant on September 1, 1969 had long become
final when the Order for the Issuance of a Writ of Execution was promulgated on October 15, 1969." His
Honor also stressed that —
The defendant's Motion for Reconsideration of the Courts decision was in reality one for new trial.
Regarded as motion for new trial it should allege the grounds for new trial, provided for in the Rules of
Court, to be supported by affidavit of merits; and this the defendant failed to do. If the defendant
sincerely desired for an opportunity to submit to an amicable settlement, which he failed to do extra
judicially despite the ample time before him, he should have appeared in the pre- trial to achieve the
same purpose.
Judge Tañada thereafter promulgated another Order dated September 21, 1970 granting a motion of
Goulds for completion of execution of the judgment of August 29, 1969 to be undertaken by the City
Sheriff of Cebu. Once more, Yap sought reconsideration. He submitted a "Motion for Reconsideration of
Two Orders" dated October 13, 1970, 28 seeking the setting aside not only of this Order of September
21, 1970 but also that dated September 16, 1970, denying his motion to set aside execution dated June
23, 1970. He contended that the Order of September 21, 1970 (authorizing execution by the City Sheriff)
was premature, since the 30-day period to appeal from the earlier order of September 16, 1970 (denying
his motion to set aside) had not yet expired. He also reiterated his view that his motion for
reconsideration dated September 15, 1969 did not require that it be accompanied by an affidavit of
merits. This last motion was also denied for "lack of merits," by Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal" manifesting his intention to appeal to the Supreme
Court on certiorari only on questions of law, "from the Order ... of September 16, 1970 ... and from the
Order ... of November 21, 1970, ... pursuant to sections 2 and 3 of Republic Act No. 5440." He filed his
petition for review with this Court on January 5, 1971, after obtaining an extension therefor. 30
The errors of law he attributes to the Court a quo are the following: 31
1) refusing to invalidate the execution pursuant to its Order of October 16, 1969 although the
judgment had not then become final and executory and despite its being incomplete and vague;
2) ignoring the fact that the execution sale was carried out although it (the Court) had itself
ordered suspension of execution on November 6, 1969;
3) declining to annul the execution sale of the pump and accessories subject of the action although
made without the requisite notice prescribed for the sale of immovables; and
4) refusing to allow the petitioner to prove irregularities in the process of execution which had
resulted in damages to him.
Notice of the Trial Court's judgment was served on Yap on September 1, 1969. His motion for
reconsideration thereof was filed 15 days thereafter, on September 16, 1969. Notice of the Order
denying the motion was received by him on October 14, 1969. The question is whether or not the
motion for reconsideration — which was not verified, or accompanied by an affidavit of merits (setting
forth facts constituting his meritorious defenses to the suit) or other sworn statement (stating facts
excusing his failure to appear at the pre-trial was pro forma and consequently had not interrupted the
running of the period of appeal. It is Yap's contention that his motion was not pro forma for lack of an
affidavit of merits, such a document not being required by Section 1 (a) of Rule 37 of the Rules of Court
upon which his motion was based. This is incorrect.
Section 2, Rule 37 precisely requires that when the motion for new trial is founded on Section 1 (a), it
should be accompanied by an affidavit of merit.
xxx xxx xxx
When the motion is made for the causes mentioned in subdivisions (a) and (b) of the preceding section,
it shall be proved in the manner provided for proof of motions. Affidavit or affidavits of merits shall also
be attached to a motion for the cause mentioned in subdivision (a) which may be rebutted by counter-
affidavits.
xxx xxx xxx 32
Since Yap himself asserts that his motion for reconsideration is grounded on Section 1 (a) of Rule 37, 33
i.e., fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded
against and by reason of which ... (the) aggrieved party has probably been impaired in his rights" — this
being in any event clear from a perusal of the motion which theorizes that he had "been impaired in his
rights" because he was denied the right to present evidence of his defenses (discrepancy as to price and
breach of warranty) — it was a fatal omission to fail to attach to his motion an affidavit of merits, i.e., an
affidavit "showing the facts (not conclusions) constituting the valid x x defense which the movant may
prove in case a new trial is granted." 34 The requirement of such an affidavit is essential because
obviously "a new trial would be a waste of the court's time if the complaint turns out to be groundless or
the defense ineffective." 35
In his motion for reconsideration, Yap also contended that since he had expressed a desire to explore the
possibility of an amicable settlement, the Court should have given him time to do so, instead of declaring
him in default and thereafter rendering judgment by default on Gould's ex parte evidence.
The bona fides of this desire to compromise is however put in doubt by the attendant circumstances. It
was manifested in an eleventh-hour motion for postponement of the pre-trial which had been scheduled
with intransferable character since it had already been earlier postponed at Yap's instance; it had never
been mentioned at any prior time since commencement of the litigation; such a possible compromise (at
least in general or preliminary terms) was certainly most appropriate for consideration at the pre-trial; in
fact Yap was aware that the matter was indeed a proper subject of a pre-trial agenda, yet he sought to
avoid appearance at said pre-trial which he knew to be intransferable in character. These considerations
and the dilatory tactics thus far attributable to him-seeking postponements of hearings, or failing to
appear therefor despite notice, not only in the Court of First Instance but also in the City Court —
proscribe belief in the sincerity of his avowed desire to negotiate a compromise. Moreover, the disregard
by Yap of the general requirement that "(n)otice of a motion shall be served by the applicant to all
parties concerned at least three (3) days before the hearing thereof, together with a copy of the motion,
and of any affidavits and other papers accompanying it," 36 for which no justification whatever has been
offered, also militates against the bona fides of Yap's expressed wish for an amicable settlement. The
relevant circumstances do not therefore justify condemnation, as a grave abuse of discretion, or a
serious mistake, of the refusal of the Trial Judge to grant postponement upon this proferred ground.
The motion for reconsideration did not therefore interrupt the running of the period of appeal. The time
during which it was pending before the court — from September 16, 1969 when it was filed with the
respondent Court until October 14, 1969 when notice of the order denying the motion was received by
the movant — could not be deducted from the 30-day period of appeal. 37 This is the inescapable
conclusion from a consideration of Section 3 of Rule 41 which in part declares that, "The "time during
which a motion to set aside the judgment or order or for a new trial has been pending shall be deducted,
unless such motion fails to satisfy the requirements of Rule 37. 38
Notice of the judgment having been received by Yap on September 1, 1969, and the period of appeal
therefrom not having been interrupted by his motion for reconsideration filed on September 16, 1969,
the reglementary period of appeal expired thirty (30) days after September 1, 1969, or on October 1,
1969, without an appeal being taken by Yap. The judgment then became final and executory; Yap could
no longer take an appeal therefrom or from any other subsequent orders; and execution of judgment
correctly issued on October 15, 1969, "as a matter of right." 39
The next point discussed by Yap, that the judgment is incomplete and vague, is not well taken. It is true
that the decision does not fix the starting time of the computation of interest on the judgment debt, but
this is inconsequential since that time is easily determinable from the opinion, i.e., from the day the
buyer (Yap) defaulted in the payment of his obligation, 40 on May 31, 1968. 41 The absence of any
disposition regarding his counterclaim is also immaterial and does not render the judgment incomplete.
Yap's failure to appear at the pre-trial without justification and despite notice, which caused the
declaration of his default, was a waiver of his right to controvert the plaintiff s proofs and of his right to
prove the averments of his answer, inclusive of the counterclaim therein pleaded. Moreover, the
conclusion in the judgment of the merit of the plaintiff s cause of action was necessarily and at the same
time a determination of the absence of merit of the defendant's claim of untenability of the complaint
and of malicious prosecution.
Yap's next argument that the water pump had become immovable property by its being installed in his
residence is also untenable. The Civil Code considers as immovable property, among others, anything
"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." 42 The pump does not fit this description.
It could be, and was in fact separated from Yap's premises without being broken or suffering
deterioration. Obviously the separation or removal of the pump involved nothing more complicated than
the loosening of bolts or dismantling of other fasteners.
Yap's last claim is that in the process of the removal of the pump from his house, Goulds' men had
trampled on the plants growing there, destroyed the shed over the pump, plugged the exterior casings
with rags and cut the electrical and conduit pipes; that he had thereby suffered actual-damages in an
amount of not less than P 2,000.00, as well as moral damages in the sum of P 10,000.00 resulting from
his deprivation of the use of his water supply; but the Court had refused to allow him to prove these acts
and recover the damages rightfully due him. Now, as to the loss of his water supply, since this arose from
acts legitimately done, the seizure on execution of the water pump in enforcement of a final and
executory judgment, Yap most certainly is not entitled to claim moral or any other form of damages
therefor.
WHEREFORE, the petition is DENIED and the appeal DISMISSED, and the Orders of September 16, 1970
and November 21, 1970 subject thereof, AFFIRMED in toto. Costs against petitioner.
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
Footnotes
1 Then presiding Judge of Branch V of the Court of First Instance of Cebu City.
2 Annex E, petition, pp. 34-35, Rollo.
3 However Mrs. Minerva V. Yap was subsequently dropped from the complaint.
4 Yap's answer (rollo, pp. 36 et seq put up the defense that the purchase document did not reflect
his real agreement with Goulds, and he had made several complaints about the pump to no avail.
Gould's claim is that the examination of the pump showed it to be in good working order, but the Yaps
had refused to attest thereto despite being present during the examination (rollo, pp. 72 et seq).
5 Infra: footnote No. 1, p. 3.
6 Rollo, p. 188.
7 Id., P. 10.
8 Id., pp. 41-42.
9 Id., pp. 43 et seq. An additional ground for postponement was that he would be in Barili, Cebu,
on the date of the pre-trial.
10 It appears that the pump was delivered and installed at the Yaps' premises in December, 1967:
Rollo, pp. 34 et seq.
11 Rollo, p. 10.
12 Id ,p. 114.
13 Id., p. 115.
14 Id., P. 117.
15 Id., p. 11.
16 Id., p. 124 et seq. The motion reiterated prior arguments and in addition, contained a
"Specification of findings not supported by evidence" and a "Specification of conclusions contrary to
law." An opposition thereto was filed under date of Nov. 27, 1969 (Rollo, p. 128)
17 Id., p. 133.
18 Id., p. 135.
19 Id., pp. 52, 53.
20 Id., p. 54.
21 Id., p. 56, SEE paragraphs 18 and 19, petition.
22 Rollo, pp. 137, 134,
23 Id., p. 131. The Certificate of Sale is dated November 14,1969.
24 Id p. 123.
25 Id., p. 57.
26 Par. 21, petition, p. 12, Rollo.

27 Rollo, pp. 22, et seq.
28 Id., pp. 30 et seq.
29 Id., p. 142. Page 472
30 Granted by Resolution dated January 4, 1971, for 15 days from December 8 (Rollo, p. 5)
31 Rollo, pp. 5-6.
32 Emphasis supplied.
33 SEE footnote No. 14, supra.
34 SEE Coombs v. Santos, 24 Phil. 446, 451, cited in Feria, Civil Procedure. 1969 ed., p. 514; see, too,
Moran, Comments on the Rules, 1979 ed., Vol. 2, pp. 214-215, citing numerous cases; parenthetical
insertion supplied.
35 Moran, op. cit., p. 215, citing Vda. de Yulo v. Chua Chuco et al., 48 O.G. 5.54; Baguieran v. Court
of Appeals, L-14551 July 31, 1961, 2 SCRA 873.
36 SEE Sections 4, 5 and 6, Rule 15; Manila Surety & Fidelity Co. v. Batu Construction Co., L-1 6636,
June 24, 1965; Fulton Insurance Co. v. Manila Railroad Co., L-24263, November 18, 1967, cited in Moran,
op cit., p. 214.
37 BP No. 129 has since reduced the period of appeal to 15 days except in special proceedings or
cases where multiple appeals are allowed.
38 Emphasis supplied; see Coombs v. Santos, 24 Phil. 446, 461, and Alfonso v. Bustamante, 98 Phil.
158, cited in Feria, op. cit, pp. 514515; and Capinpin et al. v. Isip, L-14018, Aug. 31, 1959, cited in Moran,
op. cit.
39 Sec. 1, Rule 39; See Amor v. Jugo et al., 77 Phil. 703.
40 Rollo, p. 39.
41 Id., pp. 35, 193
42 ART. 415, par. (3).42 ART. 415, par. (3).
10.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. L-7057 October 29, 1954
MACHINERY & ENGINEERING SUPPLIES, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON. POTENCIANO PECSON, JUDGE OF THE COURT OF FIRST
INSTANCE OF MANILA, IPO LIMESTONE CO., INC., and ANTONIO VILLARAMA, respondents.
Vicente J. Francisco for petitioner.
Capistrano and Capistrano for respondents.
CONCEPCION, J.:
This is an appeal by certiorari, taken by petitioner Machinery and Engineering Supplies Inc., from a
decision of the Court of Appeals denying an original petition for certiorari filed by said petitioner against
Hon. Potenciano Pecson, Ipo Limestone Co., Inc., and Antonio Villarama, the respondents herein.
The pertinent facts are set forth in the decision of the Court of Appeals, from which we quote:
On March 13, 1953, the herein petitioner filed a complaint for replevin in the Court of First Instance of
Manila, Civil Case No. 19067, entitled "Machinery and Engineering Supplies, Inc., Plaintiff, vs. Ipo
Limestone Co., Inc., and Dr. Antonio Villarama, defendants", for the recovery of the machinery and
equipment sold and delivered to said defendants at their factory in barrio Bigti, Norzagaray, Bulacan.
Upon application ex-parte of the petitioner company, and upon approval of petitioner's bond in the sum
of P15,769.00, on March 13,1953, respondent judge issued an order, commanding the Provincial Sheriff
of Bulacan to seize and take immediate possession of the properties specified in the order (Appendix I,
Answer). On March 19, 1953, two deputy sheriffs of Bulacan, the said Ramon S. Roco, and a crew of
technical men and laborers proceeded to Bigti, for the purpose of carrying the court's order into effect.
Leonardo Contreras, Manager of the respondent Company, and Pedro Torres, in charge thereof, met the
deputy sheriffs, and Contreras handed to them a letter addressed to Atty. Leopoldo C. Palad, ex-oficio
Provincial Sheriff of Bulacan, signed by Atty. Adolfo Garcia of the defendants therein, protesting against
the seizure of the properties in question, on the ground that they are not personal properties.
Contending that the Sheriff's duty is merely ministerial, the deputy sheriffs, Roco, the latter's crew of
technicians and laborers, Contreras and Torres, went to the factory. Roco's attention was called to the
fact that the equipment could not possibly be dismantled without causing damages or injuries to the
wooden frames attached to them. As Roco insisted in dismantling the equipment on his own
responsibility, alleging that the bond was posted for such eventuality, the deputy sheriffs directed that
some of the supports thereof be cut (Appendix 2). On March 20, 1953, the defendant Company filed an
urgent motion, with a counter-bond in the amount of P15,769, for the return of the properties seized by
the deputy sheriffs. On the same day, the trial court issued an order, directing the Provincial Sheriff of
Bulacan to return the machinery and equipment to the place where they were installed at the time of
the seizure (Appendix 3). On March 21, 1953, the deputy sheriffs returned the properties seized, by
depositing them along the road, near the quarry, of the defendant Company, at Bigti, without the benefit
of inventory and without re-installing hem in their former position and replacing the destroyed posts,
which rendered their use impracticable. On March 23, 1953, the defendants' counsel asked the
provincial Sheriff if the machinery and equipment, dumped on the road would be re-installed tom their
former position and condition (letter, Appendix 4). On March 24, 1953, the Provincial Sheriff filed an
urgent motion in court, manifesting that Roco had been asked to furnish the Sheriff's office with the
expenses, laborers, technical men and equipment, to carry into effect the court's order, to return the
seized properties in the same way said Roco found them on the day of seizure, but said Roco absolutely
refused to do so, and asking the court that the Plaintiff therein be ordered to provide the required aid or
relieve the said Sheriff of the duty of complying with the said order dated March 20, 1953 (Appendix 5).
On March 30, 1953, the trial court ordered the Provincial Sheriff and the Plaintiff to reinstate the
machinery and equipment removed by them in their original condition in which they were found before
their removal at the expense of the Plaintiff (Appendix 7). An urgent motion of the Provincial Sheriff
dated April 15, 1953, praying for an extension of 20 days within which to comply with the order of the
Court (appendix 10) was denied; and on May 4, 1953, the trial court ordered the Plaintiff therein to
furnish the Provincial Sheriff within 5 days with the necessary funds, technical men, laborers, equipment
and materials to effect the repeatedly mentioned re-installation (Appendix 13). (Petitioner's brief,
Appendix A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals civil case G.R. No. 11248-R, entitled "Machinery
and Engineering Supplies, Inc. vs. Honorable Potenciano Pecson, Provincial Sheriff of Bulacan, Ipo
Limestone Co., Inc., and Antonio Villarama." In the petition therein filed, it was alleged that, in ordering
the petitioner to furnish the provincial sheriff of Bulacan "with necessary funds, technical men, laborers,
equipment and materials, to effect the installation of the machinery and equipment" in question, the
Court of Firs Instance of Bulacan had committed a grave abuse if discretion and acted in excess of its
jurisdiction, for which reason it was prayed that its order to this effect be nullified, and that, meanwhile,
a writ of preliminary injunction be issued to restrain the enforcement o said order of may 4, 1953.
Although the aforementioned writ was issued by the Court of Appeals, the same subsequently dismissed
by the case for lack of merit, with costs against the petitioner, upon the following grounds:
While the seizure of the equipment and personal properties was ordered by the respondent Court, it is,
however, logical to presume that said court did not authorize the petitioner or its agents to destroy, as
they did, said machinery and equipment, by dismantling and unbolting the same from their concrete
basements, and cutting and sawing their wooden supports, thereby rendering them unserviceable and
beyond repair, unless those parts removed, cut and sawed be replaced, which the petitioner, not
withstanding the respondent Court's order, adamantly refused to do. The Provincial Sheriff' s tortious
act, in obedience to the insistent proddings of the president of the Petitioner, Ramon S. Roco, had no
justification in law, notwithstanding the Sheriffs' claim that his duty was ministerial. It was the bounden
duty of the respondent Judge to give redress to the respondent Company, for the unlawful and wrongful
acts committed by the petitioner and its agents. And as this was the true object of the order of March
30, 1953, we cannot hold that same was within its jurisdiction to issue. The ministerial duty of the Sheriff
should have its limitations. The Sheriff knew or must have known what is inherently right and inherently
wrong, more so when, as in this particular case, the deputy sheriffs were shown a letter of respondent
Company's attorney, that the machinery were not personal properties and, therefore, not subject to
seizure by the terms of the order. While it may be conceded that this was a question of law too technical
to decide on the spot, it would not have costs the Sheriff much time and difficulty to bring the letter to
the court's attention and have the equipment and machinery guarded, so as not to frustrate the order of
seizure issued by the trial court. But acting upon the directives of the president of the Petitioner, to seize
the properties at any costs, in issuing the order sought to be annulled, had not committed abuse of
discretion at all or acted in an arbitrary or despotic manner, by reason of passion or personal hostility; on
the contrary, it issued said order, guided by the well known principle that of the property has to be
returned, it should be returned in as good a condition as when taken (Bachrach Motor Co., Inc., vs. Bona,
44 Phil., 378). If any one had gone beyond the scope of his authority, it is the respondent Provincial
Sheriff. But considering that fact that he acted under the pressure of Ramon S. Roco, and that the order
impugned was issued not by him, but by the respondent Judge, We simply declare that said Sheriff' act
was most unusual and the result of a poor judgment. Moreover, the Sheriff not being an officer
exercising judicial functions, the writ may not reach him, for certiorari lies only to review judicial actions.
The Petitioner complains that the respondent Judge had completely disregarded his manifestation that
the machinery and equipment seized were and still are the Petitioner's property until fully paid for and
such never became immovable. The question of ownership and the applicability of Art. 415 of the new
Civil Code are immaterial in the determination of the only issue involved in this case. It is a matter of
evidence which should be decided in the hearing of the case on the merits. The question as to whether
the machinery or equipment in litigation are immovable or not is likewise immaterial, because the only
issue raised before the trial court was whether the Provincial Sheriff of Bulacan, at the Petitioner's
instance, was justified in destroying the machinery and in refusing to restore them to their original form ,
at the expense of the Petitioner. Whatever might be the legal character of the machinery and
equipment, would not be in any way justify their justify their destruction by the Sheriff's and the said
Petitioner's. (Petitioner's brief, Appendix A, pp. IV-VII.)
A motion for reconsideration of this decision of the Court of Appeals having been denied , petitioner has
brought the case to Us for review by writ of certiorari. Upon examination of the record, We are satisfied,
however that the Court of Appeals was justified in dismissing the case.
The special civil action known as replevin, governed by Rule 62 of Court, is applicable only to "personal
property".
Ordinarily replevin may be brought to recover any specific personal property unlawfully taken or
detained from the owner thereof, provided such property is capable of identification and delivery; but
replevin will not lie for the recovery of real property or incorporeal personal property. (77 C. J. S. 17)
(Emphasis supplied.)
When the sheriff repaired to the premises of respondent, Ipo Limestone Co., Inc., machinery and
equipment in question appeared to be attached to the land, particularly to the concrete foundation of
said premises, in a fixed manner, in such a way that the former could not be separated from the latter
"without breaking the material or deterioration of the object." Hence, in order to remove said outfit, it
became necessary, not only to unbolt the same, but , also, to cut some of its wooden supports.
Moreover, said machinery and equipment were "intended by the owner of the tenement for an
industry" carried on said immovable and tended." For these reasons, they were already immovable
property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines, which are
substantially identical to paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As such immovable
property, they were not subject to replevin.
In so far as an article, including a fixture annexed by a tenant, is regarded as part of the realty, it is not
the subject for personality; . . . .
. . . the action of replevin does not lie for articles so annexed to the realty as to be part as to be part
thereof, as, for example, a house or a turbine pump constituting part of a building's cooling system; . . .
(36 C. J. S. 1000 & 1001)
Moreover, as the provincial sheriff hesitated to remove the property in question, petitioner's agent and
president, Mr. Ramon Roco, insisted "on the dismantling at his own responsibility," stating that.,
precisely, "that is the reason why plaintiff posted a bond ." In this manner, petitioner clearly assumed the
corresponding risks.
Such assumption of risk becomes more apparent when we consider that, pursuant to Section 5 of Rule
62 of the Rules of Court, the defendant in an action for replevin is entitled to the return of the property
in dispute upon the filing of a counterbond, as provided therein. In other words, petitioner knew that the
restitution of said property to respondent company might be ordered under said provision of the Rules
of Court, and that, consequently, it may become necessary for petitioner to meet the liabilities incident
to such return.
Lastly, although the parties have not cited, and We have not found, any authority squarely in point —
obviously real property are not subject to replevin — it is well settled that, when the restitution of what
has been ordered, the goods in question shall be returned in substantially the same condition as when
taken (54 C.J., 590-600, 640-641). Inasmuch as the machinery and equipment involved in this case were
duly installed and affixed in the premises of respondent company when petitioner's representative
caused said property to be dismantled and then removed, it follows that petitioner must also do
everything necessary to the reinstallation of said property in conformity with its original condition.
Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs against the petitioner. So
ordered.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo and Reyes, J.B.L., JJ., concur.
Paras, C.J., concurs in the result.

11.
THIRD DIVISION
FELS ENERGY, INC., G.R. No. 168557
Petitioner,
-versus-
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL

ASSESSOR OF BATANGAS,
Respondents.
x----------------------------------------------------x
NATIONAL POWER CORPORATION, G.R. No. 170628
Petitioner,
Present:
YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
LOCAL BOARD OF ASSESSMENT CHICO-NAZARIO, JJ.
APPEALS OF BATANGAS, LAURO C.

ANDAYA, in his capacity as the Assessor
of the Province of Batangas, and the Promulgated:
PROVINCE OF BATANGAS represented
by its Provincial Assessor, February 16, 2007
Respondents.
x--------------------------------------------------------------------------------------------x
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 Decision[1] of the Court of Appeals
(CA) in CA-G.R. SP No. 67490 and its Resolution[2] dated June 20, 2005; the second, also a petition for
review on certiorari, challenges the February 9, 2005 Decision[3] and November 23, 2005 Resolution[4]
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 Agreement[5] (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 letter[7] 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 opinion[10] 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 Resolution[11] denying the petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the amount of
P56,184,088.40, for the year 1994.
SO ORDERED.[12]
The LBAA ruled that the power plant facilities, while they may be classified as movable or personal
property, are nevertheless considered real property for taxation purposes because they are installed at a
specific location with a character of permanency. The LBAA also pointed out that the owner of the
bargesFELS, a private corporationis the 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
Distraint[13] over 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 Order[14] 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 Intervention[15] dated August 7, 1998 in the proceedings before
the CBAA. This was approved by the CBAA in an Order[16] 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 Decision[17] 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 Resolution[20] 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 Resolution[22] 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 Resolution[23] dated
February 12, 2002, the appellate court directed NPC to re-file its motion for consolidation with CA-G.R.
SP No. 67491, since it is the ponente of the latter petition who should resolve the request for
reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the
appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of
prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions dated July
31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are AFFIRMED.
SO ORDERED.[24]
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the
appellate courts decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as G.R.
No. 165113, assailing the appellate courts decision in CA-G.R. SP No. 67490. The petition was, however,
denied in this Courts Resolution[25] of November 8, 2004, for NPCs failure to sufficiently show that the
CA committed any reversible error in the challenged decision. NPC filed a motion for reconsideration,
which the Court denied with finality in a Resolution[26] 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 Resolution[27] dated
November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for lack of
merit in a Resolution[28] dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising the
following issues:
A.
Whether power barges, which are floating and movable, are personal properties and therefore, not
subject to real property tax.
B.
Assuming that the subject power barges are real properties, whether they are exempt from real estate
tax under Section 234 of the Local Government Code (LGC).
C.
Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it should
be NPC which should be made to pay the same under the law.
D.
Assuming arguendo that the subject power barges are real properties, whether or not the same is
subject to depreciation just like any other personal properties.
E.
Whether the right of the petitioner to question the patently null and void real property tax assessment
on the petitioners personal properties is imprescriptible.[29]
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628), indicating
the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA WAS FILED OUT
OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES ARE NOT SUBJECT
TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON THE POWER
BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.[30]
Considering that the factual antecedents of both cases are similar, the Court ordered the consolidation
of the two cases in a Resolution[31] dated March 8, 2006.
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 governments[58] 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
WE CONCUR:
CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, it is
hereby certified that the conclusions in the above decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice
[1] Penned by Associate Justice Marina L. Buzon, with Associate Justices Mario L. Guaria III and Santiago
Javier Ranada (retired), concurring; rollo (G.R. No. 168557), pp. 103-116.
[2] Penned by Associate Justice Marina L. Buzon, with Associate Justices Mario L. Guaria III and Santiago
Javier Ranada; concurring; id. at 118-120.
[3] Penned by Associate Justice Mario L. Guaria III, with Associate Justices Marina L. Buzon and Santiago
Javier Ranada; concurring; rollo (G.R. No. 170628), pp. 59-64.
[4] Penned by Associate Justice Mario L. Guaria III, with Associate Justices Marina L. Buzon and Santiago
Javier Ranada; concurring; id. at 65.
[5] Rollo (G.R. No. 168557), pp. 121-245.
[6] Id. at 155.
[7] Id. at 249-250.

[8] Id. at 253-255.
[9] Rollo (G.R. No. 168557), pp. 256-267.
[10] Id. at 286-288.
[11] Id. at 289-294.
[12] Id. at 294.
[13] Rollo (G.R. No. 170628), pp. 122-124.
[14] Id. at 129.
[15] Rollo (G.R. No. 168557), pp. 364-369.
[16] Id. at 370-372.
[17] Id. at 383-394.
[18] Id. at 394.
[19] Otherwise known as the Local Government Code of 1991.
[20] Rollo (G.R. No. 168557), pp. 425-431.

[21] Id. at 430-431.
[22] Id. at 478.
[23] CA Rollo (CA-G.R. SP No. 67490), p. 422.
[24] Rollo (G.R. No. 168557), pp. 49-50.
[25] Id. at 605.
[26] Id. at 606.
[27] Rollo (G.R. No. 170628), p. 65.
[28] Rollo (G.R. No. 168557), pp. 23-25.
[29] Id. at 61.
[30] Rollo (G.R. No. 170628), pp. 18-19.
[31] Rollo (G.R. No. 168557), p. 637.
[32] Id. at 246 (Italics supplied).

[33] Systems Plus Computer College of Caloocan City v. Local Government of Caloocan City, 455 Phil. 956,
962-963 (2003).
[34] G.R. Nos. 115253-74, January 30, 1998, 285 SCRA 648.
[35] Formerly Section 30 of The Real Property Tax Code.
[36] Callanta v. Office of the Ombudsman, supra note 33, at 661-662.
[37] Rollo (G.R. No. 170628), pp. 62-63.
[38] Manila Electric Company v. Barlis, G. R. No. 114231, June 29, 2004, 433 SCRA 11, 32.
[39] Id. at 32-33.
[40] See Borja Estate v. Ballad, G.R. No. 152550, June 8, 2005, 459 SCRA 657, 668, 670.
[41] Cruz v. Court of Appeals, G.R. No. 164797, February 13, 2006, 482 SCRA 379, 395, citing Heirs of the
Late Faustina Adalid v. Court of Appeals, 459 SCRA 27, 41 (2005).
[42] G.R. No. 138660, February 5, 2004, 422 SCRA 101.
[43] Id. at 116.
[44] Municipality of Taguig v. Court of Appeals, G.R. No. 142619, September 13, 2005, 469 SCRA 588,
594-595.
[45] Foronda v. Guerrero, Adm. Case No. 5469, August 10, 2004, 436 SCRA 9, 23.
[46] Wee v. Galvez, G.R. No. 147394, August 11, 2004, 436 SCRA 96, 108-109.
[47] Hongkong and Shanghai Banking Corporation Limited v. Catalan, G.R. Nos. 159590 and 159591,
October 18, 2004, 440 SCRA 498, 513-514.
[48] Commissioner of Internal Revenue v. Hantex Trading Co., Inc., G.R. No. 136975, March 31, 2005, 454
SCRA 301, 329.
[49] Cagayan Robina Sugar Milling Co. v. Court of Appeals, 396 Phil. 830, 840 (2000).
[50] 80 Misc.2d 1065 (1975).
[51] J. Vitug, CIVIL LAW VOLUME II, PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS, 3-4 (2003).
[52] Rollo (G.R. No. 168557), p. 135.
[53] Id. at 142. (Emphasis supplied)
[54] L & L Lawrence Footwear, Inc. v. PCI Leasing and Finance Corporation, G.R. No. 160531, August 30,
2005, 468 SCRA 393, 402.
[55] Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company, G.R. No.
140230, December 15, 2005, 478 SCRA 61, 74.
[56] Republic v. City of Kidapawan, G.R. No. 166651, December 9, 2005, 477 SCRA 324, 335, citing Sea-
Land Service, Inc. v. Court of Appeals, 357 SCRA 441, 444 (2001).
[57] Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, September 11, 1996, 261
SCRA 667, 679.
[58] CONSTITUTION, Section 25, Article II, and Section 2, Article X.
[59] Republic Act No. 7160, Section 2(a).
[60] Mactan Cebu International Airport Authority v. Marcos, supra note 56, at 690.
12.
FIRST DIVISION
[G.R. No. 129644. March 7, 2000]
CHINA BANKING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, PAULINO ROXAS CHUA and
KIANG MING CHU CHUA, respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari assailing the decision rendered by the Court of Appeals on
June 26, 1997 which affirmed the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163
in Civil Case No. 63199 entitled "Paulino Roxas Chua and Kiang Ming Chu Chua, Plaintiffs versus China
Banking Corporation, the Sheriff of Manila and the Register of Deeds of Pasig, Defendants."
The facts of the case are not in dispute:
Alfonso Roxas Chua and his wife Kiang Ming Chu Chua were the owners of a residential land in San Juan,
Metro Manila, covered by Transfer Certificate of Title No. 410603. On February 2, 1984, a notice of levy
affecting the property was issued in connection with Civil Case No. 82-14134 entitled, "Metropolitan
Bank and Trust Company, Plaintiff versus Pacific Multi Commercial Corporation and Alfonso Roxas Chua,
Defendants," before the Regional Trial Court, Branch XLVI of Manila. The notice of levy was inscribed and
annotated at the back of TCT 410603. Subsequently, Kiang Ming Chu Chua filed a complaint against the
City Sheriff of Manila and Metropolitan Bank and Trust Company, questioning the levy of the
abovementioned property. She alleged that the judgment of the court in Civil Case No. 82-14134 against
Alfonso Roxas Chua could not be enforced against TCT 410603 inasmuch as the land subject thereof was
the conjugal property of the spouses.
The parties thereafter entered into a compromise agreement to the effect that the levy on TCT 410603
was valid and enforceable only to the extent of the undivided portion of the property pertaining to the
conjugal share of Alfonso Roxas Chua.
Meanwhile, on June 19, 1985, petitioner China Bank filed with the Regional Trial Court of Manila, Branch
29, an action for collection of sum of money against Pacific Multi Agro-Industrial Corporation and
Alfonso Roxas Chua which was docketed as Civil Case No. 85-31257. The complaint was anchored on
three (3) promissory notes with an aggregate amount of P2,500,000.00 plus stipulated interest.
On November 7, 1985, the trial court promulgated its decision in Civil Case No. 85-31257 in favor of
China Banking Corporation, the dispositive portion of which reads as follows:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiff and against the
defendants; ordering the latter to pay, jointly and severally, the former, under the first cause of action,
the sum of P1,800,000.00, representing the unpaid of the promissory note, plus 21% interest per annum
and an additional amount equivalent to 1/10 of 1% per day of the total amount due, as penalty both
from and after October 4, 1983, until fully paid; under the second cause of action, to pay the plaintiff the
amount of P350,000.00 representing the unpaid principal of the promissory note, plus 12% interest per
annum and an additional amount equivalent to 1/10 of 1% per day of the total amount due, as penalty
both from and after September 14, 1983, until fully paid; under the third cause of action, to pay the
plaintiff the further sum of P350,000.00, representing the unpaid principal of the promissory note, plus
12% interest per annum and an additional amount equivalent to 1/10 % of 1% per day of the total
amount due as penalty both from and after September 14, 1983, until fully paid; and to pay the same
plaintiff the amount equivalent to 10% of the foregoing sums, as and for attorneys fees, such amount to
bear the same rate of interest as the principal obligation under each promissory note, compounded
monthly, until fully paid; and to pay the costs of suit.
SO ORDERED.[1]
On September 8, 1986, an alias notice of levy on execution on the one-half () undivided portion of TCT
410603 belonging to Alfonso Chua was issued in connection with Civil Case 82-14134. The notice was
inscribed and annotated at the back of TCT 410603 on September 15, 1986 and a certificate of sale
covering the one-half undivided portion of the property was executed in favor of Metropolitan Bank and
Trust Company. The certificate of sale was inscribed at the back of said TCT on December 22, 1987.
Meanwhile, Pacific Multi Agro-Industrial Corporation and Alfonso Roxas Chuas appeal was dismissed by
the Court of Appeals on September 29, 1988 for failure to file brief.[2]
On November 21, 1988, Alfonso Roxas Chua executed a public instrument denominated as "Assignment
of Rights to Redeem," whereby he assigned his rights to redeem the one-half undivided portion of the
property to his son, private respondent Paulino Roxas Chua.[3] Paulino redeemed said one-half share on
the very same day. The instrument was inscribed at the back of TCT 410603 as Entry No. 7629, and the
redemption of the property by Paulino was inscribed as Entry No. 7630, both dated March 14, 1989.[4]
On the other hand, in connection with Civil Case No. 85-31257, another notice of levy on execution was
issued on February 4, 1991 by the Deputy Sheriff of Manila against the right and interest of Alfonso
Roxas Chua in TCT 410603. Thereafter, a certificate of sale on execution dated April 13, 1992 was issued
by the Sheriff of Branch 39, RTC Manila in Civil Case No. 85-31257, in favor of China Bank and inscribed
at the back of TCT 410603 as Entry No. 01896 on May 4, 1992.[5]
On May 20, 1993, Paulino Roxas Chua and Kiang Ming Chu Chua instituted Civil Case No. 63199 before
the RTC of Pasig, Metro Manila against China Bank, averring that Paulino has a prior and better right over
the rights, title, interest and participation of China Banking Corporation in TCT 410603; that Alfonso
Roxas Chua sold his right to redeem one-half (1/2) of the aforesaid conjugal property in his favor on
November 21, 1988 while China Banking Corporation acquired its right from the notice of levy of
execution dated January 30, 1991; that the assignment of rights in his favor was annotated at the back of
TCT 410603 on March 14, 1989 and inscribed as Entry No. 7629, and his redemption of the property was
effected in an instrument dated January 11, 1989 and inscribed and annotated at the back of TCT 410603
on March 14, 1989, two years before the annotation of the rights of China Banking Corporation on TCT
410603 on February 4, 1991.
The trial court rendered a decision on July 15, 1994 in favor of private respondent Paulino Roxas Chua
and against China Banking Corporation, the decretal portion of which reads:
WHEREFORE, foregoing premises considered, this Court finds sufficient preponderance of evidence
against defendants in favor of plaintiffs and therefore render (sic) judgment ordering defendant to pay
plaintiffs:
a) P100,000.00 as moral damages and P50,000.00 as exemplary damages plus 12% interest per annum to
start from the date of this decision until fully paid;
b) P100,000.00 attorneys fee; and
c) the cost of the suit.
The writ of preliminary injunction issued by this Court on 30 June 1993 enjoining China Banking
Corporation, the Sheriff of Manila and the Register of Deeds of San Juan, their officers, representatives,
agents or persons acting on their behalf from causing the transfer of possession, ownership and
certificate of title or otherwise disposing of the property covered by TCT No. 410603 in favor of
defendant bank or to any other person is hereby made permanent. The Register of Deeds of San Juan,
Metro Manila is also hereby ordered to cancel all annotations in TCT No. 410603 in favor of defendant
China Banking Corporation adverse to the rights and interest of plaintiffs.
SO ORDERED.[6]
The trial court ruled that the assignment was made for a valuable consideration and was executed two
years before petitioner China Bank levied the conjugal share of Alfonso Roxas Chua on TCT 410603. The
trial court found that Paulino redeemed the one-half portion of the property, using therefor the amount
of P100,000.00 which he withdrew from his savings account as evidenced by his bankbook and the
receipts of Metrobank for his payment of the redemption price. The court noted that Paulino at that
time was already of age and had his own source of income.
On appeal, the Court of Appeals affirmed the ruling of the trial court. It held that petitioner China Bank
had been remiss in the exercise of its rights as creditor; and that it should have exercised its right of
redemption under Sections 29 and 30, Rule 39 of the Rules of Court.
The issues raised by petitioner before us essentially boil down to whether or not the assignment of the
right of redemption made by Alfonso Roxas Chua in favor of private respondent Paulino was done to
defraud his creditors and may be rescinded under Article 1387 of the Civil Code.
Under Article 1381(3) of the Civil Code, contracts which are undertaken in fraud of creditors when the
latter cannot in any manner collect the claims due them, are rescissible.
The existence of fraud or intent to defraud creditors may either be presumed in accordance with Article
1387 of the Civil Code or duly proved in accordance with the ordinary rules of evidence. Article 1387
reads:
Art. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed
to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to
pay all debts contracted before the donation.
Alienation by onerous title are also presumed fraudulent when made by persons against whom some
judgment has been rendered in any instance or some writ of attachment has been issued. The decision
or attachment need not refer to the property alienated, and need not have been obtained by the party
seeking rescission.
In addition to these presumptions, the design to defraud creditors may be proved in any other manner
recognized by the law of evidence.
Hence, the law presumes that there is fraud of creditors when:
a) There is alienation of property by gratuitous title by the debtor who has not reserved sufficient
property to pay his debts contracted before such alienation; or
b) There is alienation of property by onerous title made by a debtor against whom some judgment has
been rendered in any instance or some writ of attachment has been issued. The decision or attachment
need not refer to the property alienated and need not have been obtained by the party seeking
rescission.
After his conjugal share in TCT 410603 was foreclosed by Metrobank, the only property that Alfonso
Roxas Chua had was his right to redeem the same, it forming part of his patrimony. "Property" under civil
law comprehends every species of title, inchoate or complete, legal or equitable.
Alfonso Roxas Chua sold his right of redemption to his son, Paulino Roxas Chua, in 1988. Thereafter,
Paulino redeemed the property and caused the annotation thereof at the back of TCT 410603. This
preceded the annotation of the levy of execution in favor of China Bank by two (2) years and the
certificate of sale in favor of China Bank by more than three (3) years. On this basis, the Court of Appeals
concluded that the allegation of fraud made by petitioner China Bank is vague and unsubstantiated.
Such conclusion, however, runs counter to the law applicable in the case at bar. Inasmuch as the
judgment of the trial court in favor of China Bank against Alfonso Roxas Chua was rendered as early as
1985, there is a presumption that the 1988 sale of his property, in this case the right of redemption, is
fraudulent under Article 1387 of the Civil Code. The fact that private respondent Paulino Roxas Chua
redeemed the property and caused its annotation on the TCT more than two years ahead of petitioner
China Bank is of no moment. As stated in the case of Cabaliw vs. Sadorra,[7] "the parties here do not
stand in equipoise, for the petitioners have in their favor, by a specific provision of law, the presumption
of fraudulent transaction which is not overcome by the mere fact that the deeds of sale were in the
nature of public instruments."
This presumption is strengthened by the fact that the conveyance has virtually left Alfonsos other
creditors with no other property to attach. It should be noted that the presumption of fraud or intention
to defraud creditors is not just limited to the two instances set forth in the first and second paragraphs of
Article 1387 of the Civil Code. Under the third paragraph of the same article, the design to defraud
creditors may be proved in any other manner recognized by the law of evidence. In the early case of Oria
vs. Mcmicking,[8] the Supreme Court considered the following instances as badges of fraud:
1. The fact that the consideration of the conveyance is fictitious or is inadequate.
2. A transfer made by a debtor after suit has begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially.
6. The fact that the transfer is made between father and son, when there are present other of the above
circumstances
7. The failure of the vendee to take exclusive possession of all the property. (Underscoring provided)
Before China Bank obtained judgment against Pacific Multi Agro-Industrial Corporation and Alfonso
Roxas Chua on November 7, 1985, Alfonso Roxas Chua had only his one-half share of the conjugal
property in question to pay his previous creditor, Metrobank. Even his son, private respondent Paulino
Roxas Chua himself, knew this as shown by the following excerpts of his testimony during the trial:
Q: You said that month before or October 1988 your father approached you regarding his problem with
respect to his property, subject of this case, can you tell us what in particular did he tell you about
Metrobank?
A: He told me about his problem with Metrobank,about the loan with Metrobank and Metrobank gonna
foreclose his property.
xxxxxxxxx
Q: What did your father tell you regarding his problem?
A: He told me about Metrobank, our house will gonna foreclose (sic). He cannot pay Metrobank
anymore. His business is down.[9]
Despite Alfonso Roxas Chuas knowledge that it is the only property he had which his other creditors
could levy, he still assigned his right to redeem his one-half share of the conjugal property in question
from Metrobank in favor of his son, Paulino. Alfonsos intent to defraud his other creditors, specifically,
China Bank, becomes even more apparent when we take into consideration the fact that immediately
after the Court of Appeals rendered its Resolution dated September 29, 1988, dismissing the appeal of
Pacific Multi-Agro and Alfonso Roxas Chua in CA-G.R. No. CV-14681 entitled, "China Banking Corporation,
Plaintiff-Appellee versus Pacific Multi Agro-Industrial Corporation, et al., Defendants-Appellants,"[10] he
assigned his right to redeem one-half of the conjugal property to his son on November 21, 1988.
The Court of Appeals, however, maintained that although the transfer was made between father and
son, the conveyance was not fraudulent since Paulino had indeed paid the redemption price of
P1,463,375.39 to Metrobank and the sum of P100,000.00 to his father. The Court of Appeals reiterated
the findings of the trial court that Paulino at that time had his own source of income, having been given
HK$1Million by his maternal grandmother which he used to invest in a buy-and-sell business of stuffed
toys.
It bears emphasis that it is not sufficient that the conveyance is founded on a valuable consideration. In
the case of Oria vs. Mcmicking,[11] we had occasion to state that "In determining whether or not a
certain conveyance is fraudulent the question in every case is whether the conveyance was a bona fide
transaction or a trick and contrivance to defeat creditors, or whether it conserves to the debtor a special
right. It is not sufficient that it is founded on good considerations or is made with bona fide intent: it
must have both elements. If defective in either of these, although good between the parties, it is
voidable as to creditors. x x x The test as to whether or not a conveyance is fraudulent is, does it
prejudice the rights of creditors?"
The mere fact that the conveyance was founded on valuable consideration does not necessarily negate
the presumption of fraud under Article 1387 of the Civil Code. There has to be a valuable consideration
and the transaction must have been made bona fide.
In the case at bar, the presumption that the conveyance is fraudulent has not been overcome. At the
time a judgment was rendered in favor of China Bank against Alfonso and the corporation, Paulino was
still living with his parents in the subject property. Paulino himself admitted that he knew his father was
heavily indebted and could not afford to pay his debts. The transfer was undoubtedly made between
father and son at a time when the father was insolvent and had no other property to pay off his
creditors. Hence, it is of no consequence whether or not Paulino had given valuable consideration for the
conveyance.
With regard to the finding of the Court of Appeals that petitioner was remiss in its duties for not having
availed of redemption under Rule 39 of the Rules of Court, it should be borne in mind that petitioner is
not limited to the procedure outlined in Rule 39 of the Rules of Court to enforce its claim against its
debtor Alfonso Roxas Chua. Verily, Article 1387 of the Civil Code clearly states that conveyances made by
the debtor to defraud his creditor may be rescinded.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 46735 is
REVERSED and SET ASIDE. The permanent injunction enjoining petitioner, the Sheriff of Manila, the
Register of Deeds of San Juan, their officers, representatives, agents and persons acting on their behalf
from causing the transfer of possession, ownership and title of the property covered by TCT No. 410603
in favor of petitioner is LIFTED. The Assignment of Rights to Redeem dated November 21, 1988 executed
by Alfonso Roxas Chua in favor of Paulino Roxas Chua is ordered RESCINDED. The levy on execution dated
February 4, 1991 and the Certificate of Sale dated April 30, 1992 in favor of petitioner are DECLARED
VALID against the one-half portion of the subject property.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Kapunan, JJ., concur.
Pardo, J., on official business abroad.
[1] Records, p. 89.
[2] Records, p. 90.
[3] Records, p. 154.
[4] Records, p. 54.
[5] Records, p. 55.
[7] 64 SCRA 310, 316 (1975).
[8] 21 Phil. 243, 250-51 (1912).
[9] TSN, January 14, 1994, p. 20.

[11] Supra, at 250.
Arts. 419-425
1.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign
Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA,
AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES
ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN,
respondents.
Arturo M. Tolentino for petitioner in 92013.
GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents
from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-
Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary
restraining order effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes
for a writ of mandamus to compel the respondents to fully disclose to the public the basis of their
decision to push through with the sale of the Roppongi property inspire of strong public opposition and
to explain the proceedings which effectively prevent the participation of Filipino citizens and entities in
the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990.
After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required to file
a comment by the Court's resolution dated February 22, 1990. The two petitions were consolidated on
March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for an
extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an
extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of
time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5,
1990 but calling the attention of the respondents to the length of time the petitions have been pending.
After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We
noted his motion and resolved to decide the two (2) cases.
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine
government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots
being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square
meters and categorized as a commercial lot now being used as a warehouse and parking lot for the
consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for national
development projects are part of the indemnification to the Filipino people for their losses in life and
property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty
(20) years in accordance with annual schedules of procurements to be fixed by the Philippine and
Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law,
prescribes the national policy on procurement and utilization of reparations and development loans. The
procurements are divided into those for use by the government sector and those for private parties in
projects as the then National Economic Council shall determine. Those intended for the private sector
shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned
entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule
and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June
27, 1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine
Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the
Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi
building needed major repairs. Due to the failure of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan,
Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima
Corporation — which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai
and renovate the present Philippine Chancery in Nampeidai. The consideration of the construction
would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi
and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be used as the
Philippine Embassy Chancery. At the end of the lease period, all the three leased buildings shall be
occupied and used by the Philippine government. No change of ownership or title shall occur. (See
Annex "B" to Reply to Comment) The Philippine government retains the title all throughout the lease
period and thereafter. However, the government has not acted favorably on this proposal which is
pending approval and ratification between the parties. Instead, on August 11, 1986, President Aquino
created a committee to study the disposition/utilization of Philippine government properties in Tokyo
and Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A,
B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities
to avail of separations' capital goods and services in the event of sale, lease or disposition. The four
properties in Japan including the Roppongi were specifically mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been pushing, with
great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has
twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since
only one bidder qualified. The second one, after postponements, has not yet materialized. The last
scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were
changed such that the $225 million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013
objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds
as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the
property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at
the same time for the objective is the same - to stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?;
and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the
Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to
alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making the
property available for sale to non-Filipino citizens and entities. He also questions the bidding procedures
of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for
being discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be
informed about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were
acquired as part of the reparations from the Japanese government for diplomatic and consular use by
the Philippine government. Vice-President Laurel states that the Roppongi property is classified as one of
public dominion, and not of private ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under "property intended for public service"
in paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any
one can attach to it, not even by the State. The Roppongi and related properties were acquired for "sites
for chancery, diplomatic, and consular quarters, buildings and other improvements" (Second Year
Reparations Schedule). The petitioner states that they continue to be intended for a necessary service.
They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
cannot be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be
alienated nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20
[1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same
remains property of public dominion so long as the government has not used it for other purposes nor
adopted any measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the subject property is
not governed by our Civil Code but by the laws of Japan where the property is located. They rely upon
the rule of lex situs which is used in determining the applicable law regarding the acquisition, transfer
and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated January
27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine
law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the
Roppongi property has ceased to become property of public dominion. It has become patrimonial
property because it has not been used for public service or for diplomatic purposes for over thirteen (13)
years now (Citing Article 422, Civil Code) and because the intention by the Executive Department and the
Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the
transfer of the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the
possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order No.
296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law]
on June 10, 1988 which contains a provision stating that funds may be taken from the sale of Philippine
properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which
failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an
acknowledgment by the Senate of the government's intention to remove the Roppongi property from
the public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding
Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property
scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of
Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on
August 1, 1989. He now avers that the executive order contravenes the constitutional mandate to
conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also
allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to
Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act
141).i•t•c-aüsl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the
national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern (Section
7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino
citizens of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of Rep.
Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving public
interest (Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive
order is a misapplication of public funds He states that since the details of the bidding for the Roppongi
property were never publicly disclosed until February 15, 1990 (or a few days before the scheduled
bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements
and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities
owned by them did not have the chance to comply with Purchase Offer Requirements on the Roppongi.
Worse, the Roppongi shall be sold for a minimum price of $225 million from which price capital gains tax
under Japanese law of about 50 to 70% of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the
three related properties were through reparations agreements, that these were assigned to the
government sector and that the Roppongi property itself was specifically designated under the
Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the
terms of the Reparations Agreement and the corresponding contract of procurement which bind both
the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the property has
become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be
alienated. Its ownership is a special collective ownership for general use and enjoyment, an application
to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the
State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot
be the object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the
Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private ownership.
ART. 420. The following things are property of public dominion
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks shores roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as
property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because the lot has
been Idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property
continues to be part of the public domain, not available for private appropriation or ownership until
there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials insinuating a change
of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi
property for public service and to make it patrimonial property under Article 422 of the Civil Code must
be definite Abandonment cannot be inferred from the non-use alone specially if the non-use was
attributable not to the government's own deliberate and indubitable will but to a lack of financial
support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]).
Abandonment must be a certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi
property's original purpose. Even the failure by the government to repair the building in Roppongi is not
abandonment since as earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of government properties in Japan
were merely directives for investigation but did not in any way signify a clear intention to dispose of the
properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its
text expressly authorizing the sale of the four properties procured from Japan for the government sector.
The executive order does not declare that the properties lost their public character. It merely intends to
make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other
disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be
sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of
Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary
notwithstanding, the above-mentioned properties can be made available for sale, lease or any other
manner of disposition to non-Filipino citizens or to entities owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three
other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No.
1789 differentiates the procurements for the government sector and the private sector (Sections 2 and
12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos
or entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No.
296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the properties of the Government in foreign
countries, did not withdraw the Roppongi property from being classified as one of public dominion when
it mentions Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not
to those reserved for public use or service. Rep Act No. 6657, therefore, does not authorize the
Executive Department to sell the Roppongi property. It merely enumerates possible sources of future
funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order No.
299. Obviously any property outside of the commerce of man cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi property by insisting
that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to insist that
in the sale of extremely valuable government property, Japanese law and not Philippine law should
prevail. The Japanese law - its coverage and effects, when enacted, and exceptions to its provision — is
not presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law should apply
without stating what that law provides. It is a ed on faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A
conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an
immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the
essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land
ownership and its conveyance is asserted to conflict with a domestic law on the same matters. Hence,
the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the property
belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of
property belonging to the State. And the validity of the procedures adopted to effect its sale. This is
governed by Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs rule
is misplaced. The opinion does not tackle the alienability of the real properties procured through
reparations nor the existence in what body of the authority to sell them. In discussing who are capable
of acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who
can acquire the properties so that the constitutional limitation on acquisition of lands of the public
domain to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point in
belaboring whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi
lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the
investigating committee to sell the Roppongi property was premature or, at the very least, conditioned
on a valid change in the public character of the Roppongi property. Moreover, the approval does not
have the force and effect of law since the President already lost her legislative powers. The Congress had
already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public
dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government is a party. — In cases in which the
Government of the Republic of the Philippines is a party to any deed or other instrument conveying the
title to real estate or to any other property the value of which is in excess of one hundred thousand
pesos, the respective Department Secretary shall prepare the necessary papers which, together with the
proper recommendations, shall be submitted to the Congress of the Philippines for approval by the
same. Such deed, instrument, or contract shall be executed and signed by the President of the
Philippines on behalf of the Government of the Philippines unless the Government of the Philippines
unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive
Order No. 292).
SEC. 48.Official Authorized to Convey Real Property. — Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real property of the government on his or her own sole will.
Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires
executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi
property does not withdraw the property from public domain much less authorize its sale. It is a mere
resolution; it is not a formal declaration abandoning the public character of the Roppongi property. In
fact, the Senate Committee on Foreign Relations is conducting hearings on Senate Resolution No. 734
which raises serious policy considerations and calls for a fact-finding investigation of the circumstances
behind the decision to sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold the
authority of the President to sell the Roppongi property. The Court stated that the constitutionality of
the executive order was not the real issue and that resolving the constitutional question was "neither
necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately
questions is the use of the proceeds of the disposition of the Roppongi property." In emphasizing that
"the decision of the Executive to dispose of the Roppongi property to finance the CARP ... cannot be
questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that
the property became alienable nor did it indicate that the President was authorized to dispose of the
Roppongi property. The resolution should be read to mean that in case the Roppongi property is re-
classified to be patrimonial and alienable by authority of law, the proceeds of a sale may be used for
national economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale
of the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in
1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property from public
domain to make it alienable and a need for legislative authority to allow the sale of the property, we see
no compelling reason to tackle the constitutional issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions are properly
raised in appropriate cases and their resolution is necessary for the determination of the case (People v.
Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly
presented by the record if the case can be disposed of on some other ground such as the application of a
statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission
v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:
The Roppongi property is not just like any piece of property. It was given to the Filipino people in
reparation for the lives and blood of Filipinos who died and suffered during the Japanese military
occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the
homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits
from them. But who would think of selling these monuments? Filipino honor and national dignity dictate
that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered. Even
if we should become paupers we should not think of selling them. For it would be as if we sold the lives
and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:

Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its past
belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic
devastation the whole Filipino people endured in World War II.
It is for what it stands for, and for what it could never bring back to life, that its significance today
remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32
years since the property passed on to the Philippine government.
Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the inflated prices
fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos — veterans
and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy
determination where both the President and Congress must concur. Considering the properties'
importance and value, the laws on conversion and disposition of property of public dominion must be
faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is issued
enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo, Japan. The
February 20, 1990 Temporary Restraining Order is made PERMANENT.
SO ORDERED.
Melencio-Herrera, Paras, Bidin, Griño-Aquino and Regalado, JJ., concur.
Separate Opinions
CRUZ, J., concurring:
I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following
observations only for emphasis.
It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi
property. When asked to do so at the hearing on these petitions, the Solicitor General was at best
ambiguous, although I must add in fairness that this was not his fault. The fact is that there is -no such
authority. Legal expertise alone cannot conjure that statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority.
Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our properties abroad
to be used for the comprehensive agrarian reform program. Senate Res. No. 55 was a mere request for
the deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction
altogether; and ill any case it is not a law. The sale of the said property may be authorized only by
Congress through a duly enacted statute, and there is no such law.
Once again, we have affirmed the principle that ours is a government of laws and not of men, where
every public official, from the lowest to the highest, can act only by virtue of a valid authorization. I am
happy to note that in the several cases where this Court has ruled against her, the President of the
Philippines has submitted to this principle with becoming grace.
PADILLA, J., concurring:
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations which
could help in further clarifying the issues.
Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or
determines policies. The President executes such policies. The policies determined by Congress are
embodied in legislative enactments that have to be approved by the President to become law. The
President, of course, recommends to Congress the approval of policies but, in the final analysis, it is
Congress that is the policy - determining branch of government.
The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by
Congress and approved by the President, and presidential acts implementing such laws, are in
accordance with the Constitution.
The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this property
was acquired by the Philippine government for a specific purpose, namely, to serve as the site of the
Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and
intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code,
which provides:
Art. 420. The following things are property of public dominion :
(1) ...
service or for the development of the national wealth. (339a)
Public dominion property intended for public service cannot be alienated unless the property is first
transformed into private property of the state otherwise known as patrimonial property of the state. 1
The transformation of public dominion property to state patrimonial property involves, to my mind, a
policy decision. It is a policy decision because the treatment of the property varies according to its
classification. Consequently, it is Congress which can decide and declare the conversion of Roppongi
from a public dominion property to a state patrimonial property. Congress has made no such decision or
declaration.
Moreover, the sale of public property (once converted from public dominion to state patrimonial
property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of the
property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:
But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise
bare of any congressional authority extended to the President to sell Roppongi thru public bidding or
otherwise.
It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or
otherwise without a prior congressional approval, first, converting Roppongi from a public dominion
property to a state patrimonial property, and, second, authorizing the President to sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining
order earlier issued by this Court.
SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its nature as
property of public dominion, and hence, has become patrimonial property of the State. I understand
that the parties are agreed that it was property intended for "public service" within the contemplation of
paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond
human commerce. The lone issue is, in the light of supervening developments, that is non-user thereof
by the National Government (for diplomatic purposes) for the last thirteen years; the issuance of
Executive Order No. 296 making it available for sale to any interested buyer; the promulgation of
Republic Act No. 6657, the Comprehensive Agrarian Reform Law, making available for the program's
financing, State assets sold; the approval by the President of the recommendation of the investigating
committee formed to study the property's utilization; and the issuance of Resolution No. 55 of the
Philippine Senate requesting for the deferment of its disposition it, "Roppongi", is still property of the
public dominion, and if it is not, how it lost that character.
When land of the public dominion ceases to be one, or when the change takes place, is a question our
courts have debated early. In a 1906 decision, 1 it was held that property of the public dominion, a
public plaza in this instance, becomes patrimonial upon use thereof for purposes other than a plaza. In a
later case, 2 this ruling was reiterated. Likewise, it has been held that land, originally private property,
has become of public dominion upon its donation to the town and its conversion and use as a public
plaza. 3 It is notable that under these three cases, the character of the property, and any change
occurring therein, depends on the actual use to which it is dedicated. 4
Much later, however, the Court held that "until a formal declaration on the part of the Government,
through the executive department or the Legislative, to the effect that the land . . . is no longer needed
for [public] service- for public use or for special industries, [it] continue[s] to be part of the public
[dominion], not available for private expropriation or ownership." 5 So also, it was ruled that a political
subdivision (the City of Cebu in this case) alone may declare (under its charter) a city road abandoned
and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property from
public domain to make it alienable and a land for legislative authority to allow the sale of the property" 7
the majority lays stress to the fact that: (1) An affirmative act — executive or legislative — is necessary to
reclassify property of the public dominion, and (2) a legislative decree is required to make it alienable. It
also clears the uncertainties brought about by earlier interpretations that the nature of property-
whether public or patrimonial is predicated on the manner it is actually used, or not used, and in the
same breath, repudiates the Government's position that the continuous non-use of "Roppongi", among
other arguments, for "diplomatic purposes", has turned it into State patrimonial property.
I feel that this view corresponds to existing pronouncements of this Court, among other things, that: (1)
Property is presumed to be State property in the absence of any showing to the contrary; 8 (2) With
respect to forest lands, the same continue to be lands of the public dominion unless and until
reclassified by the Executive Branch of the Government; 9 and (3) All natural resources, under the
Constitution, and subject to exceptional cases, belong to the State. 10
I am elated that the Court has banished previous uncertainties.
FELICIANO, J., dissenting
With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E. Gutierrez, Jr.
For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-Chome,
Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be characterized as
property of public dominion, within the meaning of Article 420 (2) of the Civil Code:
[Property] which belong[s] to the State, without being for public use, and are intended for some public
service -.
It might not be amiss however, to note that the appropriateness of trying to bring within the confines of
the simple threefold classification found in Article 420 of the Civil Code ("property for public use
property "intended for some public service" and property intended "for the development of the national
wealth") all property owned by the Republic of the Philippines whether found within the territorial
boundaries of the Republic or located within the territory of another sovereign State, is not self-evident.
The first item of the classification property intended for public use — can scarcely be properly applied to
property belonging to the Republic but found within the territory of another State. The third item of the
classification property intended for the development of the national wealth is illustrated, in Article 339
of the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands owned by a
sovereign State are rarely, if ever, found within the territorial base of another sovereign State. The task of
examining in detail the applicability of the classification set out in Article 420 of our Civil Code to
property that the Philippines happens to own outside its own boundaries must, however, be left to
academicians.
For present purposes, too, I agree that there is no question of conflict of laws that is, at the present time,
before this Court. The issues before us relate essentially to authority to sell the Roppongi property so far
as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been converted
into patrimonial property or property of the private domain of the State; and (b) assuming an affirmative
answer to (a), whether or not there is legal authority to dispose of the Roppongi property.
Addressing the first issue of conversion of property of public dominion intended for some public service,
into property of the private domain of the Republic, it should be noted that the Civil Code does not
address the question of who has authority to effect such conversion. Neither does the Civil Code set out
or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit pronouncements on this point, as Justice Sarmiento
has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]),
petitioner Ignacio argued that if the land in question formed part of the public domain, the trial court
should have declared the same no longer necessary for public use or public purposes and which would,
therefore, have become disposable and available for private ownership. Mr. Justice Montemayor,
speaking for the Court, said:
Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by
the waters of the sea and is not necessary for purposes of public utility, or for the establishment of
special industries, or for coast-guard service, the government shall declare it to be the property of the
owners of the estates adjacent thereto and as an increment thereof. We believe that only the executive
and possibly the legislative departments have the authority and the power to make the declaration that
any land so gained by the sea, is not necessary for purposes of public utility, or for the establishment of
special industries, or for coast-guard service. If no such declaration has been made by said departments,
the lot in question forms part of the public domain. (Natividad v. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde
v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).
... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine
whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters.
Consequently, until a formal declaration on the part of the Government, through the executive
department or the Legislature, to the effect that the land in question is no longer needed for coast-guard
service, for public use or for special industries, they continue to be part of the public domain not
available for private appropriation or ownership. (108 Phil. at 338-339; emphasis supplied)
Thus, under Ignacio, either the Executive Department or the Legislative Department may convert
property of the State of public dominion into patrimonial property of the State. No particular formula or
procedure of conversion is specified either in statute law or in case law. Article 422 of the Civil Code
simply states 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". I respectfully submit, therefore, that
the only requirement which is legitimately imposable is that the intent to convert must be reasonably
clear from a consideration of the acts or acts of the Executive Department or of the Legislative
Department which are said to have effected such conversion.
The same legal situation exists in respect of conversion of property of public dominion belonging to
municipal corporations, i.e., local governmental units, into patrimonial property of such entities. In Cebu
Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by resolution declared a
certain portion of an existing street as an abandoned road, "the same not being included in the city
development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting
City Mayor to sell the land through public bidding. Although there was no formal and explicit declaration
of conversion of property for public use into patrimonial property, the Supreme Court said:
xxx xxx xxx
(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 of 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 registrable title over the lot in question. (66 SCRA at 484-;
emphasis supplied)
Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned by
municipal corporations simple non-use or the actual dedication of public property to some use other
than "public use" or some "public service", was sufficient legally to convert such property into
patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan v.
Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22 SCRA
1334 (1968).
I would also add that such was the case not only in respect of' property of municipal corporations but
also in respect of property of the State itself. Manresa in commenting on Article 341 of the 1889 Spanish
Civil Code which has been carried over verbatim into our Civil Code by Article 422 thereof, wrote:
La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los bienes de
dominio publico dejan de serlo. Si la Administracion o la autoridad competente legislative realizan qun
acto en virtud del cual cesa el destino o uso publico de los bienes de que se trata naturalmente la
dificultad queda desde el primer momento resuelta. Hay un punto de partida cierto para iniciar las
relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya taldeclaracion expresa,
legislativa or administrativa, y, sin embargo, cesar de hecho el destino publico de los bienes; ahora bien,
en este caso, y para los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,'
se entedera que se ha verificado la conversion de los bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por nuestra parte
creemos que tal debe ser la soluciion. El destino de las cosas no depende tanto de una declaracion
expresa como del uso publico de las mismas, y cuanda el uso publico cese con respecto de determinados
bienes, cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se abandona y no se
repara, si un trozo de la via publica se abandona tambien por constituir otro nuevo an mejores
condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas o memos administrativas. (3
Manresa, Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)
The majority opinion says that none of the executive acts pointed to by the Government purported,
expressly or definitely, to convert the Roppongi property into patrimonial property — of the Republic.
Assuming that to be the case, it is respectfully submitted that cumulative effect of the executive acts
here involved was to convert property originally intended for and devoted to public service into
patrimonial property of the State, that is, property susceptible of disposition to and appropration by
private persons. These executive acts, in their totality if not each individual act, make crystal clear the
intent of the Executive Department to effect such conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of officials
of the Executive Department: the Executive Secretary; the Philippine Ambassador to Japan; and
representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19 September
1988, the Committee recommended to the President the sale of one of the lots (the lot specifically in
Roppongi) through public bidding. On 4 October 1988, the President approved the recommendation of
the Committee.
On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry of
Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The Japanese
Government through its Ministry of Foreign Affairs replied that it interposed no objection to such
disposition by the Republic. Subsequently, the President and the Committee informed the leaders of the
House of Representatives and of the Senate of the Philippines of the proposed disposition of the
Roppongi property.
(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the
majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the sale of the
Roppongi property, it is here submitted with respect that Executive Order No. 296 is more than sufficient
to indicate an intention to convert the property previously devoted to public service into patrimonial
property that is capable of being sold or otherwise disposed of
(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert the
property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with the other
factors here listed, was legally effective to convert the lot in Roppongi into patrimonial property of the
State. Actually, as already pointed out, case law involving property of municipal corporations is to the
effect that simple non-use or the actual dedication of public property to some use other than public use
or public service, was sufficient to convert such property into patrimonial property of the local
governmental entity concerned. Also as pointed out above, Manresa reached the same conclusion in
respect of conversion of property of the public domain of the State into property of the private domain
of the State.
The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if
the non-use was attributable not to the Government's own deliberate and indubitable will but to lack of
financial support to repair and improve the property" (Majority Opinion, p. 13). With respect, it may be
stressed that there is no abandonment involved here, certainly no abandonment of property or of
property rights. What is involved is the charge of the classification of the property from property of the
public domain into property of the private domain of the State. Moreover, if for fourteen (14) years, the
Government did not see fit to appropriate whatever funds were necessary to maintain the property in
Roppongi in a condition suitable for diplomatic representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the crystalizing intent to change the character of the
property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of
the lot in Roppongi. The circumstance that this bidding was not successful certainly does not argue
against an intent to convert the property involved into property that is disposable by bidding.
The above set of events and circumstances makes no sense at all if it does not, as a whole, show at least
the intent on the part of the Executive Department (with the knowledge of the Legislative Department)
to convert the property involved into patrimonial property that is susceptible of being sold.
II
Having reached an affirmative answer in respect of the first issue, it is necessary to address the second
issue of whether or not there exists legal authority for the sale or disposition of the Roppongi property.
The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which reads as
follows:
SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in which the
Philippines on behalf of the Government of the Philippines unless the authority therefor be expressly
vested by law in another officer. (Emphasis supplied)
The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4, Book
I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:
Two points need to be made in this connection. Firstly, the requirement of obtaining specific approval of
Congress when the price of the real property being disposed of is in excess of One Hundred Thousand
Pesos (P100,000.00) under the Revised Administrative Code of 1917, has been deleted from Section 48
of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers to is
authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal
authority for conveyance of real property of the Government. For Section 48 merely specifies the official
authorized to execute and sign on behalf of the Government the deed of conveyance in case of such a
conveyance.
Secondly, examination of our statute books shows that authorization by law for disposition of real
property of the private domain of the Government, has been granted by Congress both in the form of (a)
a general, standing authorization for disposition of patrimonial property of the Government; and (b)
specific legislation authorizing the disposition of particular pieces of the Government's patrimonial
property.
Standing legislative authority for the disposition of land of the private domain of the Philippines is
provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural
Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine Islands (now
Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:
Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled
and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the Environment
and Natural Resources) is hereby authorized to sell or lease land of the private domain of the
Government of the Philippine Islands, or any part thereof, to such persons, corporations or associations
as are, under the provisions of Act Numbered Twenty-eight hundred and seventy-four, (now
Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled to apply for the
purchase or lease or agricultural public land.
SECTION 2. The sale of the land referred to in the preceding section shall, if such land is agricultural,
be made in the manner and subject to the limitations prescribed in chapters five and six, respectively, of
said Public Land Act, and if it be classified differently, in conformity with the provisions of chapter nine of
said Act: Provided, however, That the land necessary for the public service shall be exempt from the
provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State,
it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9 of the present
Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes refer to: "any tract of
land of the public domain which being neither timber nor mineral land, is intended to be used for
residential purposes or for commercial or industrial purposes other than agricultural" (Emphasis
supplied).i•t•c-aüsl In other words, the statute covers the sale or lease or residential, commercial or
industrial land of the private domain of the State.
Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038. On 21
December 1954, the then Secretary of Agriculture and Natural Resources promulgated Lands
Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively: "Supplementary Regulations
Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and
"Supplementary Regulations Governing the Lease of Lands of Private Domain of the Republic of the
Philippines" (text in 51 O.G. 28-29 [1955]).
It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect and
has not been repealed. 1
Specific legislative authorization for disposition of particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April 1904,
which provided for the disposition of the friar lands, purchased by the Government from the Roman
Catholic Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director of
Lands (49 Phil. 853 [1926]), these friar lands were held to be private and patrimonial properties of the
State. Act No. 2360, enacted on -28 February 1914, authorized the sale of the San Lazaro Estate located
in the City of Manila, which had also been purchased by the Government from the Roman Catholic
Church. In January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and buildings
owned by the Hospital and the Foundation of San Lazaro theretofor leased by private persons, and which
were also acquired by the Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one statute
authorizing the President to dispose of a specific piece of property. This statute is Republic Act No. 905,
enacted on 20 June 1953, which authorized the
President to sell an Identified parcel of land of the private domain of the National Government to the
National Press Club of the Philippines, and to other recognized national associations of professionals
with academic standing, for the nominal price of P1.00. It appears relevant to note that Republic Act No.
905 was not an outright disposition in perpetuity of the property involved- it provided for reversion of
the property to the National Government in case the National Press Club stopped using it for its
headquarters. What Republic Act No. 905 authorized was really a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing legislative authorization for
disposition of the Roppongi property which, in my view, has been converted into patrimonial property of
the Republic. 2
To some, the submission that Act No. 3038 applies not only to lands of the private domain of the State
located in the Philippines but also to patrimonial property found outside the Philippines, may appear
strange or unusual. I respectfully submit that such position is not any more unusual or strange than the
assumption that Article 420 of the Civil Code applies not only to property of the Republic located within
Philippine territory but also to property found outside the boundaries of the Republic.
It remains to note that under the well-settled doctrine that heads of Executive Departments are alter
egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the
constitutional power of control exercised by the President over department heads (Article VII, Section
17,1987 Constitution), the President herself may carry out the function or duty that is specifically lodged
in the Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan 101
Phil. 328 [1957]). At the very least, the President retains the power to approve or disapprove the
exercise of that function or duty when done by the Secretary of Environment and Natural Resources.
It is hardly necessary to add that the foregoing analyses and submissions relate only to the austere
question of existence of legal power or authority. They have nothing to do with much debated questions
of wisdom or propriety or relative desirability either of the proposed disposition itself or of the proposed
utilization of the anticipated proceeds of the property involved. These latter types of considerations He
within the sphere of responsibility of the political departments of government the Executive and the
Legislative authorities.
For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and 92047.
Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.
Separate Opinions
CRUZ, J., concurring:
I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following
observations only for emphasis.
It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi
property. When asked to do so at the hearing on these petitions, the Solicitor General was at best
ambiguous, although I must add in fairness that this was not his fault. The fact is that there is -no such
authority. Legal expertise alone cannot conjure that statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority.
Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our properties abroad
to be used for the comprehensive agrarian reform program. Senate Res. No. 55 was a mere request for
the deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction
altogether; and ill any case it is not a law. The sale of the said property may be authorized only by
Congress through a duly enacted statute, and there is no such law.
Once again, we have affirmed the principle that ours is a government of laws and not of men, where
every public official, from the lowest to the highest, can act only by virtue of a valid authorization. I am
happy to note that in the several cases where this Court has ruled against her, the President of the
Philippines has submitted to this principle with becoming grace.
PADILLA, J., concurring:
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations which
could help in further clarifying the issues.
Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or
determines policies. The President executes such policies. The policies determined by Congress are
embodied in legislative enactments that have to be approved by the President to become law. The
President, of course, recommends to Congress the approval of policies but, in the final analysis, it is
Congress that is the policy - determining branch of government.
The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by
Congress and approved by the President, and presidential acts implementing such laws, are in
accordance with the Constitution.
The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this property
was acquired by the Philippine government for a specific purpose, namely, to serve as the site of the
Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and
intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code,
which provides:
Art. 420. The following things are property of public dominion :
(1) ...
service or for the development of the national wealth. (339a)
Public dominion property intended for public service cannot be alienated unless the property is first
transformed into private property of the state otherwise known as patrimonial property of the state. 1
The transformation of public dominion property to state patrimonial property involves, to my mind, a
policy decision. It is a policy decision because the treatment of the property varies according to its
classification. Consequently, it is Congress which can decide and declare the conversion of Roppongi
from a public dominion property to a state patrimonial property. Congress has made no such decision or
declaration.
Moreover, the sale of public property (once converted from public dominion to state patrimonial
property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of the
property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:
But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise
bare of any congressional authority extended to the President to sell Roppongi thru public bidding or
otherwise.
It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or
otherwise without a prior congressional approval, first, converting Roppongi from a public dominion
property to a state patrimonial property, and, second, authorizing the President to sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining
order earlier issued by this Court.
SARMIENTO, J., concurring:
The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its nature as
property of public dominion, and hence, has become patrimonial property of the State. I understand
that the parties are agreed that it was property intended for "public service" within the contemplation of
paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond
human commerce. The lone issue is, in the light of supervening developments, that is non-user thereof
by the National Government (for diplomatic purposes) for the last thirteen years; the issuance of
Executive Order No. 296 making it available for sale to any interested buyer; the promulgation of
Republic Act No. 6657, the Comprehensive Agrarian Reform Law, making available for the program's
financing, State assets sold; the approval by the President of the recommendation of the investigating
committee formed to study the property's utilization; and the issuance of Resolution No. 55 of the
Philippine Senate requesting for the deferment of its disposition it, "Roppongi", is still property of the
public dominion, and if it is not, how it lost that character.
When land of the public dominion ceases to be one, or when the change takes place, is a question our
courts have debated early. In a 1906 decision, 1 it was held that property of the public dominion, a
public plaza in this instance, becomes patrimonial upon use thereof for purposes other than a plaza. In a
later case, 2 this ruling was reiterated. Likewise, it has been held that land, originally private property,
has become of public dominion upon its donation to the town and its conversion and use as a public
plaza. 3 It is notable that under these three cases, the character of the property, and any change
occurring therein, depends on the actual use to which it is dedicated. 4
Much later, however, the Court held that "until a formal declaration on the part of the Government,
through the executive department or the Legislative, to the effect that the land . . . is no longer needed
for [public] service- for public use or for special industries, [it] continue[s] to be part of the public
[dominion], not available for private expropriation or ownership." 5 So also, it was ruled that a political
subdivision (the City of Cebu in this case) alone may declare (under its charter) a city road abandoned
and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property from
public domain to make it alienable and a land for legislative authority to allow the sale of the property" 7
the majority lays stress to the fact that: (1) An affirmative act — executive or legislative — is necessary to
reclassify property of the public dominion, and (2) a legislative decree is required to make it alienable. It
also clears the uncertainties brought about by earlier interpretations that the nature of property-
whether public or patrimonial is predicated on the manner it is actually used, or not used, and in the
same breath, repudiates the Government's position that the continuous non-use of "Roppongi", among
other arguments, for "diplomatic purposes", has turned it into State patrimonial property.
I feel that this view corresponds to existing pronouncements of this Court, among other things, that: (1)
Property is presumed to be State property in the absence of any showing to the contrary; 8 (2) With
respect to forest lands, the same continue to be lands of the public dominion unless and until
reclassified by the Executive Branch of the Government; 9 and (3) All natural resources, under the
Constitution, and subject to exceptional cases, belong to the State. 10
I am elated that the Court has banished previous uncertainties.
FELICIANO, J., dissenting
With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E. Gutierrez, Jr.
For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-Chome,
Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be characterized as
property of public dominion, within the meaning of Article 420 (2) of the Civil Code:
[Property] which belong[s] to the State, without being for public use, and are intended for some public
service -.
It might not be amiss however, to note that the appropriateness of trying to bring within the confines of
the simple threefold classification found in Article 420 of the Civil Code ("property for public use
property "intended for some public service" and property intended "for the development of the national
wealth") all property owned by the Republic of the Philippines whether found within the territorial
boundaries of the Republic or located within the territory of another sovereign State, is not self-evident.
The first item of the classification property intended for public use — can scarcely be properly applied to
property belonging to the Republic but found within the territory of another State. The third item of the
classification property intended for the development of the national wealth is illustrated, in Article 339
of the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands owned by a
sovereign State are rarely, if ever, found within the territorial base of another sovereign State. The task of
examining in detail the applicability of the classification set out in Article 420 of our Civil Code to
property that the Philippines happens to own outside its own boundaries must, however, be left to
academicians.
For present purposes, too, I agree that there is no question of conflict of laws that is, at the present time,
before this Court. The issues before us relate essentially to authority to sell the Roppongi property so far
as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been converted
into patrimonial property or property of the private domain of the State; and (b) assuming an affirmative
answer to (a), whether or not there is legal authority to dispose of the Roppongi property.
Addressing the first issue of conversion of property of public dominion intended for some public service,
into property of the private domain of the Republic, it should be noted that the Civil Code does not
address the question of who has authority to effect such conversion. Neither does the Civil Code set out
or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit pronouncements on this point, as Justice Sarmiento
has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]),
petitioner Ignacio argued that if the land in question formed part of the public domain, the trial court
should have declared the same no longer necessary for public use or public purposes and which would,
therefore, have become disposable and available for private ownership. Mr. Justice Montemayor,
speaking for the Court, said:
Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by
the waters of the sea and is not necessary for purposes of public utility, or for the establishment of
special industries, or for coast-guard service, the government shall declare it to be the property of the
owners of the estates adjacent thereto and as an increment thereof. We believe that only the executive
and possibly the legislative departments have the authority and the power to make the declaration that
any land so gained by the sea, is not necessary for purposes of public utility, or for the establishment of
special industries, or for coast-guard service. If no such declaration has been made by said departments,
the lot in question forms part of the public domain. (Natividad v. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde
v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).
... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine
whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters.
Consequently, until a formal declaration on the part of the Government, through the executive
department or the Legislature, to the effect that the land in question is no longer needed for coast-guard
service, for public use or for special industries, they continue to be part of the public domain not
available for private appropriation or ownership. (108 Phil. at 338-339; emphasis supplied)
Thus, under Ignacio, either the Executive Department or the Legislative Department may convert
property of the State of public dominion into patrimonial property of the State. No particular formula or
procedure of conversion is specified either in statute law or in case law. Article 422 of the Civil Code
simply states 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". I respectfully submit, therefore, that
the only requirement which is legitimately imposable is that the intent to convert must be reasonably
clear from a consideration of the acts or acts of the Executive Department or of the Legislative
Department which are said to have effected such conversion.
The same legal situation exists in respect of conversion of property of public dominion belonging to
municipal corporations, i.e., local governmental units, into patrimonial property of such entities. In Cebu
Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by resolution declared a
certain portion of an existing street as an abandoned road, "the same not being included in the city
development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting
City Mayor to sell the land through public bidding. Although there was no formal and explicit declaration
of conversion of property for public use into patrimonial property, the Supreme Court said:
xxx xxx xxx

(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 of 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 registrable title over the lot in question. (66 SCRA at 484-;
emphasis supplied)
Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned by
municipal corporations simple non-use or the actual dedication of public property to some use other
than "public use" or some "public service", was sufficient legally to convert such property into
patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan v.
Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22 SCRA
1334 (1968).
I would also add that such was the case not only in respect of' property of municipal corporations but
also in respect of property of the State itself. Manresa in commenting on Article 341 of the 1889 Spanish
Civil Code which has been carried over verbatim into our Civil Code by Article 422 thereof, wrote:
La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los bienes de
dominio publico dejan de serlo. Si la Administracion o la autoridad competente legislative realizan qun
acto en virtud del cual cesa el destino o uso publico de los bienes de que se trata naturalmente la
dificultad queda desde el primer momento resuelta. Hay un punto de partida cierto para iniciar las
relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya taldeclaracion expresa,
legislativa or administrativa, y, sin embargo, cesar de hecho el destino publico de los bienes; ahora bien,
en este caso, y para los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,'
se entedera que se ha verificado la conversion de los bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por nuestra parte
creemos que tal debe ser la soluciion. El destino de las cosas no depende tanto de una declaracion
expresa como del uso publico de las mismas, y cuanda el uso publico cese con respecto de determinados
bienes, cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se abandona y no se
repara, si un trozo de la via publica se abandona tambien por constituir otro nuevo an mejores
condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas o memos administrativas. (3
Manresa, Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)
The majority opinion says that none of the executive acts pointed to by the Government purported,
expressly or definitely, to convert the Roppongi property into patrimonial property — of the Republic.
Assuming that to be the case, it is respectfully submitted that cumulative effect of the executive acts
here involved was to convert property originally intended for and devoted to public service into
patrimonial property of the State, that is, property susceptible of disposition to and appropration by
private persons. These executive acts, in their totality if not each individual act, make crystal clear the
intent of the Executive Department to effect such conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of officials
of the Executive Department: the Executive Secretary; the Philippine Ambassador to Japan; and
representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19 September
1988, the Committee recommended to the President the sale of one of the lots (the lot specifically in
Roppongi) through public bidding. On 4 October 1988, the President approved the recommendation of
the Committee.
On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry of
Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The Japanese
Government through its Ministry of Foreign Affairs replied that it interposed no objection to such
disposition by the Republic. Subsequently, the President and the Committee informed the leaders of the
House of Representatives and of the Senate of the Philippines of the proposed disposition of the
Roppongi property.
(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the
majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the sale of the
Roppongi property, it is here submitted with respect that Executive Order No. 296 is more than sufficient
to indicate an intention to convert the property previously devoted to public service into patrimonial
property that is capable of being sold or otherwise disposed of
(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert the
property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with the other
factors here listed, was legally effective to convert the lot in Roppongi into patrimonial property of the
State. Actually, as already pointed out, case law involving property of municipal corporations is to the
effect that simple non-use or the actual dedication of public property to some use other than public use
or public service, was sufficient to convert such property into patrimonial property of the local
governmental entity concerned. Also as pointed out above, Manresa reached the same conclusion in
respect of conversion of property of the public domain of the State into property of the private domain
of the State.
The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if
the non-use was attributable not to the Government's own deliberate and indubitable will but to lack of
financial support to repair and improve the property" (Majority Opinion, p. 13). With respect, it may be
stressed that there is no abandonment involved here, certainly no abandonment of property or of
property rights. What is involved is the charge of the classification of the property from property of the
public domain into property of the private domain of the State. Moreover, if for fourteen (14) years, the
Government did not see fit to appropriate whatever funds were necessary to maintain the property in
Roppongi in a condition suitable for diplomatic representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the crystalizing intent to change the character of the
property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of
the lot in Roppongi. The circumstance that this bidding was not successful certainly does not argue
against an intent to convert the property involved into property that is disposable by bidding.
The above set of events and circumstances makes no sense at all if it does not, as a whole, show at least
the intent on the part of the Executive Department (with the knowledge of the Legislative Department)
to convert the property involved into patrimonial property that is susceptible of being sold.
II
Having reached an affirmative answer in respect of the first issue, it is necessary to address the second
issue of whether or not there exists legal authority for the sale or disposition of the Roppongi property.
The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which reads as
follows:
SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in which the
Philippines on behalf of the Government of the Philippines unless the authority therefor be expressly
vested by law in another officer. (Emphasis supplied)
The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4, Book
I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:
Two points need to be made in this connection. Firstly, the requirement of obtaining specific approval of
Congress when the price of the real property being disposed of is in excess of One Hundred Thousand
Pesos (P100,000.00) under the Revised Administrative Code of 1917, has been deleted from Section 48
of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers to is
authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal
authority for conveyance of real property of the Government. For Section 48 merely specifies the official
authorized to execute and sign on behalf of the Government the deed of conveyance in case of such a
conveyance.
Secondly, examination of our statute books shows that authorization by law for disposition of real
property of the private domain of the Government, has been granted by Congress both in the form of (a)
a general, standing authorization for disposition of patrimonial property of the Government; and (b)
specific legislation authorizing the disposition of particular pieces of the Government's patrimonial
property.
Standing legislative authority for the disposition of land of the private domain of the Philippines is
provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural
Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine Islands (now
Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:
Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled
and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the Environment
and Natural Resources) is hereby authorized to sell or lease land of the private domain of the
Government of the Philippine Islands, or any part thereof, to such persons, corporations or associations
as are, under the provisions of Act Numbered Twenty-eight hundred and seventy-four, (now
Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled to apply for the
purchase or lease or agricultural public land.
SECTION 2. The sale of the land referred to in the preceding section shall, if such land is agricultural,
be made in the manner and subject to the limitations prescribed in chapters five and six, respectively, of
said Public Land Act, and if it be classified differently, in conformity with the provisions of chapter nine of
said Act: Provided, however, That the land necessary for the public service shall be exempt from the
provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922. (Emphasis supplied)
Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State,
it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9 of the present
Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes refer to: "any tract of
land of the public domain which being neither timber nor mineral land, is intended to be used for
residential purposes or for commercial or industrial purposes other than agricultural" (Emphasis
supplied). In other words, the statute covers the sale or lease or residential, commercial or industrial
land of the private domain of the State.
Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038. On 21
December 1954, the then Secretary of Agriculture and Natural Resources promulgated Lands
Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively: "Supplementary Regulations
Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and
"Supplementary Regulations Governing the Lease of Lands of Private Domain of the Republic of the
Philippines" (text in 51 O.G. 28-29 [1955]).
It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect and
has not been repealed. 1
Specific legislative authorization for disposition of particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April 1904,
which provided for the disposition of the friar lands, purchased by the Government from the Roman
Catholic Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director of
Lands (49 Phil. 853 [1926]), these friar lands were held to be private and patrimonial properties of the
State. Act No. 2360, enacted on -28 February 1914, authorized the sale of the San Lazaro Estate located
in the City of Manila, which had also been purchased by the Government from the Roman Catholic
Church. In January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and buildings
owned by the Hospital and the Foundation of San Lazaro theretofor leased by private persons, and which
were also acquired by the Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one statute
authorizing the President to dispose of a specific piece of property. This statute is Republic Act No. 905,
enacted on 20 June 1953, which authorized the
President to sell an Identified parcel of land of the private domain of the National Government to the
National Press Club of the Philippines, and to other recognized national associations of professionals
with academic standing, for the nominal price of P1.00. It appears relevant to note that Republic Act No.
905 was not an outright disposition in perpetuity of the property involved- it provided for reversion of
the property to the National Government in case the National Press Club stopped using it for its
headquarters. What Republic Act No. 905 authorized was really a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing legislative authorization for
disposition of the Roppongi property which, in my view, has been converted into patrimonial property of
the Republic. 2
To some, the submission that Act No. 3038 applies not only to lands of the private domain of the State
located in the Philippines but also to patrimonial property found outside the Philippines, may appear
strange or unusual. I respectfully submit that such position is not any more unusual or strange than the
assumption that Article 420 of the Civil Code applies not only to property of the Republic located within
Philippine territory but also to property found outside the boundaries of the Republic.
It remains to note that under the well-settled doctrine that heads of Executive Departments are alter
egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the
constitutional power of control exercised by the President over department heads (Article VII, Section
17,1987 Constitution), the President herself may carry out the function or duty that is specifically lodged
in the Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan 101
Phil. 328 [1957]). At the very least, the President retains the power to approve or disapprove the
exercise of that function or duty when done by the Secretary of Environment and Natural Resources.
It is hardly necessary to add that the foregoing analyses and submissions relate only to the austere
question of existence of legal power or authority. They have nothing to do with much debated questions
of wisdom or propriety or relative desirability either of the proposed disposition itself or of the proposed
utilization of the anticipated proceeds of the property involved. These latter types of considerations He
within the sphere of responsibility of the political departments of government the Executive and the
Legislative authorities.
For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and 92047.
Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.
Footnotes
Padilla, J.
1 Art. 422 of the Civil Code provides:
"Property of public dominion, when no longer intended for public use or public service, shall form part
of the patrimonial property of the State. (341a)
Sarmiento, J.
1 Municipality of Oas v. Roa, 7 Phil. 20 (1906).
2 Municipality of Hinunangan v. Director of Lands, 24 Phil. 124 (11913). The property involved here
was a fortress.
3 Harty v. Municipality of Victoria, 13 Phil. 152 (1909).
4 See also II TOLENTINO, CIVIL CODE OF THE PHILIPPINES 39 (1972 ed.), citing 3 Manresa III. See also
Province of Zamboanga del Norte v. City of Zamboanga, No. L-24440, March 28, 1968, 22 SCRA 1334.
5 Ignacio v. Director of Lands, 108 Phil. 335, 339 (1960).

6 Cebu Oxygen & Acetylene Co., Inc. vs. Bercilles, No. L-40474, August 29, 1975, 66 SCRA 481.
7 G.R. Nos. 92013 & 92047, 21.
8 Salas v. Jarencio, No. L-29788, August 30, 1972, 46 SCRA 734; Rabuco v. Villegas, No.
L-24916, February 28, 1974, 55 SCRA 658.
9 See Lianga Bay Logging Co., Inc. v. Lopez Enage, No. L-30637, July 16, 1987, 152 SCRA 80.
10 CONST., art. XII, sec. 2.
Feliciano, J.
1 We are orally advised by the Office of the Director of Lands that Act No. 3038 is very much in
effect and that the Bureau of Lands continues to date to act under it. See also, in this connection,
Sections 2 and 4 of Republic Act No. 477, enacted 9 June 1950 and as last amended by B.P. Blg 233. This
statute government the disposition of lands of the public domain and of the private domain of the State,
including lands previously vested in the United States Alien Property Custodian and transferred to the
Republic of the Philippines.
2 Since Act No. 3038 established certain qualifications for applicants for purchase or lease of land
of private domain of the government, it is relevant to note that Executive Order No. 296, promulgated at
a time when the President was still exercising legislative authority, provides as follows:
"Sec. 1. The provisions of Republic Act No. 1789, as amended, and of other laws, to the contrary
notwithstanding, the above mentioned properties can be made available for sale, lease or any other
manner of disposition to non-Filipino citizens." (Emphasis supplied)
2.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. L-24661 February 28, 1974
BENJAMIN RABUCO, VENANCIO G. GUIRNALDA, LEODEGARIO ALOBA, ELEUTERIO IBAÑES, ROGELIO

ARAGONES, ASENCIO ABANCO, BENEDICTO BAUTISTA, MAXIMO AQUINO, PAULINA DALUMIAS, NENITA
RAMOS, GUILLERMO VARIAS, EMELDA ARELLANO, PEDRO BILBAO, ERNESTO BONBALES, ROSITA OCA
BAUTISTA, TERESITA ESTEBAN, JOSE BENJAMIN, LORENZO BELDEVER, LEODEGARIO TUMLOS, PATRICIO
MALATE, ANSELMO CORTEJOS, ANACLETA ADUCA, SALOME BARCELONA, ENRICO CELSO, IRENE CAMBA,
MARIA COLLADO, RUFINO CANTIL, ANANIAS CANILLO, MAXIMO DE CASTRO, CEFERINO SALAZAR, PATRIA
ANAYA, FELISA VELASCO, IGNACIO SARASPI, FLAVIO DINAGUIT, REMEDIOS BAROMETRO, PEDRO
GEBANIA, RUBEN GEGABALEN, EMETRIO EDAÑO, LUCIANO ARAGONES, ADRIANO ESTRELLADO,
BONIFACIO EVARISTO, ISIDORO EDORIA, TIMOTEA ECARUAN, BIENVENIDO COLLADO, CENON DAJUYA,
RAFAELA FERNANDEZ, ALFONSO FAUSTINO, AVELINO GARCIA, RICARDO GUIRNALDA, FRANCISCO
HENERAL, CARMEN KIONESALA, FELICIANO LUMACTOD, DOLORES VILLACAMPA, NARCISO LIM, EUFEMIO
LEGASPI, MATILDE MABAQUIAO, EULOGIO VIÑA, MACARIO ANTONIO, JEREMIAS DE LA CRUZ, MARTIN
MANGABAN, SIMEON MANGABA T., CARIDAD MER MILLA, FELIX MAHINAY, NAPOLEON MARZAN, ISAIAS
MANALASTAS, JOSEFA CORVERA, JOSE APRUEDO, ARSENIO REYES, EUGENIA A. ONO, CORNELIO
OPOLENCIA, SEDECIAS PASCUA, ABUNDIO PAGUNTALAN, ESPERANZA DE QUIROS, CRESENCIO SALEM,
MOISES FERNANDEZ, FORTUNATO GONZALES, SOCORRO R. VALEN, RODOLFO COLLADO, VENERIO CELSO,
GREGORIO DE LA CRUZ, CELSO ALCERA, NICOLAS ARAGONES, JOSEFINA MANANSALA, ADELAIDA
CALASIN , JOSE AGUSTIN, TOMAS JOSEPH, MANUEL DADOR, SERGIO LIPATON, ERNESTO SUMAYDING,
MARCELINO DIOSO, MIGUEL ALCERA, CRISANTA ENAMER, JUAN VIADO HILARION CHIOCO, EUROPIA
CABAHUG, VICTORIA DUERO, CONSORCIO ENOC, MAMERTO GAMONIDO, BONIFACIO SABADO, MARIA
INTROLIZO, HENRY ENOLBA, REYNALDO LIM, FORTUNATO LIPON, ERNESTO MALLOS, FLORENTINA
PATRICIO, MAMERTO PALAPALA, RAMON DE PERALTA, JOSE PARRAS, APOLINARIO YAP, JUAN ROQUE,
FELIX ROQUE, GLICERIA SALAZAR, MIGUELA SABIO, AGAPITO SAYAS, PAULINO SARROZA, PACIFICO
JUANICO, LIBERADO TULAWAN, LIGAYA LAUS, ERNESTO VERZOSA, LEOPOLDO BERNALES, JAIME VISTA,
ISAIAS AMURAO, BENITA M. BARENG, and BRIGIDA SANCHEZ, petitioners,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY MAYOR OF MANILA, HON.
LADISLAO J. TOLENTINO, City Engineer of Manila, their agents, employees, assistants and all persons
acting under them; HON. BENJAMIN GOZON, Administrator, Land Reform Authority substituted by HON
CONRADO ESTRELLA as Secretary of the Department of Agrarian Reforms and his agents, employees,
assistants and all persons acting under his orders, respondent.1
G.R. No. L-24915 February 28, 1974
BENJAMIN RABUCO, et al., (the same co-petitioners in L-24661), petitioners,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY MAYOR OF MANILA, et al.,
(the same co-respondents in L-24661), respondents.
G.R. No. L-24916 February 28, 1974

BENJAMIN RABUCO, et al. (the same co-petitioners in L-24661), petitioners-appellants,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY MAYOR OF MANILA, et al.,
(the same co-respondents in L-24661), respondents-appellees.
Manuel D. Melotindos and Ricardo M. Guirnalda for petitioners.
Second Assistant City Fiscal Manuel T. Reyes for respondents.
TEEHANKEE, J.:p
The Court herein upholds the constitutionality of Republic Act 3120 on the strength of the established
doctrine that the subdivision of communal land of the State (although titled in the name of the
municipal corporation) and conveyance of the resulting subdivision lots by sale on installment basis to
bona fide occupants by Congressional authorization and disposition does not constitute infringements of
the due process clause or the eminent domain provisions of the Constitution but operates simply as a
manifestation of the legislature's right of control and power to deal with State property.
The origin and background of the cases at bar which deal with the decisive issue of constitutionality of
Republic Act 3120 enacted on June 17, 1961, as raised by respondent mayor of Manila in resisting
petitioners' pleas that respondent mayor not only lacks the authority to demolish their houses or eject
them as tenants and bona fide occupants of a parcel of land in San Andres, Malate2 but is also expressly
prohibited from doing so by section 2 of the Act, may be summarized from the Court of Appeals'3
certification of resolution of May 31, 1965 as follows:
Case L-24916 involves petitioners' appeal to the Court of Appeals4 from the decision of the Manila court
of first instance dismissing their petition for injunction and mandamus to enjoin the demolition of their
houses and the ejectment from the public lots in question and to direct respondent administrator of the
Land Authority (now Secretary of Agrarian Reform) to implement the provisions of Republic Act 3120 for
the subdivision and sale on installment basis of the subdivided lots to them as the tenants and bona fide
occupants thereof, and instead ordering their ejectment.
Case L-24915 involves petitioners' independent petition for injunction filed directly with the Court of
Appeals January 29, 19655 to forestall the demolition overnight of their houses pursuant to the order of
demolition set for January 30, 1965 at 8 a.m. issued by respondents city officials pending the elevation of
their appeal. The appellate court gave due course thereto and issued the writ of preliminary injunction
as prayed for.
The two cases were ordered "consolidated into one" since they were "unavoidably interlaced." The
appellate court, finding that the constitutionality of Republic Act 3120 was "the dominant and
inextricable issue in the appeal" over which it had no jurisdiction and that the trial court incorrectly
"sidetracked" the issue, thereafter certified the said cases to this Court, as follows:
The validity of Republic Act 3120 which was seasonably posed in issue in the court below was
sidetracked by the trial court, thus:
The constitutionality of Republic Act No. 3120 need not be passed upon as the principal question in issue
is whether the houses of the petitioners are public nuisances, which the court resolved in the
affirmative. As a matter of fact even if the petitioners were already the owners of the land on which their
respected houses are erected, the respondent city officials could cause the removal thereof as they were
constructed in violation of city ordinances and constitute public nuisance.
It is significant to note, however, that what is sought by the respondent City Mayor and City Engineer of
Manila is not only the demolition of the petitioners' houses in the premises in controversy, but their
ejectment as well. Moreover, Republic Act 3120 does intend not only the dismissal of the ejectment
proceedings against the petitioners from the land in controversy upon their motion, but as well that any
demolition order issued against them shall also have to be dismissed. The law says:
Upon approval of this Act no ejectment proceedings against any tenants or bona fide occupant shall be
instituted and any proceedings against any such tenant or bona fide occupant shall be dismissed upon
motion of the defendant. Provided, That any demolition order directed against any tenant or bona fide
occupant thereof, shall be dismissed. (Sec. 2, R. A. 3120).
Indeed, the petitioners-appellants, who contended in the court below that it was not necessary to
decide on the validity or constitutionality of the law, now asseverate that 'Republic Act No. 3120
expressly prohibits ejectment and demolition of petitioners' home.' The petitioners' argument in their
appeal to this Court runs as follows:
1. Petitioners-appellants are entitled to the remedies of injunction and mandamus, being vested
with lawful possession over Lot 21-B, Block 610, granted by law, Republic Act No. 3120.
2. Civil Case No. 56092 has not been barred by any prior judgment, as wrongly claimed by
respondents-appellees.
3. Ejectment and demolition against petitioners-appellants are unlawful and clearly prohibited by
Republic Act No. 3120.
The defense of the respondents Mayor and City Engineer of Manila to arguments 2 and 3 is the invalidity
of the said Republic Act 3120 for being in violation of the Constitutional prohibition against the
deprivation of property without due process of law and without just compensation. So that even if
argument 2 interposed by the petitioners-appellants should be rejected, still they may claim a right, by
virtue of the aforesaid provisions of Republic Act 3120, to continue possession and occupation of the
premises and the lifting of the order of demolition issued against them. The constitutionality of the said
Republic Act 3120, therefore, becomes the dominant and inextricable issue of the appeal.
Case L-24661 for the continuation and maintenance of the writ of preliminary injunction previously
issued by the Court of Appeals for preservation of the status quo was filed by petitioners directly with
this Court on June 21, 1965, pending transmittal of the records of Cases L-24915 and L-24916 to this
Court as certified by the Court of Appeals which declared itself without jurisdiction over the principal
and decisive issue of constitutionality of Republic Act 3120.
The Court gave due course thereto and on August 17, 1965 issued upon a P1,000 — bond the writ of
preliminary injunction as prayed for enjoining respondents "from demolishing and/or continuing to
demolish the houses of herein petitioners situated in Lot No. 21-B, Block No. 610 of the Cadastral Survey
of the City of Manila, or from performing any act constituting an interference in or disturbance of their
present possession."
The records of two cases certified by the appellate court, L-24915 and L-24916, were eventually
forwarded to this Court which per its resolution of August 24, 1965 ordered that they be docketed and
be considered together with case L-24661.
In the early morning of April 19, 1970, a large fire of undetermined origin gutted the Malate area
including the lot on which petitioners had built their homes and dwellings. Respondents city officials
then took over the lot and kept petitioners from reconstructing or repairing their burned dwellings. At
petitioners' instance, the Court issued on June 17, 1970 a temporary restraining order enjoining
respondents city officials "from performing any act constituting an interference in or disturbance of
herein petitioners' possession of Lot No. 21-B, Block No. 610, of the Cadastral Survey of the City of
Manila" as safeguarded them under the Court's subsisting preliminary injunction of August 17, 1965.
The "dominant and inextricable issue" at bar, as correctly perceived by the appellate court is the
constitutionality of Republic Act 3120 whereby Congress converted the lot in question together with
another lot in San Andres, Malate "which are reserved as communal property" into "disposable or
alienable lands of the State to be placed under the administration and disposal of the Land Tenure
Administration" for subdivision into small lots not exceeding 120 square meters per lot for sale on
installment basis to the tenants or bona fide occupants thereof6 and expressly prohibited ejectment and
demolition of petitioners' homes under section 2 of the Act as quoted in the appellate court's
certification resolution, supra.
The incidental issue seized upon by the trial court as a main issue for "sidetracking" the decisive issue of
constitutionality, to wit, that petitioners' houses as they stood at the time of its judgment in 1965 "were
constructed in violation of city ordinances and constituted public nuisances" whose removal could be
ordered "even if petitioners were already the owners of the land on which their respective houses are
erected" has become moot with the burning down of the petitioners' houses in the fire of April 19, 1970.
If the Act is invalid and unconstitutional for constituting deprivation of property without due process of
law and without just compensation as contended by respondents city officials, then the trial court's
refusal to enjoin ejectment and demolition of petitioners' houses may be upheld. Otherwise, petitioners'
right under the Act to continue possession and occupation of the premises and to the lifting and
dismissal of the order of demolition issued against them must be enforced and the trial court's judgment
must be set aside.
Respondents city officials' contention that the Act must be stricken down as unconstitutional for
depriving the city of Manila of the lots in question and providing for their sale in subdivided small lots to
bona fide occupants or tenants without payment of just compensation is untenable and without basis,
since the lots in question are manifestly owned by the city in its public and governmental capacity and
are therefore public property over which Congress had absolute control as distinguished from
patrimonial property owned by it in its private or proprietary capacity of which it could not be deprived
without due process and without just compensation.7
Here, Republic Act 3120 expressly declared that the properties were "reserved as communal property"
and ordered their conversion into "disposable and alienable lands of the State" for sale in small lots to
the bona fide occupants thereof. It is established doctrine that the act of classifying State property calls
for the exercise of wide discretionary legislative power which will not be interfered with by the courts.
The case of Salas vs. Jarencio8 wherein the Court upheld the constitutionality of Republic Act 4118
whereby Congress in identical terms as in Republic Act 3120 likewise converted another city lot (Lot 1-B-
2-B of Block 557 of the cadastral survey of Manila also in Malate) which was reserved as communal
property into disposable land of the State for resale in small lots by the Land Tenure, Administration to
the bona fide occupants is controlling in the case at bar.
The Court therein reaffirmed the established general rule that "regardless of the source or classification
of land in the possession of a municipality, excepting those acquired with its own funds in its private or
corporate capacity, such property is held in trust for the State for the benefit of its inhabitants, whether
it be for governmental or proprietary purposes. It holds such lands subject to the paramount power of
the legislature to dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a subdivision or instrumentality
thereof for purposes of local administration. Accordingly, the legal situation is the same as if the State
itself holds the property and puts it to a different use"9 and stressed that "the property, as has been
previously shown, was not acquired by the City of Manila with its own funds in its private or proprietary
capacity. That it has in its name a registered title is not questioned, but this title should be deemed to be
held in trust for the State as the land covered thereby was part of the territory of the City of Manila
granted by the sovereign upon its creation." 10
There as here, the Court holds that the Acts in question (Republic Acts 4118 in Salas and Republic Act
3120 in the case at bar) were intended to implement the social justice policy of the Constitution and the
government program of land for the landless and that they were not "intended to expropriate the
property involved but merely to confirm its character as communal land of the State and to make it
available for disposition by the National Government: ... The subdivision of the land and conveyane of
the resulting subdivision lots to the occupants by Congressional authorization does not operate as an
exercise of the power of eminent domain without just compensation in violation of Section 1, subsection
(2), Article III of the Constitution, 11 but simply as a manifestation of its right and power to deal with
state property." 12
Since the challenge of respondents city officials against the constitutionality of Republic Act 3120 must
fail as the City was not deprived thereby of anything it owns by acquisition with its private or corporate
funds either under the due process clause or under the eminent domain provisions of the Constitution,
the provisions of said Act must be enforced and petitioners are entitled to the injunction as prayed for
implementing the Act's prohibition against their ejectment and demolition of their houses.
WHEREFORE, the appealed decision of the lower court (in Case No. L-24916) is hereby set aside, and the
preliminary injunction heretofore issued on August 17, 1965 is hereby made permanent. The respondent
Secretary of Agrarian Reform as successor agency of the Land Tenure Administration may now proceed
with the due implementation of Republic Act 3120 in accordance with its terms and provisions. No costs.
Makalintal, C.J., Zaldivar, Castro, Barredo, Makasiar, Antonio, Esguerra, Muñoz Palma and Aquino, JJ.,
concur.
Fernandez, J., took no part.

Separate Opinions
FERNANDO, J., concurring:
It is undoubted that the opinion of the Court penned by Justice Teehankee, with his customary lucidity
and thoroughness, is in accordance with our past decisions on the matter. Reflection on the innovation
introduced by the present Constitution on local government, did, however, give rise to doubts on my
part as to the continuing authoritativeness of Province of Zamboanga del Norte v. City of Zamboanga1
and Salas v. Jarencio,2 the two principal opinions relied upon, both of which decisions were promulgated
before the effectivity of the new fundamental law. Hence this separate opinion setting forth the reasons
why I join the rest of my brethren.
1. In the declaration of principles and state policies3 it is specifically provided: "The State shall
guarantee and promote the autonomy of local government units, especially the barrio, to ensure their
fullest development as self-reliant communities."4 What was succinctly expressed therein was made
more definite in the article on local government.5 Its first section reads: "The territorial and political
subdivisions of the Philippines are the provinces, cities, municipalities, and barrios."6 Then comes this
provision: "The National Assembly shall enact a local government code which may not thereafter be
amended except by a majority vote of all its Members, defining a more responsive and accountable local
government structure with an effective system of recall, allocating among the different local government
units their powers, responsibilities, and resources, and providing for the qualifications, election and
removal, term, salaries, powers, functions, and duties of local officials, and all other matters relating to
the organization and operation of the local units. However, any change in the existing form of local
government shall not take effect until ratified by a majority of the votes cast in a plebiscite called for the
purpose."7 After which there is this limitation on the power of local government: "No province, city,
municipality, or barrio may be created, divided, merged, abolished, or its boundary substantially altered,
except in accordance with the criteria established in the local government code, and subject to the
approval by a majority of the votes cast in a plebiscite in the unit or units affected."8 The autonomy of
cities and municipalities is guaranteed in these words: "(1) Provinces with respect to component cities
and municipalities, and cities and municipalities with respect to component barrios, shall ensure that the
acts of their component units are with the scope of their assigned powers and functions. Highly
urbanized cities, as determined by standards established in the local government code, shall be
independent of province."9 Then comes the last section: "Each local government unit shall have the
power to create its own sources of revenue and to levy taxes, subject to such limitations as may be
provided by law." 10
The objective is thus crystal-clear and well-defined. The goal is the fullest autonomy to local government
units consistent with the basic theory of a unitary, not a federal, polity. It is the hope that thereby they
will attain "their fullest development as self-reliant communities." 11 It is more than just the expression
of an aspiration as attest by one of the articles of the Constitution devoted to such a subject. 12 It was
not so under the 1935 charter. On this point, all that appeared therein was: "The President shall ...
exercise general supervision over all local governments as may be provided by law ... . 13 According to
Justice Laurel in Planas v. Gil, 14 "the deliberation of the Constitutional Convention show that the grant
of the supervisory authority to the Chief Executive in this regard was in the nature of a compromise
resulting from the conflict of views in that body, mainly between the historical view which recognizes the
right of local self-government ... and the legal theory which sanctions the possession by the state of
absolute control over local governments .. . The result was the recognition of the power of supervision
and all its implications and the rejection of what otherwise would be an imperium in imperio to the
detriment of a strong national government." 15 For the above provision starts with the vesting of control
in the President "of all the executive departments, bureaus, or offices," as distinguished from "general
supervision over all local governments as may be provided by law." 16 The difference in wording is highly
significant. So it was stressed by the then Justice, later Chief Justice, Concepcion in Pelaez v. Auditor
General: 17 "The power of control under this provision implies the right of the President to interfere in
the exercise of such discretion as may be vested by law in the officers of the executive departments,
bureaus, or offices of the national government, as well as to act in lieu of such officers. This power is
denied by the Constitution to the Executive, insofar as local governments are concerned. With respect to
the latter, the fundamental law permits him to wield no more authority than that of checking whether
said local governments or the officers thereof perform their duties as provided by statutory enactments.
Hence, the President cannot interfere with local governments, so long as the same or its officers act
within the scope of their authority. He may not enact an ordinance which the municipal council has
failed or refused to pass, even if it had thereby violated a duty imposed thereto by law, although he may
see to it that the corresponding provincial officials take appropriate disciplinary action therefor. Neither
may he vote, set aside or annul an ordinance passed by said council within the scope of its jurisdiction,
no matter how patently unwise it may be. He may not even suspend an elective official of a regular
municipality or take any disciplinary action against him, except on appeal from a decision of the
corresponding provincial board." 18
2. So it was that under the 1935 Constitution, the national government when acting through the
executive had only such general supervisory authority as was provided by statute. There was no
restriction, however, on the legislative body to create or to abolish local government units. What was
more, the powers vested in them could be expanded or diminished depending on the will of Congress. It
could hardly be assumed therefore that under the previous charter, they could justifiably lay claim to real
autonomy. For so long as the legislation itself took care of delineating the matters that were
appropriately within the scope of their competence, there could be no objection to its validity. No
constitutional problem arose. Things have changed radically. We start with the declared principle of the
State guaranteeing and promoting the autonomy of local government units. 19 We have likewise noted
the earnestness of the framers as to the attainment of such declared objective as set forth in the specific
article 20 on the matter. It is made obligatory on the National Assembly to enact a local government
code. What is more, unlike the general run of statutes, it cannot be amended except by a majority vote
of all its members. It is made to include "a more responsive and accountable local government structure
with an effective system of recall," with an expressed reference to "qualifications, election and removal,
term, salaries, powers, functions, and duties of local officials, [as well as] all other matters relating to the
organization and operation of local units." 21 Mention is likewise made of the "powers, responsibilities,
and resources," 22 items that are identified with local autonomy. As if that were not enough, the last
sentence of this particular provision reads: "However, any change in the existing form of local
purpose." 23 To the extent that the last section requires that the creation, division, merger, abolition or
alteration of a boundary of a province, city, municipality, or barrio, must be in accordance with the
criteria established in the local government code and subject to the approval by a majority of the votes
cast in a plebiscite in such unit or units, the adherence to the basic principle of local self-government is
quite clear.24 Equally significant is the stress on the competence of a province, city, municipality or
barrio "to create its own sources of revenue and to levy taxes subject to such limitations as may be
provided by law." 25 The care and circumspection with which the framers saw to the enjoyment of real
local self-government not only in terms of administration but also in terms of resources is thus manifest.
Their intent is unmistakable. Unlike the case under the 1935 Constitution, there is thus a clear
manifestation of the presumption now in favor of a local government unit. It is a well-nigh complete
departure from what was. Nor should it be ignored that a highly urbanized city "shall be independent"
not only of the national government but also of a province. 26 Would it not follow then that under the
present dispensation, the moment property is transferred to it by the national government, its control
over the same should be as extensive and as broad as possible. Considerations of the above nature gave
rise to doubts on my part as to the decisions in the Zamboanga del Norte and Salas cases still retaining
unimpaired their doctrinal force. Would this be a case of Republic Act No. 3120 being rendered
inoperative by virtue of its repugnancy to the present Constitution? 27
3. Nonetheless, such doubts were set at rest by two considerations. The opinion of Justice
Teehankee makes reference to the ratio decidendi of Salas v. Jarencio as to the trust character impressed
on communal property of a municipal corporation, even if already titled. As set forth in the opinion: "The
Court [in Salas v. Jarencio] reaffirmed the established general rule that 'regardless of the source of
classification of land in the possession of a municipality, excepting those acquired with its own funds in
its private or corporate capacity, such property is held in trust for the State for the benefit of its
inhabitants, whether it be governmental or proprietary purposes. It holds such lands subject to the
paramount power of the legislature to dispose of the same, for after all it owes its creation to it as agent
for the performance of a part of its public work, municipality being but a subdivision or instrumentality
itself holds the property and puts it to a different use' and stressed that 'the property, as has been
capacity. That it has in its name registered title is not questioned, but this title should be deemed to be
This is a doctrine which to my mind is unaffected by grant of extensive local autonomy under the present
Constitution. Its basis is the regalian doctrine. It is my view that under the Constitution, as was the case
under the 1935 charter, the holding of a municipal corporation as a unit of state does not impair the
plenary power of the national government exercising dominical rights to dispose of it in a manner it sees
fit, subject to applicable constitutional limitations as to the citizenship of the grantee. An excerpt from
Lee Hong Hok v. David 29 is relevant: "As there are overtones indicative of skepticism, if not of outright
rejection, of the well-known distinction in public law between the government authority possessed by
the state which is appropriately embraced in the concept of sovereignty, and its capacity to own or
acquire property, it is not inappropriate to pursue the matter further. The former comes under the
heading of imperium and the latter of dominium. The use of this term is appropriate with reference to
lands held by the state in its proprietary character. In such capacity, it may provide for the exploitation
and use of lands and other natural resources, including their disposition, except as limited by the
Constitution. Dean Pound did speak of the confusion that existed during the medieval era between such
two concepts, but did note the existence of res publicae as a corollary to dominium. As far as the
Philippines was concerned, there was a recognition by Justice Holmes in Cariño v. Insular Government, a
case of Philippine origin, that 'Spain in its earlier decrees embodied the universal feudal theory that all
lands were held from the Crown ... .' That was a manifestation of the concept of jura regalia, which was
adopted by the present Constitution, ownership however being vested in the state as such rather than
the head thereof." 30
4. Much more compelling is the reliance on the opinion of Justice Teehankee on the even more
fundamental principle of social justice, which was given further stress and a wider scope in the present
Constitution. According to the opinion of the Court: "There as here, the Court holds that the Acts in
question (Republic Act 4118 in Salas and Republic Act 3120 in the case at bar) were intended to
implement the social justice policy of the Constitution and the government program of land for the
landless and that they were not 'intended to expropriate the property involved but merely to confirm its
character as communal land of the State and to make it available for disposition by the National
Government: ... The subdivision of the land and conveyance of the resulting subdivision lots to the
occupants by Congressional authorization does not operate as an exercise of the power of eminent
domain without just compensation in violation of Section 1, subsection (2), Article III of the Constitution,
but simply as a manifestation of its right and power to deal with state property." 31 It is true of course,
that a local government unit, if expressly authorized by statute, could make use of its property in the
same manner. It does appear, however, that there was no such grant of authority. Moreover, the national
government is not only in a better position to make a reality of the social justice principle but also is
subject to less pressure on the part of the affluent, at least where the distribution of state property is
concerned. It is thus a more efficient instrument than a province, city or municipality to attain this highly
desirable goal. In an economy essentially based on capitalism, where the power of concentrated wealth
cannot be underestimated, the countervailing force exerted by a strong national government sensitive to
the needs of our countrymen, deeply mired in the morass of poverty, the disinherited of fortune, can
make itself much more effectively felt. If only for that cogent reason then, I am prepared to ignore
whatever doubts or misgivings I did entertain at the outset.
Hence this concurrence.
Separate Opinions
It is undoubted that the opinion of the Court penned by Justice Teehankee, with his customary lucidity
and thoroughness, is in accordance with our past decisions on the matter. Reflection on the innovation
introduced by the present Constitution on local government, did, however, give rise to doubts on my
part as to the continuing authoritativeness of Province of Zamboanga del Norte v. City of Zamboanga1
and Salas v. Jarencio,2 the two principal opinions relied upon, both of which decisions were promulgated
before the effectivity of the new fundamental law. Hence this separate opinion setting forth the reasons
why I join the rest of my brethren.
1. In the declaration of principles and state policies3 it is specifically provided: "The State shall
guarantee and promote the autonomy of local government units, especially the barrio, to ensure their
fullest development as self-reliant communities."4 What was succinctly expressed therein was made
more definite in the article on local government.5 Its first section reads: "The territorial and political
subdivisions of the Philippines are the provinces, cities, municipalities, and barrios."6 Then comes this
provision: "The National Assembly shall enact a local government code which may not thereafter be
amended except by a majority vote of all its Members, defining a more responsive and accountable local
government structure with an effective system of recall, allocating among the different local government
units their powers, responsibilities, and resources, and providing for the qualifications, election and
removal, term, salaries, powers, functions, and duties of local officials, and all other matters relating to
the organization and operation of the local units. However, any change in the existing form of local
purpose."7 After which there is this limitation on the power of local government: "No province, city,
municipality, or barrio may be created, divided, merged, abolished, or its boundary substantially altered,
except in accordance with the criteria established in the local government code, and subject to the
approval by a majority of the votes cast in a plebiscite in the unit or units affected."8 The autonomy of
cities and municipalities is guaranteed in these words: "(1) Provinces with respect to component cities
and municipalities, and cities and municipalities with respect to component barrios, shall ensure that the
acts of their component units are with the scope of their assigned powers and functions. Highly
urbanized cities, as determined by standards established in the local government code, shall be
independent of province."9 Then comes the last section: "Each local government unit shall have the
power to create its own sources of revenue and to levy taxes, subject to such limitations as may be
provided by law." 10
The objective is thus crystal-clear and well-defined. The goal is the fullest autonomy to local government
units consistent with the basic theory of a unitary, not a federal, polity. It is the hope that thereby they
will attain "their fullest development as self-reliant communities." 11 It is more than just the expression
of an aspiration as attest by one of the articles of the Constitution devoted to such a subject. 12 It was
not so under the 1935 charter. On this point, all that appeared therein was: "The President shall ...
exercise general supervision over all local governments as may be provided by law ... . 13 According to
Justice Laurel in Planas v. Gil, 14 "the deliberation of the Constitutional Convention show that the grant
of the supervisory authority to the Chief Executive in this regard was in the nature of a compromise
resulting from the conflict of views in that body, mainly between the historical view which recognizes the
right of local self-government ... and the legal theory which sanctions the possession by the state of
absolute control over local governments .. . The result was the recognition of the power of supervision
and all its implications and the rejection of what otherwise would be an imperium in imperio to the
detriment of a strong national government." 15 For the above provision starts with the vesting of control
in the President "of all the executive departments, bureaus, or offices," as distinguished from "general
supervision over all local governments as may be provided by law." 16 The difference in wording is highly
significant. So it was stressed by the then Justice, later Chief Justice, Concepcion in Pelaez v. Auditor
General: 17 "The power of control under this provision implies the right of the President to interfere in
the exercise of such discretion as may be vested by law in the officers of the executive departments,
bureaus, or offices of the national government, as well as to act in lieu of such officers. This power is
denied by the Constitution to the Executive, insofar as local governments are concerned. With respect to
the latter, the fundamental law permits him to wield no more authority than that of checking whether
said local governments or the officers thereof perform their duties as provided by statutory enactments.
Hence, the President cannot interfere with local governments, so long as the same or its officers act
within the scope of their authority. He may not enact an ordinance which the municipal council has
failed or refused to pass, even if it had thereby violated a duty imposed thereto by law, although he may
see to it that the corresponding provincial officials take appropriate disciplinary action therefor. Neither
may he vote, set aside or annul an ordinance passed by said council within the scope of its jurisdiction,
no matter how patently unwise it may be. He may not even suspend an elective official of a regular
municipality or take any disciplinary action against him, except on appeal from a decision of the
corresponding provincial board." 18
2. So it was that under the 1935 Constitution, the national government when acting through the
executive had only such general supervisory authority as was provided by statute. There was no
restriction, however, on the legislative body to create or to abolish local government units. What was
more, the powers vested in them could be expanded or diminished depending on the will of Congress. It
could hardly be assumed therefore that under the previous charter, they could justifiably lay claim to real
autonomy. For so long as the legislation itself took care of delineating the matters that were
appropriately within the scope of their competence, there could be no objection to its validity. No
constitutional problem arose. Things have changed radically. We start with the declared principle of the
State guaranteeing and promoting the autonomy of local government units. 19 We have likewise noted
the earnestness of the framers as to the attainment of such declared objective as set forth in the specific
article 20 on the matter. It is made obligatory on the National Assembly to enact a local government
code. What is more, unlike the general run of statutes, it cannot be amended except by a majority vote
of all its members. It is made to include "a more responsive and accountable local government structure
with an effective system of recall," with an expressed reference to "qualifications, election and removal,
term, salaries, powers, functions, and duties of local officials, [as well as] all other matters relating to the
organization and operation of local units." 21 Mention is likewise made of the "powers, responsibilities,
and resources," 22 items that are identified with local autonomy. As if that were not enough, the last
sentence of this particular provision reads: "However, any change in the existing form of local
purpose." 23 To the extent that the last section requires that the creation, division, merger, abolition or
alteration of a boundary of a province, city, municipality, or barrio, must be in accordance with the
criteria established in the local government code and subject to the approval by a majority of the votes
cast in a plebiscite in such unit or units, the adherence to the basic principle of local self-government is
quite clear.24 Equally significant is the stress on the competence of a province, city, municipality or
barrio "to create its own sources of revenue and to levy taxes subject to such limitations as may be
provided by law." 25 The care and circumspection with which the framers saw to the enjoyment of real
local self-government not only in terms of administration but also in terms of resources is thus manifest.
Their intent is unmistakable. Unlike the case under the 1935 Constitution, there is thus a clear
manifestation of the presumption now in favor of a local government unit. It is a well-nigh complete
departure from what was. Nor should it be ignored that a highly urbanized city "shall be independent"
not only of the national government but also of a province. 26 Would it not follow then that under the
present dispensation, the moment property is transferred to it by the national government, its control
over the same should be as extensive and as broad as possible. Considerations of the above nature gave
rise to doubts on my part as to the decisions in the Zamboanga del Norte and Salas cases still retaining
unimpaired their doctrinal force. Would this be a case of Republic Act No. 3120 being rendered
inoperative by virtue of its repugnancy to the present Constitution? 27
3. Nonetheless, such doubts were set at rest by two considerations. The opinion of Justice
Teehankee makes reference to the ratio decidendi of Salas v. Jarencio as to the trust character impressed
on communal property of a municipal corporation, even if already titled. As set forth in the opinion: "The
Court [in Salas v. Jarencio] reaffirmed the established general rule that 'regardless of the source of
classification of land in the possession of a municipality, excepting those acquired with its own funds in
its private or corporate capacity, such property is held in trust for the State for the benefit of its
inhabitants, whether it be governmental or proprietary purposes. It holds such lands subject to the
paramount power of the legislature to dispose of the same, for after all it owes its creation to it as agent
for the performance of a part of its public work, municipality being but a subdivision or instrumentality
itself holds the property and puts it to a different use' and stressed that 'the property, as has been
capacity. That it has in its name registered title is not questioned, but this title should be deemed to be
This is a doctrine which to my mind is unaffected by grant of extensive local autonomy under the present
Constitution. Its basis is the regalian doctrine. It is my view that under the Constitution, as was the case
under the 1935 charter, the holding of a municipal corporation as a unit of state does not impair the
plenary power of the national government exercising dominical rights to dispose of it in a manner it sees
fit, subject to applicable constitutional limitations as to the citizenship of the grantee. An excerpt from
Lee Hong Hok v. David 29 is relevant: "As there are overtones indicative of skepticism, if not of outright
rejection, of the well-known distinction in public law between the government authority possessed by
the state which is appropriately embraced in the concept of sovereignty, and its capacity to own or
acquire property, it is not inappropriate to pursue the matter further. The former comes under the
heading of imperium and the latter of dominium. The use of this term is appropriate with reference to
lands held by the state in its proprietary character. In such capacity, it may provide for the exploitation
and use of lands and other natural resources, including their disposition, except as limited by the
Constitution. Dean Pound did speak of the confusion that existed during the medieval era between such
two concepts, but did note the existence of res publicae as a corollary to dominium. As far as the
Philippines was concerned, there was a recognition by Justice Holmes in Cariño v. Insular Government, a
case of Philippine origin, that 'Spain in its earlier decrees embodied the universal feudal theory that all
lands were held from the Crown ... .' That was a manifestation of the concept of jura regalia, which was
adopted by the present Constitution, ownership however being vested in the state as such rather than
the head thereof." 30
4. Much more compelling is the reliance on the opinion of Justice Teehankee on the even more
fundamental principle of social justice, which was given further stress and a wider scope in the present
Constitution. According to the opinion of the Court: "There as here, the Court holds that the Acts in
question (Republic Act 4118 in Salas and Republic Act 3120 in the case at bar) were intended to
implement the social justice policy of the Constitution and the government program of land for the
landless and that they were not 'intended to expropriate the property involved but merely to confirm its
character as communal land of the State and to make it available for disposition by the National
Government: ... The subdivision of the land and conveyance of the resulting subdivision lots to the
occupants by Congressional authorization does not operate as an exercise of the power of eminent
domain without just compensation in violation of Section 1, subsection (2), Article III of the Constitution,
but simply as a manifestation of its right and power to deal with state property." 31 It is true of course,
that a local government unit, if expressly authorized by statute, could make use of its property in the
same manner. It does appear, however, that there was no such grant of authority. Moreover, the national
government is not only in a better position to make a reality of the social justice principle but also is
subject to less pressure on the part of the affluent, at least where the distribution of state property is
concerned. It is thus a more efficient instrument than a province, city or municipality to attain this highly
desirable goal. In an economy essentially based on capitalism, where the power of concentrated wealth
cannot be underestimated, the countervailing force exerted by a strong national government sensitive to
the needs of our countrymen, deeply mired in the morass of poverty, the disinherited of fortune, can
make itself much more effectively felt. If only for that cogent reason then, I am prepared to ignore
whatever doubts or misgivings I did entertain at the outset.
Hence this concurrence.
Footnotes
1 Substitution of respondents was made as per the Court's resolution of July 26, 1973 granting
petitioners' motion for such substitution.
2 Lot 21-B, Block 610 of the cadastral survey of the City of Manila with an area of 10,198 square
meters described as located in the San Andres Playground. The Act also makes the same disposition of
another lot known as Lot 62 of Block 573, with which petitioners are not involved.
3 Third Division then composed of Castro, Capistrano & Villamor, JJ.
4 Docketed as CA-G.R. No. 35453.
5 Docketed as CA-G.R. No. 35269.
6 Section 1 of the Act thus provides: "Section 1. lot 62 of Block 573 and Lot 21-B of Block 610 of
the cadastral survey of the City of Manila, all situated in the District of Malate, City of Manila, which are
reserved as communal property are hereby converted into disposable or alienable lands of the State, to
be placed under the administration and disposal of the Land Tenure Administration. The Land Tenure
Administration shall subdivide the property into small lots, none of which shall exceed one hundred and
twenty square meters in area, fix the price of each lot and sell the same on installment basis to the
tenants or bona fide occupants thereof and to individuals, in the order mentioned: Provided, That no
down payment shall be required to tenants or bona fide occupants who cannot afford to pay such down
payment: Provided, further, That no person can purchase more than one lot: Provided, further, That if
the tenant or bona fide occupant of any given lot is not able to purchase the same, he shall be given a
lease from month to month until such time that he is able to purchase the lot: Provided, further, That in
the event of lease, the rentals which may be charged shall not exceed eight per cent per annum of the
assessed valuation of the property leased: Provided, finally, That in fixing the price of each lot, the cost
of subdivision and survey shall not be included."
7 Prov. of Zamboanga del Norte vs. City of Zamboanga, 22 SCRA 1334 (1968). Cf. Nawasa cases
where the municipality' waterworks system was held patrimonial property of the municipality that
established it, of which it cannot be deprive except by the exercise of eminent domain with the payment
of full compensation as held in Mun. of Paete vs. Nawasa, 33 SCRA 122 (May 29, 1970) and cases cited;
Mun. of Compostela, Cebu vs. Nawasa, 18 SCRA 988 (1966); and City of Baguio vs. Nawasa, 18 SCRA 988
(1966); and City of Baguio vs. Nawasa, 106 PHIL. 144 (1959).
8 46 SCRA 734 (1972), per Esguerra, J.

9 Idem, at page 747, emphasis added.
10 Idem, at page 750.
11 Reproduced in Art. IV, section 2 of the 1973 Constitution.
12 46 SCRA at pages 751-752, emphasis added.
1 L-24440, March 28, 1968, 22 SCRA 1334.
2 L-29788, August 30, 1972, 46 SCRA 734.
3 Article II of the Constitution.
4 Section 10 of Article II.
5 Article XI.
6 Section 1 of Article XI.

11 Section 10 of Article II of the Constitution.
12 Article XI.
13 Article VII, Section 10, par. 1 of the 1935 Constitution.
14 67 Phil. 62 (1939).
15 Ibid, 78.
16 Section 10, par. 1 of Article VII of the 1935 Constitution reads in full: "The President shall have
control of all the executive departments, bureaus, or offices, exercise general supervision over all local
governments as may be provided by law, and take care that all laws be faithfully executed."
17 L-23825, December 24, 1965, 15 SCRA 569.
18 Ibid, 582-583.
19 Cf. Section 10 of Article II.

20 Cf. Article XI.
21 Cf. Section 2 of Article XI.
22 Ibid.
23 Ibid.
27 Cf. People v. Linsangan. 62 Phil. 646 (1935); De los Santos v. Mallare, 87 Phil. 289 (1950) ;
Martinez v. Morfe, L-34022, March 24, 1972, 44 SCRA 22.
28 Opinion of Justice Teehankee, 9.
29 L-30389, December 27, 1972, 48 SCRA 372.
30 Ibid, 377.
31 Opinion of Justice Teehankee, 9.

3.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. 97764 August 10, 1992
LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of Makati, Metro
Manila, MUNICIPALITY OF PARAÑAQUE, METRO MANILA, PALANYAG KILUSANG BAYAN FOR SERVICE,
respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Parañaque.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the decision
of the Regional Trial Court of Makati, Branch 62, which granted the writ of preliminary injunction applied
for by respondents Municipality of Parañaque and Palanyag Kilusang Bayan for Service (Palanyag for
brevity) against petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which
authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets located
at Baclaran, Parañaque, Metro Manila and the establishment of a flea market thereon. The said
ordinance was approved by the municipal council pursuant to MMC Ordinance No. 2, Series of 1979,
authorizing and regulating the use of certain city and/or municipal streets, roads and open spaces within
Metropolitan Manila as sites for flea market and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the
municipal council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly,
and that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed
areas are developed and donated by the Public Estate Authority.
On June 20, 1990, the municipal council of Parañaque issued a resolution authorizing Parañaque Mayor
Walfrido N. Ferrer to enter into contract with any service cooperative for the establishment, operation,
maintenance and management of flea markets and/or vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative, entered
into an agreement whereby the latter shall operate, maintain and manage the flea market in the
aforementioned streets with the obligation to remit dues to the treasury of the municipal government of
Parañaque. Consequently, market stalls were put up by respondent Palanyag on the said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan
Traffic Command, ordered the destruction and confiscation of stalls along G.G. Cruz and J. Gabriel St. in
Baclaran. These stalls were later returned to respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag giving
the latter ten (10) days to discontinue the flea market; otherwise, the market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint
petition for prohibition and mandamus with damages and prayer for preliminary injunction, to which the
petitioner filed his memorandum/opposition to the issuance of the writ of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from
enforcing his letter-order of October 16, 1990 pending the hearing on the motion for writ of preliminary
injunction.
On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No. 86 s. 1990
of the Municipality' of Parañaque and enjoining petitioner Brig. Gen. Macasiano from enforcing his
letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging grave
abuse of discretion tantamount to lack or excess of jurisdiction on the part of the trial judge in issuing
the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by the
municipal council of Parañaque authorizing the lease and use of public streets or thoroughfares as sites
for flea markets is valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public service
and are therefore public properties; that as such, they cannot be subject to private appropriation or
private contract by any person, even by the respondent Municipality of Parañaque. Petitioner submits
that a property already dedicated to public use cannot be used for another public purpose and that
absent a clear showing that the Municipality of Parañaque has been granted by the legislature specific
authority to convert a property already in public use to another public use, respondent municipality is,
therefore, bereft of any authority to close municipal roads for the establishment of a flea market.
Petitioner also submits that assuming that the respondent municipality is authorized to close streets, it
failed to comply with the conditions set forth by the Metropolitan Manila Authority for the approval of
the ordinance providing for the establishment of flea markets on public streets. Lastly, petitioner
contends that by allowing the municipal streets to be used by market vendors the municipal council of
respondent municipality violated its duty under the Local Government Code to promote the general
welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of power given to local
government units, the Municipality of Parañaque as such, is empowered under that law to close its
roads, streets or alley subject to limitations stated therein (i.e., that it is in accordance with existing laws
and the provisions of this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its power is in fact
an encroachment of power legally vested to the municipality, precisely because when the municipality
enacted the ordinance in question — the authority of the respondent as Police Superintendent ceases to
be operative on the ground that the streets covered by the ordinance ceases to be a public
thoroughfare. (pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed municipal ordinance
authorizing the flea market on the public streets is valid, it is necessary to examine the laws in force
during the time the said ordinance was enacted, namely, Batas Pambansa Blg. 337, otherwise known as
Local Government Code, in connection with established principles embodied in the Civil Code an
property and settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use and
patrimonial property (Art. 423, Civil Code). As to what consists of property for public use, Article 424 of
Civil Code states:
Art. 424. Property for public use, in the provinces, cities and municipalities, consists of the
provincial roads, city streets, the squares, fountains, public waters, promenades, and public works for
public service paid for by said provinces, cities or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code, without
prejudice to the provisions of special laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local
roads used for public service and are therefore considered public properties of respondent municipality.
Properties of the local government which are devoted to public service are deemed public and are under
the absolute control of Congress (Province of Zamboanga del Norte v. City of Zamboanga, L-24440,
March 28, 1968, 22 SCRA 1334). Hence, local governments have no authority whatsoever to control or
regulate the use of public properties unless specific authority is vested upon them by Congress. One
such example of this authority given by Congress to the local governments is the power to close roads as
provided in Section 10, Chapter II of the Local Government Code, which states:
Sec. 10. Closure of roads. — A local government unit may likewise, through its head acting pursuant to a
resolution of its sangguniang and in accordance with existing law and the provisions of this Code, close
any barangay, municipal, city or provincial road, street, alley, park or square. No such way or place or any
part of thereof shall be close without indemnifying any person prejudiced thereby. A property thus
withdrawn from public use may be used or conveyed for any purpose for which other real property
belonging to the local unit concerned might be lawfully used or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units to close roads
and other similar public places should be read and interpreted in accordance with basic principles
already established by law. These basic principles have the effect of limiting such authority of the
province, city or municipality to close a public street or thoroughfare. Article 424 of the Civil Code lays
down the basic principle that properties of public dominion devoted to public use and made available to
the public in general are outside the commerce of man and cannot be disposed of or leased by the local
government unit to private persons. Aside from the requirement of due process which should be
complied with before closing a road, street or park, the closure should be for the sole purpose of
withdrawing the road or other public property from public use when circumstances show that such
property is no longer intended or necessary for public use or public service. When it is already
withdrawn from public use, the property then becomes patrimonial property of the local government
unit concerned (Article 422, Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474,
August 29, 1975, 66 SCRA 481). It is only then that the respondent municipality can "use or convey them
for any purpose for which other real property belonging to the local unit concerned might be lawfully
used or conveyed" in accordance with the last sentence of Section 10, Chapter II of Blg. 337, known as
Local Government Code. In one case, the City Council of Cebu, through a resolution, declared the
terminal road of M. Borces Street, Mabolo, Cebu City as an abandoned road, the same not being
included in the City Development Plan. Thereafter, the City Council passes another resolution authorizing
the sale of the said abandoned road through public bidding. We held therein that the City of Cebu is
empowered to close a city street and to vacate or withdraw the same from public use. Such withdrawn
portion becomes patrimonial property which can be the object of an ordinary contract (Cebu Oxygen
and Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are available to the
public in general and ordinarily used for vehicular traffic are still considered public property devoted to
public use. In such case, the local government has no power to use it for another purpose or to dispose
of or lease it to private persons. This limitation on the authority of the local government over public
properties has been discussed and settled by this Court en banc in "Francisco V. Dacanay, petitioner v.
Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654, May 6, 1992." This Court ruled:
There is no doubt that the disputed areas from which the private respondents' market stalls are sought
to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A public street is
property for public use hence outside the commerce of man (Arts. 420, 424, Civil Code). Being outside
the commerce of man, it may not be the subject of lease or others contract (Villanueva, et al. v.
Castañeda and Macalino, 15 SCRA 142 citing the Municipality of Cavite v. Rojas, 30 SCRA 602; Espiritu v.
Municipal Council of Pozorrubio, 102 Phil. 869; And Muyot v. De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the right to occupy portions of the public street,
the City Government, contrary to law, has been leasing portions of the streets to them. Such leases or
licenses are null and void for being contrary to law. The right of the public to use the city streets may not
be bargained away through contract. The interests of a few should not prevail over the good of the
greater number in the community whose health, peace, safety, good order and general welfare, the
respondent city officials are under legal obligation to protect.
The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del '96 Street as a
vending area for stallholders who were granted licenses by the city government contravenes the general
law that reserves city streets and roads for public use. Mayor Robles' Executive Order may not infringe
upon the vested right of the public to use city streets for the purpose they were intended to serve: i.e.,
as arteries of travel for vehicles and pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed
ordinance, the same cannot be validly implemented because it cannot be considered approved by the
Metropolitan Manila Authority due to non-compliance by respondent municipality of the conditions
imposed by the former for the approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do(es) not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly,
and that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed
areas are developed and donated by the Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the foregoing
conditions precedent to the approval of the ordinance. The allegations of respondent municipality that
the closed streets were not used for vehicular traffic and that the majority of the residents do not
oppose the establishment of a flea market on said streets are unsupported by any evidence that will
show that this first condition has been met. Likewise, the designation by respondents of a time schedule
during which the flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with people, houses and
traffic brought about by the proliferation of vendors occupying the streets. To license and allow the
establishment of a flea market along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena
streets in Baclaran would not help in solving the problem of congestion. We take note of the other
observations of the Solicitor General when he said:
. . . There have been many instances of emergencies and fires where ambulances and fire engines,
instead of using the roads for a more direct access to the fire area, have to maneuver and look for other
streets which are not occupied by stalls and vendors thereby losing valuable time which could,
otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the people
rushing their patients to the hospital cannot pass through G.G. Cruz because of the stalls and the
vendors. One can only imagine the tragedy of losing a life just because of a few seconds delay brought
about by the inaccessibility of the streets leading to the hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal
transportation flow is disrupted and school children have to get off at a distance still far from their
schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by vendors on the streets at the end of the day.
Needless to say, these cause further pollution, sickness and deterioration of health of the residents
therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners. Instead,
respondents want this Court to focus its attention solely on the argument that the use of public spaces
for the establishment of a flea market is well within the powers granted by law to a local government
which should not be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down
by toe Constitution and the laws such as our Civil Code. Moreover, the exercise of such powers should be
subservient to paramount considerations of health and well-being of the members of the community.
Every local government unit has the sworn obligation to enact measures that will enhance the public
health, safety and convenience, maintain peace and order, and promote the general prosperity of the
inhabitants of the local units. Based on this objective, the local government should refrain from acting
towards that which might prejudice or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to demand the
demolition of the illegally constructed stalls in public roads and streets and the officials of respondent
municipality have the corresponding duty arising from public office to clear the city streets and restore
them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for lack of
basis and authority in laws applicable during its time. However, at this point, We find it worthy to note
that Batas Pambansa Blg. 337, known as Local Government Lode, has already been repealed by Republic
Act No. 7160 known as Local Government Code of 1991 which took effect on January 1, 1992. Section
5(d) of the new Code provides that rights and obligations existing on the date of effectivity of the new
Code and arising out of contracts or any other source of prestation involving a local government unit
shall be governed by the original terms and conditions of the said contracts or the law in force at the
time such rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial Court dated
December 17, 1990 which granted the writ of preliminary injunction enjoining petitioner as PNP
Superintendent, Metropolitan Traffic Command from enforcing the demolition of market stalls along J.
Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets is hereby RESERVED and SET
ASIDE.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero,
Nocon and Bellosillo, JJ., concur.
4. THIRD DIVISION
[G.R. No. 100709. November 14, 1997]
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS, petitioner, vs. COURT OF
APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA CO and ANTONIO QUILATAN AND THE REGISTER OF
DEEDS OF QUEZON PROVINCE, respondents.
DECISION
PANGANIBAN, J.:
Will the lease and/or mortgage of a portion of a realty acquired through free patent constitute sufficient
ground for the nullification of such land grant? Should such property revert to the State once it is
invaded by the sea and thus becomes foreshore land?
The Case
These are the two questions raised in the petition before us assailing the Court of Appeals[1] Decision in
CA-G.R. CV No. 02667 promulgated on June 13, 1991 which answered the said questions in the negative.
[2] Respondent Courts Decision dismissed[3] petitioners appeal and affirmed in toto the decision of the
Regional Trial Court[4] of Calauag, Quezon, dated December 28, 1983 in Civil Case No. C-608. In turn, the
Regional Trial Courts decision dismissed petitioners complaint for cancellation of the Torrens Certificate
of Title of Respondent Morato and for reversion of the parcel of land subject thereof to the public
domain.
The Facts
The petition of the solicitor general, representing the Republic of the Philippines, recites the following
facts:[5]
Sometime in December, 1972, respondent Morato filed a Free Patent Application No. III-3-8186-B on a
parcel of land with an area of 1,265 square meters situated at Pinagtalleran, Calauag, Quezon. On
January 16, 1974, the patent was approved and the Register of Deeds of Quezon at Lucena City issued on
February 4, 1974 Original Certificate of Title No. P-17789. Both the free patent and the title specifically
mandate that the land shall not be alienated nor encumbered within five (5) years from the date of the
issuance of the patent (Sections 118 and 124 of CA No. 141, as amended).
Subsequently, the District Land Officer in Lucena City, acting upon reports that respondent Morato had
encumbered the land in violation of the condition of the patent, conducted an investigation. Thereafter,
it was established that the subject land is a portion of the Calauag Bay, five (5) to six (6) feet deep under
water during high tide and two (2) feet deep at low tide, and not suitable to vegetation. Moreover, on
October 24, 1974, a portion of the land was mortgaged by respondent Morato to respondents Nenita Co
and Antonio Quilatan for P10,000.00 (pp. 2, 25, Folder of Exhibits). The spouses Quilatan constructed a
house on the land. Another portion of the land was leased to Perfecto Advincula on February 2, 1976 at
P100.00 a month, where a warehouse was constructed.
On November 5, 1978, petitioner filed an amended complaint against respondents Morato, spouses
Nenita Co and Antonio Quilatan, and the Register of Deeds of Quezon for the cancellation of title and
reversion of a parcel of land to the public domain, subject of a free patent in favor of respondent
Morato, on the grounds that the land is a foreshore land and was mortgaged and leased within the five-
year prohibitory period (p. 46, Records).
After trial, the lower court, on December 28, 1983, rendered a decision dismissing petitioners complaint.
In finding for private respondents, the lower court ruled that there was no violation of the 5-year period
ban against alienating or encumbering the land, because the land was merely leased and not alienated.
It also found that the mortgage to Nenita Co and Antonio Quilatan covered only the improvement and
not the land itself.
On appeal, the Court of Appeals affirmed the decision of the trial court. Thereafter, the Republic of the
Philippines filed the present petition.[6]
The Issues
Petitioner alleges that the following errors were committed by Respondent Court:[7]
Respondent Court erred in holding that the patent granted and certificate of title issued to Respondent
Morato cannot be cancelled and annulled since the certificate of title becomes indefeasible after one
year from the issuance of the title.
II
Respondent Court erred in holding that the questioned land is part of a disposable public land and not a
foreshore land.
The Courts Ruling

The petition is meritorious.
First Issue: Indefeasibility of a Free Patent Title
In resolving the first issue against petitioner, Respondent Court held:[8]
x x x. As ruled in Heirs of Gregorio Tengco vs. Heirs of Jose Alivalas, 168 SCRA 198. x x. The rule is well-
settled that an original certificate of title issued on the strength of a homestead patent partakes of the
nature of a certificate of title issued in a judicial proceeding, as long as the land disposed of is really part
of the disposable land of the public domain, and becomes indefeasible and incontrovertible upon the
expiration of one year from the date of promulgation of the order of the Director of Lands for the
issuance of the patent. (Republic v. Heirs of Carle, 105 Phil. 1227 (1959); Ingaran v. Ramelo, 107 Phil. 498
(1960); Lopez v. Padilla, (G.R. No. L-27559, May 18, 1972, 45 SCRA 44). A homestead patent, one
registered under the Land Registration Act, becomes as indefeasible as a Torrens Title. (Pamintuan v. San
Agustin, 43 Phil. 558 (1982); El Hogar Filipino v. Olviga, 60 Phil. 17 (1934); Duran v. Oliva, 113 Phil. 144
(1961); Pajomayo v. Manipon, G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p. 203).
Again, in Lopez vs. Court of Appeals, 169 SCRA 271, citing Iglesia ni Cristo v. Hon. Judge, CFI of Nueva
Ecija, Branch I, (123 SCRA 516 (1983) and Pajomayo, et al. v. Manipon, et al. (39 SCRA 676 (1971) held
that once a homestead patent granted in accordance with the Public Land Act is registered pursuant to
Section 122 of Act 496, the certificate of title issued in virtue of said patent has the force and effect of a
Torrens Title issued under the Land Registration Act.
Indefeasibility of the title, however, may not bar the State, thru the Solicitor General, from filing an
action for reversion, as ruled in Heirs of Gregorio Tengo v. Heirs of Jose Aliwalas, (supra), as follows:
But, as correctly pointed out by the respondent Court of Appeals, Dr. Aliwalas title to the property having
become incontrovertible, such may no longer be collaterally attacked. If indeed there had been any fraud
or misrepresentation in obtaining the title, an action for reversion instituted by the Solicitor General
would be the proper remedy (Sec. 101, C.A. No. 141; Director of Lands v. Jugado, G.R. No. L-14702, May
21, 1961, 2 SCRA 32; Lopez v. Padilla, supra). (p. 204).
Petitioner contends that the grant of Free Patent (IV-3) 275 and the subsequent issuance of Original
Certificate of Title No. P-17789 to Respondent Josefina L. Morato were subject to the conditions
provided for in Commonwealth Act (CA) No. 141. It alleges that on October 24, 1974, or nine (9) months
and eight (8) days after the grant of the patent, Respondent Morato, in violation of the terms of the
patent, mortgaged a portion of the land to Respondent Nenita Co, who thereafter constructed a house
thereon. Likewise, on February 2, 1976 and within the five-year prohibitory period, Respondent Morato
leased a portion of the land to Perfecto Advincula at a monthly rent of P100.00 who, shortly thereafter,
constructed a house of concrete materials on the subject land.[9] Further, petitioner argues that the
defense of indefeasibility of title is inaccurate. The original certificate of title issued to Respondent
Morato contains the seeds of its own cancellation: such certificate specifically states on its face that it is
subject to the provisions of Sections 118, 119, 121, 122, 124 of CA No. 141, as amended.[10]
Respondent Morato counters by stating that although a portion of the land was previously leased, it
resulted from the fact that Perfecto Advincula built a warehouse in the subject land without [her] prior
consent. The mortgage executed over the improvement cannot be considered a violation of the said
grant since it can never affect the ownership.[11] She states further:
x x x. the appeal of the petitioner was dismissed not because of the principle of indefeasibility of title but
mainly due to failure of the latter to support and prove the alleged violations of respondent Morato. The
records of this case will readily show that although petitioner was able to establish that Morato
committed some acts during the prohibitory period of 5 years, a perusal thereof will also show that what
petitioner was able to prove never constituted a violation of the grant.[12]
Respondent-Spouses Quilatan, on the other hand, state that the mortgage contract they entered into
with Respondent Morato can never be considered as [an] alienation inasmuch as the ownership over the
property remains with the owner.[13] Besides, it is the director of lands and not the Republic of the
Philippines who is the real party in interest in this case, contrary to the provision of the Public Land Act
which states that actions for reversion should be instituted by the solicitor general in the name of
Republic of the Philippines.[14]
We find for petitioner.
Quoted below are relevant sections of Commonwealth Act No. 141, otherwise known as the Public Land
Act:
Sec. 118. Except in favor of the Government or any of its branches, units or institutions, or legally
constituted banking corporations, lands acquired under free patent or homestead provisions shall not be
subject to encumbrance or alienation from the date of the approval of the application and for a term of
five years from and after the date of issuance of the patent or grant nor shall they become liable to the
satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops
on the land may be mortgaged or pledged to qualified persons, associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years
after issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural
Resources, which approval shall not be denied except on constitutional and legal grounds. (As amended
by Com. Act No. 456, approved June 8, 1939.)
xxxxxxxxx
Sec. 121. Except with the consent of the grantee and the approval of the Secretary of Agriculture and
Natural Resources, and solely for educational, religious, or charitable purposes or for a right of way, no
corporation, association, or partnership may acquire or have any right, title, interest, or property right
whatsoever to any land granted under the free patent, homestead, or individual sale provisions of this
Act or to any permanent improvement on such land. (As amended by Com. Act No. 615, approved May
5, 1941)
Sec. 122. No land originally acquired in any manner under the provisions of this Act, nor any permanent
improvement on such land, shall be encumbered, alienated or transferred, except to persons,
corporations, association, or partnerships who may acquire lands of the public domain under this Act or
to corporations organized in the Philippines authorized therefore by their charters.
Except in cases of hereditary successions, no land or any portion thereof originally acquired under the
free patent, homestead, or individual sale provisions of this Act, or any permanent improvement on such
land, shall be transferred or assigned to any individual, nor shall such land or any permanent
improvement thereon be leased to such individual, when the area of said land, added to that of his own,
shall exceed one hundred and forty-four hectares. Any transfer, assignment, or lease made in violation
hereto shall be null and void. (As amended by Com. Act No. 615, Id.)
xxxxxxxxx
Sec. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in
violation of any of the provisions of sections one hundred and eighteen, one hundred and twenty, one
hundred and twenty-one, one hundred and twenty-two, and one hundred and twenty-three of this Act
shall be unlawful and null and void from its execution and shall produce the effect of annulling and
cancelling the grant, title, patent, or permit originally issued, recognized or confirmed, actually or
presumptively, and cause the reversion of the property and its improvements to the State. (Underscoring
supplied.)
The foregoing legal provisions clearly proscribe the encumbrance of a parcel of land acquired under a
free patent or homestead within five years from the grant of such patent. Furthermore, such
encumbrance results in the cancellation of the grant and the reversion of the land to the public domain.
Encumbrance has been defined as [a]nything that impairs the use or transfer of property; anything which
constitutes a burden on the title; a burden or charge upon property; a claim or lien upon property. It may
be a legal claim on an estate for the discharge of which the estate is liable; an embarrassment of the
estate or property so that it cannot be disposed of without being subject to it; an estate, interest, or
right in lands, diminishing their value to the general owner; a liability resting upon an estate.[15] Do the
contracts of lease and mortgage executed within five (5) years from the issuance of the patent constitute
an encumbrance and violate the terms and conditions of such patent? Respondent Court answered in
the negative:[16]
From the evidence adduced by both parties, it has been proved that the area of the portion of the land,
subject matter of the lease contract (Exh. B) executed by and between Perfecto Advincula and Josefina L.
Morato is only 10 x 12 square meters, whereas the total area of the land granted to Morato is 1,265
square meters. It is clear from this that the portion of the land leased by Advincula does not significantly
affect Moratos ownership and possession. Above all, the circumstances under which the lease was
executed do not reflect a voluntary and blatant intent to violate the conditions provided for in the patent
issued in her favor. On the contrary, Morato was compelled to enter into that contract of lease out of
sympathy and the goodness of her heart to accommodate a fellow man. x x x
It is indisputable, however, that Respondent Morato cannot fully use or enjoy the land during the
duration of the lease contract. This restriction on the enjoyment of her property sufficiently meets the
definition of an encumbrance under Section 118 of the Public Land Act, because such contract impairs
the use of the property by the grantee. In a contract of lease which is consensual, bilateral, onerous and
commutative, the owner temporarily grants the use of his or her property to another who undertakes to
pay rent therefor.[17] During the term of the lease, the grantee of the patent cannot enjoy the beneficial
use of the land leased. As already observed, the Public Land Act does not permit a grantee of a free
patent from encumbering any portion of such land. Such encumbrance is a ground for the nullification of
the award.
Moratos resort to equity, i.e. that the lease was executed allegedly out of the goodness of her heart
without any intention of violating the law, cannot help her. Equity, which has been aptly described as
justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules
of procedure. Positive rules prevail over all abstract arguments based on equity contra legem.[18]
Respondents failed to justify their position that the mortgage should not be considered an encumbrance.
Indeed, we do not find any support for such contention. The questioned mortgage falls squarely within
the term encumbrance proscribed by Section 118 of the Public Land Act.[19] Verily, a mortgage
constitutes a legal limitation on the estate, and the foreclosure of such mortgage would necessarily
result in the auction of the property.[20]
Even if only part of the property has been sold or alienated within the prohibited period of five years
from the issuance of the patent, such alienation is a sufficient cause for the reversion of the whole estate
to the State. As a condition for the grant of a free patent to an applicant, the law requires that the land
should not be encumbered, sold or alienated within five years from the issuance of the patent. The sale
or the alienation of part of the homestead violates that condition.[21]
The prohibition against the encumbrance -- lease and mortgage included -- of a homestead which, by
analogy applies to a free patent, is mandated by the rationale for the grant, viz.:[22]
It is well-known that the homestead laws were designed to distribute disposable agricultural lots of the
State to land-destitute citizens for their home and cultivation. Pursuant to such benevolent intention the
State prohibits the sale or encumbrance of the homestead (Section 116) within five years after the grant
of the patent. After that five-year period the law impliedly permits alienation of the homestead; but in
line with the primordial purpose to favor the homesteader and his family the statute provides that such
alienation or conveyance (Section 117) shall be subject to the right of repurchase by the homesteader,
his widow or heirs within five years. This section 117 is undoubtedly a complement of section 116. It
aims to preserve and keep in the family of the homesteader that portion of public land which the State
had gratuitously given to him. It would, therefore, be in keeping with this fundamental idea to hold, as
we hold, that the right to repurchase exists not only when the original homesteader makes the
conveyance, but also when it is made by his widow or heirs. This construction is clearly deducible from
the terms of the statute.
By express provision of Section 118 of Commonwealth Act 141 and in conformity with the policy of the
law, any transfer or alienation of a free patent or homestead within five years from the issuance of the
patent is proscribed. Such transfer nullifies said alienation and constitutes a cause for the reversion of
the property to the State.
The prohibition against any alienation or encumbrance of the land grant is a proviso attached to the
approval of every application.[23] Prior to the fulfillment of the requirements of law, Respondent Morato
had only an inchoate right to the property; such property remained part of the public domain and,
therefore, not susceptible to alienation or encumbrance. Conversely, when a homesteader has complied
with all the terms and conditions which entitled him to a patent for [a] particular tract of public land, he
acquires a vested interest therein and has to be regarded an equitable owner thereof.[24] However, for
Respondent Moratos title of ownership over the patented land to be perfected, she should have
complied with the requirements of the law, one of which was to keep the property for herself and her
family within the prescribed period of five (5) years. Prior to the fulfillment of all requirements of the
law, Respondent Moratos title over the property was incomplete. Accordingly, if the requirements are
not complied with, the State as the grantor could petition for the annulment of the patent and the
cancellation of the title.
Respondent Morato cannot use the doctrine of the indefeasibility of her Torrens title to bar the state
from questioning its transfer or encumbrance. The certificate of title issued to her clearly stipulated that
its award was subject to the conditions provided for in Sections 118, 119, 121, 122 and 124 of
Commonwealth Act (CA) No. 141. Because she violated Section 118, the reversion of the property to the
public domain necessarily follows, pursuant to Section 124.
Second Issue: Foreshore Land Reverts to the Public Domain
There is yet another reason for granting this petition.
Although Respondent Court found that the subject land was foreshore land, it nevertheless sustained
the award thereof to Respondent Morato:[25]
First of all, the issue here is whether the land in question, is really part of the foreshore lands. The
Supreme Court defines foreshore land in the case of Republic vs. Alagad, 169 SCRA 455, 464, as follows:
Otherwise, where the rise in water level is due to, the extraordinary action of nature, rainful, for
instance, the portions inundated thereby are not considered part of the bed or basin of the body of
water in question. It cannot therefore be said to be foreshore land but land outside of the public
dominion, and land capable of registration as private property.
A foreshore land, on the other hand has been defined as follows:
... that part of (the land) which is between high and low water and left dry by the flux and reflux of the
tides x x x x (Republic vs. C.A., Nos. L-43105, L-43190, August 31, 1984, 131 SCRA 532; Government vs.
Colegio de San Jose, 53 Phil 423)
The strip of land that lies between the high and low water marks and that is alternatively wet and dry
according to the flow of the tide. (Rep. vs. CA, supra, 539).
The factual findings of the lower court regarding the nature of the parcel of land in question reads:
Evidence disclose that the marginal area of the land radically changed sometime in 1937 up to 1955 due
to a strong earthquake followed by frequent storms eventually eroding the land. From 1955 to 1968,
however, gradual reclamation was undertaken by the lumber company owned by the Moratos. Having
thus restored the land thru mostly human hands employed by the lumber company, the area continued
to be utilized by the owner of the sawmill up to the time of his death in 1965. On or about March 17,
1973, there again was a strong earthquake unfortunately causing destruction to hundreds of residential
houses fronting the Calauag Bay including the Santiago Building, a cinema house constructed of concrete
materials. The catastrophe totally caused the sinking of a concrete bridge at Sumulong river also in the
municipality of Calauag, Quezon.
On November 13, 1977 a typhoon code named Unding wrought havoc as it lashed the main land of
Calauag, Quezon causing again great erosion this time than that which the area suffered in 1937. The
Court noted with the significance of the newspaper clipping entitled Baryo ng Mangingisda Kinain ng
Dagat (Exh. 11).
xxxxxxxxx
Evidently this was the condition of the land when on or about December 5, 1972 defendant Josefina L.
Morato filed with the Bureau of Lands her free patent application. The defendant Josefina Morato having
taken possession of the land after the demise of Don Tomas Morato, she introduced improvement and
continued developing the area, planted it to coconut trees. Having applied for a free patent, defendant
had the land area surveyed and an approved plan (Exh. 9) based on the cadastral survey as early as 1927
(Exh. 10) was secured. The area was declared for taxation purposes in the name of defendant Josefina
Morato denominated as Tax Declaration No. 4115 (Exh. 8) and the corresponding realty taxes religiously
paid as shown by Exh. 8-A). (pp. 12-14, DECISION).
Being supported by substantial evidence and for failure of the appellant to show cause which would
warrant disturbance, the afore-cited findings of the lower court, must be respected.
Petitioner correctly contends, however, that Private Respondent Morato cannot own foreshore land:
Through the encroachment or erosion by the ebb and flow of the tide, a portion of the subject land was
invaded by the waves and sea advances. During high tide, at least half of the land (632.5 square meters)
is 6 feet deep under water and three (3) feet deep during low tide. The Calauag Bay shore has extended
up to a portion of the questioned land.
While at the time of the grant of free patent to respondent Morato, the land was not reached by the
water, however, due to gradual sinking of the land caused by natural calamities, the sea advances had
permanently invaded a portion of subject land. As disclosed at the trial, through the testimony of the
court-appointed commissioner, Engr. Abraham B. Pili, the land was under water during high tide in the
month of August 1978. The water margin covers half of the property, but during low tide, the water is
about a kilometer (TSN, July 19, 1979, p. 12). Also, in 1974, after the grant of the patent, the land was
covered with vegetation, but it disappeared in 1978 when the land was reached by the tides (Exhs. E-1;
E-14). In fact, in its decision dated December 28, 1983, the lower court observed that the erosion of the
land was caused by natural calamities that struck the place in 1977 (Cf. Decision, pp. 17-18).[26]
Respondent-Spouses Quilatan argue, however, that it is unfair and unjust if Josefina Morato will be
deprived of the whole property just because a portion thereof was immersed in water for reasons not
her own doing.[27]
As a general rule, findings of facts of the Court of Appeals are binding and conclusive upon this Court,
unless such factual findings are palpably unsupported by the evidence on record or unless the judgment
itself is based on a misapprehension of facts.[28] The application for a free patent was made in 1972.
From the undisputed factual findings of the Court of Appeals, however, the land has since become
foreshore. Accordingly, it can no longer be subject of a free patent under the Public Land Act.
Government of the Philippine Islands vs. Cabagis[29] explained the rationale for this proscription:
Article 339, subsection 1, of the Civil Code, reads:
Art. 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, riverbanks, shores, roadsteads, and that of a similar character.
********
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:
ARTICLE 1. The following are part of the national domain open to public use:
********
3. The Shores. By the shore is understood that space covered and uncovered by the movement of the
tide. Its interior or terrestrial limit is the line reached by the highest equinoctal tides. Where the tides are
not appreciable, the shore begins on the land side at the line reached by the sea during ordinary storms
or tempests.
In the case of Aragon vs. Insular Government (19 Phil. 223), with reference to article 339 of the Civil
Code just quoted, this Court said:
We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion
by the ebb and flow of the tide, private property may not become property of public ownership. as
defined in article 339 of the code, where it appear that the owner has to all intents and purposes
abandoned it and permitted it to be totally destroyed, so as to become a part of the playa (shore of the
sea), rada (roadstead), or the like. * * *
In the Enciclopedia Jurdica Espaola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances and private
properties are permanently invaded by the waves, and in this case they become part of the shore or
beach. They then pass to the public domain, but the owner thus dispossessed does not retain any right
to the natural products resulting from their new nature; it is a de facto case of eminent domain, and not
subject to indemnity.
In comparison, 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;
When the sea moved towards the estate and the tide invaded it, the invaded property became foreshore
land and passed to the realm of the public domain. In fact, the Court in Government vs. Cabangis[30]
annulled the registration of land subject of cadastral proceedings when the parcel subsequently became
foreshore land.[31] In another case, the Court voided the registration decree of a trial court and held
that said court had no jurisdiction to award foreshore land to any private person or entity.[32] The
subject land in this case, being foreshore land, should therefore be returned to the public domain.
WHEREFORE, the petition is GRANTED. This Court hereby REVERSES and SETS ASIDE the assailed
Decision of Respondent Court and ORDERS the CANCELLATION of Free Patent No. (IV-3) 275 issued to
Respondent Morato and the subsequent Original Certificate of Title No. P-17789. The subject land
therefore REVERTS to the State. No costs.
SO ORDERED.
Romero, Melo, and Francisco, JJ., concur.
Narvasa, C.J., (Chairman), on leave.
[1] First Division composed of J. Asaali S. Isnani, ponente; and JJ. Rodolfo A. Nocon and Antonio M.
Martinez, concurring.
[2] Rollo, pp. 25-32.
[3] Ibid., p. 32.
[4] Branch 63.
[5] Petition, pp. 3-5; Rollo, pp. 9-11.

[6] The case was deemed submitted for resolution upon receipt by the Court of Private Respondent
Quilatans Memorandum, dated July 19, 1996, on February 16, 1996. (Rollo, p. 143.)
[7] Ibid., p. 5; Rollo, p. 11.
[8] Decision, p. 3; Rollo, p. 27.
[10] Ibid., pp. 11-12; Rollo, pp. 17-18.
[11] Respondent Moratos Comment, p. 2; Rollo, p. 44.
[12] Ibid., pp. 3-4; Rollo, pp. 45-46.
[13] Respondents Quilatans Comment, p. 1; Rollo, p. 64.
[14] Ibid., p. 2; Rollo, p. 65.
[15] Moreno, Philippine Law Dictionary, second edition, 1972, pp. 207-208.
[16] CA Decision, p. 6; Rollo, p. 30.
[17] Lim Si vs. Lim, 98 Phil. 868, 870, April 25, 1956.
[18] Causapin vs. Court of Appeals, 233 SCRA 615, 625, July 4, 1994, citing Zabat vs. Court of Appeals,
No. L-36958, July 10, 1986, 142 SCRA 587.
[19] Siy vs. Tan Gun Ga, et al., 119 Phil. 676, February 29, 1964.
[20] Prudential Bank vs. Panis, 153 SCRA 390, 397, August 31, 1987.
[21] Republic of the Philippines vs. Garcia, et al., 105 Phil. 826, May 27, 1959.
[22] Pascua vs. Talens, 80 Phil 792, 793-794, April 30, 1948, per Bengzon, J.
[23] Republic vs. Ruiz, 23 SCRA 348, 353-354, April 29, 1968.
[24] Vda. de Delizo vs. Delizo, 69 SCRA 216, 229, January 30, 1976 citing Juanico vs. American Land
Commercial Company, Inc., 97 Phil. 221, Simmons vs. Wagner, 10 U.S. 260, 68 C.J.S. 875; Balboa vs.
Farrales, 51 Phil. 498; Fiel, et al. vs. Wagas, 48 O.G., 195, January 9, 1950. SEE Uy Un vs. Perez and
Villaplana, 71 Phil. 508.
[25] CA Decision, pp. 4-5; Rollo, pp. 28-29.
[27] Respondents Quilatans Comment, p. 2; Rollo, p. 65.
[28] Valenzuela vs. Court of Appeals, 253 SCRA 303, 313, February 7, 1996.
[29] 53 Phil. 112, 115-116, March 27, 1929, per Villa-Real, J.

[30] Supra.
[31] Ibid., p. 119.
[32] Republic vs. Lozada, 90 SCRA 503, 510, May 31, 1979.
5.
Custom Search
SUPREME COURT
Manila
EN BANC
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE,
defendants-appellants.
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.
Office of the Solicitor General for defendants-appellants.
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the
provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was
approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also
provided that —
Buildings and properties which the province shall abandon upon the transfer of the capital to
another place will be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor
General.
The properties and buildings referred to consisted of 50 lots and some buildings constructed
thereon, located in the City of Zamboanga and covered individually by Torrens certificates of title in the
name of Zamboanga Province. As far as can be gleaned from the records, 1 said properties were being
utilized as follows —
No. of Lots Use
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School

2 ................................................ Burleigh School
2 ................................................ High School Playground
9 ................................................ Burleighs
1 ................................................ Hydro-Electric Site (Magay)
1 ................................................ San Roque
23 ................................................ vacant
It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. 2
Subsequently, or on June 16, 1948, Republic Act 286 was approved creating the municipality of Molave
and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to
Commonwealth Act 39, fixed the value of the properties and buildings in question left by Zamboanga
Province in Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2):
Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations of the old province
were to be divided between the two new ones, Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and the obligations of the
province of Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and
the Province of Zamboanga del Sur by the President of the Philippines, upon the recommendation of the
Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations
of the defunct Province of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for
Zamboanga del Sur. Zamboanga del Norte therefore became entitled to 54.39% of P1,294,244.00, the
total value of the lots and buildings in question, or P704,220.05 payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding
that Zamboanga del Norte had a vested right as owner (should be co-owner pro-indiviso) of the
properties mentioned in Sec. 50 of Commonwealth Act 39, and is entitled to the price thereof, payable
by Zamboanga City. This ruling revoked the previous Cabinet Resolution of July 13, 1951 conveying all the
said 50 lots and buildings thereon to Zamboanga City for P1.00, effective as of 1945, when the provincial
capital of the then Zamboanga Province was transferred to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an
amount equal to 25% of the regular internal revenue allotment for the City of Zamboanga for the quarter
ending March 31, 1960, then for the quarter ending June 30, 1960, and again for the first quarter of the
fiscal year 1960-1961. The deductions, all aggregating P57,373.46, was credited to the province of
Zamboanga del Norte, in partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth
Act 39 by providing that —
All buildings, properties and assets belonging to the former province of Zamboanga and located
within the City of Zamboanga are hereby transferred, free of charge, in favor of the said City of
Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal
Revenue to stop from effecting further payments to Zamboanga del Norte and to return to Zamboanga
City the sum of P57,373.46 taken from it out of the internal revenue allotment of Zamboanga del Norte.
Zamboanga City admits that since the enactment of Republic Act 3039, P43,030.11 of the P57,373.46
has already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint
entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the Court of First Instance of
Zamboanga del Norte against defendants-appellants Zamboanga City, the Secretary of Finance and the
Commissioner of Internal Revenue. It was prayed that: (a) Republic Act 3039 be declared
unconstitutional for depriving plaintiff province of property without due process and just compensation;
(b) Plaintiff's rights and obligations under said law be declared; (c) The Secretary of Finance and the
Internal Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to defendant City;
and (d) The latter be ordered to continue paying the balance of P704,220.05 in quarterly installments of
25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After
defendants filed their respective answers, trial was held. On August 12, 1963, judgment was rendered,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional
insofar as it deprives plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of
land and the improvements thereon under certificates of title (Exhibits "A" to "A-49") in the name of the
defunct province of Zamboanga; ordering defendant City of Zamboanga to pay to the plaintiff the sum of
P704,220.05 payment thereof to be deducted from its regular quarterly internal revenue allotment
equivalent to 25% thereof every quarter until said amount shall have been fully paid; ordering defendant
Secretary of Finance to direct defendant Commissioner of Internal Revenue to deduct 25% from the
regular quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to
plaintiff Zamboanga del Norte until said sum of P704,220.05 shall have been fully paid; ordering plaintiff
Zamboanga del Norte to execute through its proper officials the corresponding public instrument
deeding to defendant City of Zamboanga the 50 parcels of land and the improvements thereon under
the certificates of title (Exhibits "A" to "A-49") upon payment by the latter of the aforesaid sum of
P704,220.05 in full; dismissing the counterclaim of defendant City of Zamboanga; and declaring
permanent the preliminary mandatory injunction issued on June 8, 1962, pursuant to the order of the
Court dated June 4, 1962. No costs are assessed against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to
reconsider praying that Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6%
interest per annum. Over defendants' opposition, the lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief filed in the lower
court on the assertion that the law had already been violated and that plaintiff sought to give it coercive
effect, since assuming the same to be true, the Rules anyway authorize the conversion of the
proceedings to an ordinary action, 5 We proceed to the more important and principal question of the
validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in
question. For, the matter involved here is the extent of legislative control over the properties of a
municipal corporation, of which a province is one. The principle itself is simple: If the property is owned
by the municipality (meaning municipal corporation) in its public and governmental capacity, the
property is public and Congress has absolute control over it. But if the property is owned in its private or
proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality
cannot be deprived of it without due process and payment of just compensation. 6
The capacity in which the property is held is, however, dependent on the use to which it is
intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under the
law of Municipal Corporations, must be used in classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide:1äwphï1.ñët
ART. 423. The property of provinces, cities, and municipalities is divided into property for public use
and patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the
provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and
public works for public service paid for by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code, without
prejudice to the provisions of special laws. (Stressed for emphasis).
Applying the above cited norm, all the properties in question, except the two (2) lots used as High
School playgrounds, could be considered as patrimonial properties of the former Zamboanga province.
Even the capital site, the hospital and leprosarium sites, and the school sites will be considered
patrimonial for they are not for public use. They would fall under the phrase "public works for public
service" for it has been held that under the ejusdem generis rule, such public works must be for free and
indiscriminate use by anyone, just like the preceding enumerated properties in the first paragraph of Art
424. 7 The playgrounds, however, would fit into this category.
This was the norm applied by the lower court. And it cannot be said that its actuation was without
jurisprudential precedent for in Municipality of Catbalogan v. Director of Lands, 8 and in Municipality of
Tacloban v. Director of Lands, 9 it was held that the capitol site and the school sites in municipalities
constitute their patrimonial properties. This result is understandable because, unlike in the classification
regarding State properties, properties for public service in the municipalities are not classified as public.
Assuming then the Civil Code classification to be the chosen norm, the lower court must be affirmed
except with regard to the two (2) lots used as playgrounds.
On the other hand, applying the norm obtaining under the principles constituting the law of
Municipal Corporations, all those of the 50 properties in question which are devoted to public service
are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is enough
that the property be held and, devoted for governmental purposes like local administration, public
education, public health, etc. 10
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF
LANDS, 11 where it was stated that "... where the municipality has occupied lands distinctly for public
purposes, such as for the municipal court house, the public school, the public market, or other necessary
municipal building, we will, in the absence of proof to the contrary, presume a grant from the States in
favor of the municipality; but, as indicated by the wording, that rule may be invoked only as to property
which is used distinctly for public purposes...." (2) VIUDA DE TANTOCO V. MUNICIPAL COUNCIL OF ILOILO
12 held that municipal properties necessary for governmental purposes are public in nature. Thus, the
auto trucks used by the municipality for street sprinkling, the police patrol automobile, police stations
and concrete structures with the corresponding lots used as markets were declared exempt from
execution and attachment since they were not patrimonial properties. (3) MUNICIPALITY OF BATANGAS
VS. CANTOS 13 held squarely that a municipal lot which had always been devoted to school purposes is
one dedicated to public use and is not patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol
site, school sites and its grounds, hospital and leprosarium sites and the high school playground sites — a
total of 24 lots — since these were held by the former Zamboanga province in its governmental capacity
and therefore are subject to the absolute control of Congress. Said lots considered as public property are
the following:
TCT Number Lot Number Use
2200 ...................................... 4-B ...................................... Capitol Site

2816 ...................................... 149 ...................................... School Site
3281 ...................................... 1224 ...................................... Hospital Site
3282 ...................................... 1226 ...................................... Hospital Site
3283 ...................................... 1225 ...................................... Hospital Site
3748 ...................................... 434-A-1...................................... School Site
5406 ...................................... 171 ...................................... School Site
5564 ...................................... 168 ...................................... High School Play-ground
5567 ...................................... 157 & 158 ...................................... Trade School
5583 ...................................... 167 ...................................... High School Play-ground
6181 ...................................... (O.C.T.) ...................................... Curuan School
11942 ...................................... 926 ...................................... Leprosarium
11943 ...................................... 927 ...................................... Leprosarium
11944 ...................................... 925 ...................................... Leprosarium
5557 ...................................... 170 ...................................... Burleigh School
5562 ...................................... 180 ...................................... Burleigh School
5565 ...................................... 172-B ...................................... Burleigh
5570 ...................................... 171-A ...................................... Burleigh
5571 ...................................... 172-C ...................................... Burleigh
5572 ...................................... 174 ...................................... Burleigh
5573 ...................................... 178 ...................................... Burleigh
5585 ...................................... 171-B ...................................... Burleigh
5586 ...................................... 173 ...................................... Burleigh
5587 ...................................... 172-A ...................................... Burleigh
We noticed that the eight Burleigh lots above described are adjoining each other and in turn are
between the two lots wherein the Burleigh schools are built, as per records appearing herein and in the
Bureau of Lands. Hence, there is sufficient basis for holding that said eight lots constitute the
appurtenant grounds of the Burleigh schools, and partake of the nature of the same.
Regarding the several buildings existing on the lots above-mentioned, the records do not disclose
whether they were constructed at the expense of the former Province of Zamboanga. Considering
however the fact that said buildings must have been erected even before 1936 when Commonwealth
Act 39 was enacted and the further fact that provinces then had no power to authorize construction of
buildings such as those in the case at bar at their own expense, 14 it can be assumed that said buildings
were erected by the National Government, using national funds. Hence, Congress could very well
dispose of said buildings in the same manner that it did with the lots in question.
But even assuming that provincial funds were used, still the buildings constitute mere accessories
to the lands, which are public in nature, and so, they follow the nature of said lands, i.e., public.
Moreover, said buildings, though located in the city, will not be for the exclusive use and benefit of city
residents for they could be availed of also by the provincial residents. The province then — and its
successors-in-interest — are not really deprived of the benefits thereof.
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value
of the rest of the 26 remaining lots which are patrimonial properties since they are not being utilized for
distinctly, governmental purposes. Said lots are:
TCT Number Lot Number Use
5577 ...................................... 177 ...................................... Mydro, Magay
13198 ...................................... 127-0 ...................................... San Roque
5569 ...................................... 169 ...................................... Burleigh 15
5558 ...................................... 175 ...................................... Vacant
5559 ...................................... 188 ...................................... "
5560 ...................................... 183 ...................................... "
5561 ...................................... 186 ...................................... "
5563 ...................................... 191 ...................................... "
5566 ...................................... 176 ...................................... "
5568 ...................................... 179 ...................................... "

5574 ...................................... 196 ...................................... "
5575 ...................................... 181-A ...................................... "
5576 ...................................... 181-B ...................................... "
5578 ...................................... 182 ...................................... "
5579 ...................................... 197 ...................................... "
5580 ...................................... 195 ...................................... "
5581 ...................................... 159-B ...................................... "
5582 ...................................... 194 ...................................... "
5584 ...................................... 190 ...................................... "
5588 ...................................... 184 ...................................... "
5589 ...................................... 187 ...................................... "
5590 ...................................... 189 ...................................... "
5591 ...................................... 192 ...................................... "
5592 ...................................... 193 ...................................... "
5593 ...................................... 185 ...................................... "
7379 ...................................... 4147 ...................................... "
Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly
private in nature. On the other hand, that the 24 lots used for governmental purposes are also registered
is of no significance since registration cannot convert public property to private. 16
We are more inclined to uphold this latter view. The controversy here is more along the domains of
the Law of Municipal Corporations — State vs. Province — than along that of Civil Law. Moreover, this
Court is not inclined to hold that municipal property held and devoted to public service is in the same
category as ordinary private property. The consequences are dire. As ordinary private properties, they
can be levied upon and attached. They can even be acquired thru adverse possession — all these to the
detriment of the local community. Lastly, the classification of properties other than those for public use
in the municipalities as patrimonial under Art. 424 of the Civil Code — is "... without prejudice to the
provisions of special laws." For purpose of this article, the principles, obtaining under the Law of
Municipal Corporations can be considered as "special laws". Hence, the classification of municipal
property devoted for distinctly governmental purposes as public should prevail over the Civil Code
classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without merit.
Under Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province
arose only in 1949 after the Auditor General fixed the value of the properties in question. While in 1951,
the Cabinet resolved transfer said properties practically for free to Zamboanga City, a reconsideration
thereof was seasonably sought. In 1952, the old province was dissolved. As successor-in-interest to more
than half of the properties involved, Zamboanga del Norte was able to get a reconsideration of the
Cabinet Resolution in 1959. In fact, partial payments were effected subsequently and it was only after
the passage of Republic Act 3039 in 1961 that the present controversy arose. Plaintiff brought suit in
1962. All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the
former's 54.39% share in the 26 properties which are patrimonial in nature, said share to computed on
the basis of the valuation of said 26 properties as contained in Resolution No. 7, dated March 26, 1949,
of the Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already
returned to defendant City. The return of said amount to defendant was without legal basis. Republic Act
3039 took effect only on June 17, 1961 after a partial payment of P57,373.46 had already been made.
Since the law did not provide for retroactivity, it could not have validly affected a completed act. Hence,
the amount of P43,030.11 should be immediately returned by defendant City to plaintiff province. The
remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by
defendant City in the same manner originally adopted by the Secretary of Finance and the Commissioner
of Internal Revenue, and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together with
pars. 10 and 11 of the first cause of action recited in the complaint 17 clearly shows that the relief
sought was merely the continuance of the quarterly payments from the internal revenue allotments of
defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify lump
sum payment is inapplicable since there has been so far in legal contemplation no complete delivery of
the lots in question. The titles to the registered lots are not yet in the name of defendant Zamboanga
City.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby
entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump
sum the amount of P43,030.11 which the former took back from the latter out of the sum of P57,373.46
previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance
remains of plaintiff's 54.39% share in the 26 patrimonial properties, after deducting therefrom the sum
of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee
formed by the Auditor General, by way of quarterly payments from the allotments of defendant City, in
the manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue.
No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.
Footnotes
1See Record on Appeal, pp. 4-6.
2See Exhibit C.
3The Committee report itself was not submitted as evidence
4Exhibit C.
5Rule 64, Sec. 6, Rules of Court.
62 McQuillin, Municipal Corporations, 3rd ed., 191-196; Martin Public Corporation, 5th ed., 31-32;
Gonzales, Law on Public Corporations, 1962 ed., 29-30; Municipality of Naguilian v. NWSA, L-18452, Nov.
29, 1963.
7Cebu City v. NWSA, L-12892, Apr. 30, 1962.
817 Phil. 216.
917 Phil. 426.
10Martin, op. cit., supra.; Gonzales, op cit., supra.; 62 C.J. 8. 437-439.
1124 Phil. 124.
1249 Phil. 52.
1391 Phil. 514.
14It was only in Republic Act 2264, Sec. 3, last paragraph, that provinces, cities and municipalities were
"... authorized to undertake and carry out any public works projects, financed by the provincial city and
municipal funds or any other fund borrowed from or advanced by private third parties .. without the
intervention of the Department of Public Works and Communications." (Stressed for emphasis) This law
was approved and took effect on June 19, 1959.
15This could not be considered as forming part of the appurtenant grounds of the Burleigh school sites
since the records here and in the Bureau of Lands show that this lot is set apart from the other Burleigh
lots.
16Republic v. Sioson, L-13687, Nov. 29, 1963; Hodges V. City of Iloilo, L-17573, June 30, 1962.
17Record on Appeal, pp. 8-9, 13.

6. [G.R. No. 133250. July 9, 2002]
FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
DEVELOPMENT CORPORATION, respondents.
DECISION
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a
temporary restraining order. The petition seeks to compel the Public Estates Authority (PEA for brevity)
to disclose all facts on PEAs then on-going renegotiations with Amari Coastal Bay and Development
Corporation (AMARI for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin
PEA from signing a new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways, signed a
contract with the Construction and Development Corporation of the Philippines (CDCP for brevity) to
reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction
of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in
consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating
PEA. PD No. 1084 tasked PEA to reclaim land, including foreshore and submerged areas, and to develop,
improve, acquire, x x x lease and sell any and all kinds of lands.[1] On the same date, then President
Marcos issued Presidential Decree No. 1085 transferring to PEA the lands reclaimed in the foreshore and
offshore of the Manila Bay[2] under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its
contract with CDCP, so that [A]ll future works in MCCRRP x x x shall be funded and owned by PEA.
Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981, which
stated:
(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be
agreed upon by the parties, to be paid according to progress of works on a unit price/lump sum basis for
items of work to be agreed upon, subject to price escalation, retention and other terms and conditions
provided for in Presidential Decree No. 1594. All the financing required for such works shall be provided
by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor of
PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land reclaimed by
CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold, transferred or otherwise
disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine Thousand Four
Hundred Seventy Three (99,473) square meters in the Financial Center Area covered by land pledge No.
5 and approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight
(3,382,888) square meters of reclaimed areas at varying elevations above Mean Low Water Level located
outside the Financial Center Area and the First Neighborhood Unit.[3]
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and
transferring to PEA the parcels of land so reclaimed under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters. Subsequently, on April 9, 1988, the Register of Deeds of
the Municipality of Paraaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name
of PEA, covering the three reclaimed islands known as the Freedom Islands located at the southern
portion of the Manila-Cavite Coastal Road, Paraaque City. The Freedom Islands have a total land area of
One Million Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square
meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement (JVA for brevity) with AMARI, a private
corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250
hectares of submerged areas surrounding these islands to complete the configuration in the Master
Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA
through negotiation without public bidding.[4] On April 28, 1995, the Board of Directors of PEA, in its
Resolution No. 1245, confirmed the JVA. [5] On June 8, 1995, then President Fidel V. Ramos, through
then Executive Secretary Ruben Torres, approved the JVA.[6]
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the
Senate and denounced the JVA as the grandmother of all scams. As a result, the Senate Committee on
Government Corporations and Public Enterprises, and the Committee on Accountability of Public Officers
and Investigations, conducted a joint investigation. The Senate Committees reported the results of their
investigation in Senate Committee Report No. 560 dated September 16, 1997.[7] Among the conclusions
of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the
public domain which the government has not classified as alienable lands and therefore PEA cannot
alienate these lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the
JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No. 365
creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate Committee
Report No. 560. The members of the Legal Task Force were the Secretary of Justice,[8] the Chief
Presidential Legal Counsel,[9] and the Government Corporate Counsel.[10] The Legal Task Force upheld
the legality of the JVA, contrary to the conclusions reached by the Senate Committees.[11]
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-
going renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos.
According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy
Officer Sergio Cruz composed the negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application
for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No.
132994 seeking to nullify the JVA. The Court dismissed the petition for unwarranted disregard of judicial
hierarchy, without prejudice to the refiling of the case before the proper court.[12]
On April 27, 1998, petitioner Frank I. Chavez (Petitioner for brevity) as a taxpayer, filed the instant
Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary
Restraining Order. Petitioner contends the government stands to lose billions of pesos in the sale by PEA
of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any
renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution
on the right of the people to information on matters of public concern. Petitioner assails the sale to
AMARI of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987
Constitution prohibiting the sale of alienable lands of the public domain to private corporations. Finally,
petitioner asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of
public dominion.
After several motions for extension of time,[13] PEA and AMARI filed their Comments on October 19,
1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus
Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance
of a temporary restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a
Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution
dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties
to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement (Amended JVA, for
brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph
E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on
constitutional and statutory grounds the renegotiated contract be declared null and void.[14]
The Issues
The issues raised by petitioner, PEA[15] and AMARI[16] are as follows:

I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND ACADEMIC BECAUSE
OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE GOVERNING
THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-

GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO
AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION;
AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER THE AMENDED
JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.
The Courts Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and academic because of
subsequent events.
The petition prays that PEA publicly disclose the terms and conditions of the on-going negotiations for a
new agreement. The petition also prays that the Court enjoin PEA from privately entering into, perfecting
and/or executing any new agreement with AMARI.
PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on
June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in
the renegotiations. Thus, PEA has satisfied petitioners prayer for a public disclosure of the
renegotiations. Likewise, petitioners prayer to enjoin the signing of the Amended JVA is now moot
because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office
of the President has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the
signing and approval of the Amended JVA before the Court could act on the issue. Presidential approval
does not resolve the constitutional issue or remove it from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President
cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to
implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional
grounds necessarily includes preventing its implementation if in the meantime PEA and AMARI have
signed one in violation of the Constitution. Petitioners principal basis in assailing the renegotiation of the
JVA is its violation of Section 3, Article XII of the Constitution, which prohibits the government from
alienating lands of the public domain to private corporations. If the Amended JVA indeed violates the
Constitution, it is the duty of the Court to enjoin its implementation, and if already implemented, to
annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single private
corporation. It now becomes more compelling for the Court to resolve the issue to insure the
government itself does not violate a provision of the Constitution intended to safeguard the national
patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from
rendering a decision if there is a grave violation of the Constitution. In the instant case, if the Amended
JVA runs counter to the Constitution, the Court can still prevent the transfer of title and ownership of
alienable lands of the public domain in the name of AMARI. Even in cases where supervening events had
made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar, and the public.[17]
Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section
3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,[18] covered
agricultural lands sold to private corporations which acquired the lands from private parties. The
transferors of the private corporations claimed or could claim the right to judicial confirmation of their
imperfect titles[19] under Title II of Commonwealth Act. 141 (CA No. 141 for brevity). In the instant case,
AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas for non-
agricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain
undertakings by AMARI under the Amended JVA constitute the consideration for the purchase. Neither
AMARI nor PEA can claim judicial confirmation of their titles because the lands covered by the Amended
JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of agricultural lands of the public domain for at least
thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for judicial
confirmation of imperfect title expired on December 31, 1987.[20]
Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because of
the possible transfer at any time by PEA to AMARI of title and ownership to portions of the reclaimed
lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latters seventy percent
proportionate share in the reclaimed areas as the reclamation progresses. The Amended JVA even allows
AMARI to mortgage at any time the entire reclaimed area to raise financing for the reclamation project.
[21]
Second issue: whether the petition merits dismissal for failing to observe the principle governing the
hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court.
The principle of hierarchy of courts applies generally to cases involving factual questions. As it is not a
trier of facts, the Court cannot entertain cases involving factual issues. The instant case, however, raises
constitutional issues of transcendental importance to the public.[22] The Court can resolve this case
without determining any factual issue related to the case. Also, the instant case is a petition for
mandamus which falls under the original jurisdiction of the Court under Section 5, Article VIII of the
Constitution. We resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain
information without first asking PEA the needed information. PEA claims petitioners direct resort to the
Court violates the principle of exhaustion of administrative remedies. It also violates the rule that
mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary course
of law.
PEA distinguishes the instant case from Taada v. Tuvera[23] where the Court granted the petition for
mandamus even if the petitioners there did not initially demand from the Office of the President the
publication of the presidential decrees. PEA points out that in Taada, the Executive Department had an
affirmative statutory duty under Article 2 of the Civil Code[24] and Section 1 of Commonwealth Act No.
638[25] to publish the presidential decrees. There was, therefore, no need for the petitioners in Taada to
make an initial demand from the Office of the President. In the instant case, PEA claims it has no
affirmative statutory duty to disclose publicly information about its renegotiation of the JVA. Thus, PEA
asserts that the Court must apply the principle of exhaustion of administrative remedies to the instant
case in view of the failure of petitioner here to demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation. Under
Section 79 of the Government Auditing Code,[26]2 the disposition of government lands to private
parties requires public bidding. PEA was under a positive legal duty to disclose to the public the terms
and conditions for the sale of its lands. The law obligated PEA to make this public disclosure even
without demand from petitioner or from anyone. PEA failed to make this public disclosure because the
original JVA, like the Amended JVA, was the result of a negotiated contract, not of a public bidding.
Considering that PEA had an affirmative statutory duty to make the public disclosure, and was even in
breach of this legal duty, petitioner had the right to seek direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative
remedies does not apply when the issue involved is a purely legal or constitutional question.[27] The
principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of the
constitutional ban prohibiting the alienation of lands of the public domain to private corporations. We
rule that the principle of exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that PEA refused to perform an affirmative duty
imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will suffer any
concrete injury because of the signing or implementation of the Amended JVA. Thus, there is no actual
controversy requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayers suit because the petition seeks to compel PEA to
comply with its constitutional duties. There are two constitutional issues involved here. First is the right
of citizens to information on matters of public concern. Second is the application of a constitutional
provision intended to insure the equitable distribution of alienable lands of the public domain among
Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly information on the sale
of government lands worth billions of pesos, information which the Constitution and statutory law
mandate PEA to disclose. The thrust of the second issue is to prevent PEA from alienating hundreds of
hectares of alienable lands of the public domain in violation of the Constitution, compelling PEA to
comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,[28]
the Court upheld the right of a citizen to bring a taxpayers suit on matters of transcendental importance
to the public, thus -
Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an issue
of transcendental importance to the public. He asserts that ordinary taxpayers have a right to initiate
and prosecute actions questioning the validity of acts or orders of government agencies or
instrumentalities, if the issues raised are of paramount public interest, and if they immediately affect the
social, economic and moral well being of the people.
Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the
proceeding involves the assertion of a public right, such as in this case. He invokes several decisions of
this Court which have set aside the procedural matter of locus standi, when the subject of the case
involved public interest.
xxx
In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in
interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution
of the laws, he need not show that he has any legal or special interest in the result of the action. In the
aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern,
a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that
laws in order to be valid and enforceable must be published in the Official Gazette or otherwise
effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that the right
they sought to be enforced is a public right recognized by no less than the fundamental law of the land.
Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus
proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by
the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the
right.
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved
under the questioned contract for the development, management and operation of the Manila
International Container Terminal, public interest [was] definitely involved considering the important role
[of the subject contract] . . . in the economic development of the country and the magnitude of the
financial consideration involved. We concluded that, as a consequence, the disclosure provision in the
Constitution would constitute sufficient authority for upholding the petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information and access to official
records, documents and papers a right guaranteed under Section 7, Article III of the 1987 Constitution.
Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of the two basic
requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the enforcement of a
public right (2) espoused by a Filipino citizen, we rule that the petition at bar should be allowed.
We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional
rights - to information and to the equitable diffusion of natural resources - matters of transcendental
public importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official information on on-going
negotiations before a final agreement.
Section 7, Article III of the Constitution explains the peoples right to information on matters of public
concern in this manner:
Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to
official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as
well as to government research data used as basis for policy development, shall be afforded the citizen,
subject to such limitations as may be provided by law. (Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces the peoples
right to information on matters of public concern. This State policy is expressed in Section 28, Article II of
the Constitution, thus:
Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of
full public disclosure of all its transactions involving public interest. (Emphasis supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making and in the
operations of the government, as well as provide the people sufficient information to exercise effectively
other constitutional rights. These twin provisions are essential to the exercise of freedom of expression.
If the government does not disclose its official acts, transactions and decisions to citizens, whatever
citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These
twin provisions are also essential to hold public officials at all times x x x accountable to the people,[29]
for unless citizens have the proper information, they cannot hold public officials accountable for
anything. Armed with the right information, citizens can participate in public discussions leading to the
formulation of government policies and their effective implementation. An informed citizenry is essential
to the existence and proper functioning of any democracy. As explained by the Court in Valmonte v.
Belmonte, Jr.[30]
An essential element of these freedoms is to keep open a continuing dialogue or process of

communication between the government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that the government may perceive and be
responsive to the peoples will. Yet, this open dialogue can be effective only to the extent that the
citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the
discussion are aware of the issues and have access to information relating thereto can such bear fruit.
PEA asserts, citing Chavez v. PCGG,[31] that in cases of on-going negotiations the right to information is
limited to definite propositions of the government. PEA maintains the right does not include access to
intra-agency or inter-agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the exploratory stage.
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the
closing of the transaction. To support its contention, AMARI cites the following discussion in the 1986
Constitutional Commission:
Mr. Suarez. And when we say transactions which should be distinguished from contracts, agreements, or
treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the
contract, or does he refer to the contract itself?
Mr. Ople: The transactions used here, I suppose is generic and therefore, it can cover both steps leading
to a contract and already a consummated contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
Mr. Suarez: Thank you.[32] (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke the right.
Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade the
quality of decision-making in government agencies. Government officials will hesitate to express their
real sentiments during deliberations if there is immediate public dissemination of their discussions,
putting them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to disclose
publicly, and information the constitutional right to information requires PEA to release to the public.
Before the consummation of the contract, PEA must, on its own and without demand from anyone,
disclose to the public matters relating to the disposition of its property. These include the size, location,
technical description and nature of the property being disposed of, the terms and conditions of the
disposition, the parties qualified to bid, the minimum price and similar information. PEA must prepare all
these data and disclose them to the public at the start of the disposition process, long before the
consummation of the contract, because the Government Auditing Code requires public bidding. If PEA
fails to make this disclosure, any citizen can demand from PEA this information at any time during the
bidding process.
Information, however, on on-going evaluation or review of bids or proposals being undertaken by the
bidding or review committee is not immediately accessible under the right to information. While the
evaluation or review is still on-going, there are no official acts, transactions, or decisions on the bids or
proposals. However, once the committee makes its official recommendation, there arises a definite
proposition on the part of the government. From this moment, the publics right to information attaches,
and any citizen can access all the non-proprietary information leading to such definite proposition. In
Chavez v. PCGG,[33] the Court ruled as follows:
Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG
and its officers, as well as other government representatives, to disclose sufficient public information on
any proposed settlement they have decided to take up with the ostensible owners and holders of ill-
gotten wealth. Such information, though, must pertain to definite propositions of the government, not
necessarily to intra-agency or inter-agency recommendations or communications during the stage when
common assertions are still in the process of being formulated or are in the exploratory stage. There is
need, of course, to observe the same restrictions on disclosure of information in general, as discussed
earlier such as on matters involving national security, diplomatic or foreign relations, intelligence and
other classified information. (Emphasis supplied)
Contrary to AMARIs contention, the commissioners of the 1986 Constitutional Commission understood
that the right to information contemplates inclusion of negotiations leading to the consummation of the
transaction. Certainly, a consummated contract is not a requirement for the exercise of the right to
information. Otherwise, the people can never exercise the right if no contract is consummated, and if
one is consummated, it may be too late for the public to expose its defects.
Requiring a consummated contract will keep the public in the dark until the contract, which may be
grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates the
State policy of full transparency on matters of public concern, a situation which the framers of the
Constitution could not have intended. Such a requirement will prevent the citizenry from participating in
the public discussion of any proposed contract, effectively truncating a basic right enshrined in the Bill of
Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the State of its
avowed policy of full disclosure of all its transactions involving public interest.
The right covers three categories of information which are matters of public concern, namely: (1) official
records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3)
government research data used in formulating policies. The first category refers to any document that is
part of the public records in the custody of government agencies or officials. The second category refers
to documents and papers recording, evidencing, establishing, confirming, supporting, justifying or
explaining official acts, transactions or decisions of government agencies or officials. The third category
refers to research data, whether raw, collated or processed, owned by the government and used in
formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes of meetings, terms of reference and other
documents attached to such reports or minutes, all relating to the JVA. However, the right to information
does not compel PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of
the JVA.[34] The right only affords access to records, documents and papers, which means the
opportunity to inspect and copy them. One who exercises the right must copy the records, documents
and papers at his expense. The exercise of the right is also subject to reasonable regulations to protect
the integrity of the public records and to minimize disruption to government operations, like rules
specifying when and how to conduct the inspection and copying.[35]
The right to information, however, does not extend to matters recognized as privileged information
under the separation of powers.[36] The right does not also apply to information on military and
diplomatic secrets, information affecting national security, and information on investigations of crimes by
law enforcement agencies before the prosecution of the accused, which courts have long recognized as
confidential.[37] The right may also be subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged information rooted in
the separation of powers. The information does not cover Presidential conversations, correspondences,
or discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme
Court and other collegiate courts, or executive sessions of either house of Congress,[38] are recognized
as confidential. This kind of information cannot be pried open by a co-equal branch of government. A
frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by
interested parties, is essential to protect the independence of decision-making of those tasked to
exercise Presidential, Legislative and Judicial power.[39] This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information on on-going
negotiations before a final contract. The information, however, must constitute definite propositions by
the government and should not cover recognized exceptions like privileged information, military and
diplomatic secrets and similar matters affecting national security and public order.[40] Congress has also
prescribed other limitations on the right to information in several legislations.[41]
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to
be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian
doctrine which holds that the State owns all lands and waters of the public domain. Upon the Spanish
conquest of the Philippines, ownership of all lands, territories and possessions in the Philippines passed
to the Spanish Crown.[42] The King, as the sovereign ruler and representative of the people, acquired
and owned all lands and territories in the Philippines except those he disposed of by grant or sale to
private individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State,
in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the
foundation of the time-honored principle of land ownership that all lands that were not acquired from
the Government, either by purchase or by grant, belong to the public domain.[43] Article 339 of the Civil
Code of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition
of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654
which provided for the lease, but not the sale, of reclaimed lands of the government to corporations and
individuals. Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public
Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to
corporations and individuals. On November 7, 1936, the National Assembly passed Commonwealth Act
No. 141, also known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed
lands of the government to corporations and individuals. CA No. 141 continues to this day as the general
law governing the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the
maritime zone of the Spanish territory belonged to the public domain for public use.[44] The Spanish
Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows:
Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the
provinces, pueblos or private persons, with proper permission, shall become the property of the party
constructing such works, unless otherwise provided by the terms of the grant of authority.
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the
reclamation, provided the government issued the necessary permit and did not reserve ownership of the
reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
Art. 339. Property of public dominion is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, riverbanks, shores, roadsteads, and that of a similar character;
2. That belonging exclusively to the State which, without being of general public use, is employed in
some public service, or in the development of the national wealth, such as walls, fortresses, and other
works for the defense of the territory, and mines, until granted to private individuals.
Property devoted to public use referred to property open for use by the public. In contrast, property
devoted to public service referred to property used for some specific public service and open only to
those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but also to property not
so used but employed to develop the national wealth. This class of property constituted property of
public dominion although employed for some economic or commercial activity to increase the national
wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into
private property, to wit:
Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the
territory, shall become a part of the private property of the State.
This provision, however, was not self-executing. The legislature, or the executive department pursuant to
law, must declare the property no longer needed for public use or territorial defense before the
government could lease or alienate the property to private parties.[45]
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of
reclaimed and foreshore lands. The salient provisions of this law were as follows:
Section 1. The control and disposition of the foreshore as defined in existing law, and the title to all
Government or public lands made or reclaimed by the Government by dredging or filling or otherwise
throughout the Philippine Islands, shall be retained by the Government without prejudice to vested
rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or reclaimed
by the Government by dredging or filling or otherwise to be divided into lots or blocks, with the
necessary streets and alleyways located thereon, and shall cause plats and plans of such surveys to be
prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall give notice to the public that
such parts of the lands so made or reclaimed as are not needed for public purposes will be leased for
commercial and business purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and best bidder therefore, subject
to such regulations and safeguards as the Governor-General may by executive order prescribe. (Emphasis
supplied)
Act No. 1654 mandated that the government should retain title to all lands reclaimed by the
government. The Act also vested in the government control and disposition of foreshore lands. Private
parties could lease lands reclaimed by the government only if these lands were no longer needed for
public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act
No. 1654 made government reclaimed lands sui generis in that unlike other public lands which the
government could sell to private parties, these reclaimed lands were available only for lease to private
parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did
not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law of
Waters. Lands reclaimed from the sea by private parties with government permission remained private
lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.[46] The
salient provisions of Act No. 2874, on reclaimed lands, were as follows:
Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and Natural
Resources, shall from time to time classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.

Sec. 7. For the purposes of the government and disposition of alienable or disposable public lands, the
Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall
from time to time declare what lands are open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially
delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be
classified as suitable for residential purposes or for commercial, industrial, or other productive purposes
other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of
under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or
rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed of to private
parties by lease only and not otherwise, as soon as the Governor-General, upon recommendation by the
Secretary of Agriculture and Natural Resources, shall declare that the same are not necessary for the
public service and are open to disposition under this chapter. The lands included in class (d) may be
disposed of by sale or lease under the provisions of this Act. (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to classify lands of the public domain into x x
x alienable or disposable[47] lands. Section 7 of the Act empowered the Governor-General to declare
what lands are open to disposition or concession. Section 8 of the Act limited alienable or disposable
lands only to those lands which have been officially delimited and classified.
Section 56 of Act No. 2874 stated that lands disposable under this title[48] shall be classified as
government reclaimed, foreshore and marshy lands, as well as other lands. All these lands, however,
must be suitable for residential, commercial, industrial or other productive non-agricultural purposes.
These provisions vested upon the Governor-General the power to classify inalienable lands of the public
domain into disposable lands of the public domain. These provisions also empowered the Governor-
General to classify further such disposable lands of the public domain into government reclaimed,
foreshore or marshy lands of the public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain classified
as government reclaimed, foreshore and marshy lands shall be disposed of to private parties by lease
only and not otherwise. The Governor-General, before allowing the lease of these lands to private
parties, must formally declare that the lands were not necessary for the public service. Act No. 2874
reiterated the State policy to lease and not to sell government reclaimed, foreshore and marshy lands of
the public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed, foreshore
and marshy lands remained sui generis, as the only alienable or disposable lands of the public domain
that the government could not sell to private parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public
lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the
reason the government prohibited the sale, and only allowed the lease, of these lands to private parties.
The State always reserved these lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands
into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only
lands for non-agricultural purposes the government could sell to private parties. Thus, under Act No.
2874, the government could not sell government reclaimed, foreshore and marshy lands to private
parties, unless the legislature passed a law allowing their sale.[49]
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of
the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government
permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The 1935
Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that
Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the
time of the inauguration of the Government established under this Constitution. Natural resources, with
the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for
the exploitation, development, or utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water power, in
which cases beneficial use may be the measure and limit of the grant. (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public agricultural lands,
which were the only natural resources the State could alienate. Thus, foreshore lands, considered part of
the States natural resources, became inalienable by constitutional fiat, available only for lease for 25
years, renewable for another 25 years. The government could alienate foreshore lands only after these
lands were reclaimed and classified as alienable agricultural lands of the public domain. Government
reclaimed and marshy lands of the public domain, being neither timber nor mineral lands, fell under the
classification of public agricultural lands.[50] However, government reclaimed and marshy lands,
although subject to classification as disposable public agricultural lands, could only be leased and not
sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands
of the public domain was only a statutory prohibition and the legislature could therefore remove such
prohibition. The 1935 Constitution did not prohibit individuals and corporations from acquiring
government reclaimed and marshy lands of the public domain that were classified as agricultural lands
under existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows:
Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in
excess of one thousand and twenty four hectares, nor may any individual acquire such lands by purchase
in excess of one hundred and forty hectares, or by lease in excess of one thousand and twenty-four
hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing, not exceeding
two thousand hectares, may be leased to an individual, private corporation, or association. (Emphasis
supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No.
2874 to open for sale to private parties government reclaimed and marshy lands of the public domain.
On the contrary, the legislature continued the long established State policy of retaining for the
government title and ownership of government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the
Public Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as
amended, remains to this day the existing general law governing the classification and disposition of
lands of the public domain other than timber and mineral lands.[51]
Section 6 of CA No. 141 empowers the President to classify lands of the public domain into alienable or
disposable[52] lands of the public domain, which prior to such classification are inalienable and outside
the commerce of man. Section 7 of CA No. 141 authorizes the President to declare what lands are open
to disposition or concession. Section 8 of CA No. 141 states that the government can declare open for
disposition or concession only lands that are officially delimited and classified. Sections 6, 7 and 8 of CA
No. 141 read as follows:
Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall
from time to time classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to another,[53] for the
purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable public lands, the
President, upon recommendation by the Secretary of Agriculture and Commerce, shall from time to time
declare what lands are open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially
delimited and classified and, when practicable, surveyed, and which have not been reserved for public or
quasi-public uses, nor appropriated by the Government, nor in any manner become private property, nor
those on which a private right authorized and recognized by this Act or any other valid law may be
claimed, or which, having been reserved or appropriated, have ceased to be so. x x x.
Thus, before the government could alienate or dispose of lands of the public domain, the President must
first officially classify these lands as alienable or disposable, and then declare them open to disposition
or concession. There must be no law reserving these lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public
domain, are as follows:
Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is intended
to be used for residential purposes or for commercial, industrial, or other productive purposes other
than agricultural, and is open to disposition or concession, shall be disposed of under the provisions of
this chapter and not otherwise.
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or
rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any
person, corporation, or association authorized to purchase or lease public lands for agricultural
purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to private
parties by lease only and not otherwise, as soon as the President, upon recommendation by the
Secretary of Agriculture, shall declare that the same are not necessary for the public service and are
open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease
under the provisions of this Act. (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No.
2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public
domain. All these lands are intended for residential, commercial, industrial or other non-agricultural
purposes. As before, Section 61 allowed only the lease of such lands to private parties. The government
could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-
agricultural purposes not classified as government reclaimed, foreshore and marshy disposable lands of
the public domain. Foreshore lands, however, became inalienable under the 1935 Constitution which
only allowed the lease of these lands to qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for
residential, commercial, industrial or other productive purposes other than agricultural shall be disposed
of under the provisions of this chapter and not otherwise. Under Section 10 of CA No. 141, the term
disposition includes lease of the land. Any disposition of government reclaimed, foreshore and marshy
disposable lands for non-agricultural purposes must comply with Chapter IX, Title III of CA No. 141,[54]
unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of Appeals,
[55] Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:
Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by the
government by dredging, filling, or other means. Act 1654 mandated that the control and disposition of
the foreshore and lands under water remained in the national government. Said law allowed only the
leasing of reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the foreshore and
lands reclaimed by the government were to be disposed of to private parties by lease only and not
otherwise. Before leasing, however, the Governor-General, upon recommendation of the Secretary of
Agriculture and Natural Resources, had first to determine that the land reclaimed was not necessary for
the public service. This requisite must have been met before the land could be disposed of. But even
then, the foreshore and lands under water were not to be alienated and sold to private parties. The
disposition of the reclaimed land was only by lease. The land remained property of the State. (Emphasis
supplied)
As observed by Justice Puno in his concurring opinion, Commonwealth Act No. 141 has remained in
effect at present.
The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy
alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after
the 1935 Constitution took effect. The prohibition on the sale of foreshore lands, however, became a
constitutional edict under the 1935 Constitution. Foreshore lands became inalienable as natural
resources of the State, unless reclaimed by the government and classified as agricultural lands of the
public domain, in which case they would fall under the classification of government reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the
public domain continued to be only leased and not sold to private parties.[56] These lands remained sui
generis, as the only alienable or disposable lands of the public domain the government could not sell to
private parties.
Since then and until now, the only way the government can sell to private parties government reclaimed
and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such
sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands
into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that the government could sell to private
parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under
Section 59 that the government previously transferred to government units or entities could be sold to
private parties. Section 60 of CA No. 141 declares that
Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of
Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease
is requested, and shall not exceed one hundred and forty-four hectares: Provided, however, That this
limitation shall not apply to grants, donations, or transfers made to a province, municipality or branch or
subdivision of the Government for the purposes deemed by said entities conducive to the public
interest; but the land so granted, donated, or transferred to a province, municipality or branch or
subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized by Congress: x x x. (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority
required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units
and entities from the maximum area of public lands that could be acquired from the State. These
government units and entities should not just turn around and sell these lands to private parties in
violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-agricultural
purposes to government units and entities could be used to circumvent constitutional limitations on
ownership of alienable or disposable lands of the public domain. In the same manner, such transfers
could also be used to evade the statutory prohibition in CA No. 141 on the sale of government reclaimed
and marshy lands of the public domain to private parties. Section 60 of CA No. 141 constitutes by
operation of law a lien on these lands.[57]
In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141,
Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows:
Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes,
the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the Secretary of Natural
Resources) for authority to dispose of the same. Upon receipt of such authority, the Director of Lands
shall give notice by public advertisement in the same manner as in the case of leases or sales of
agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the highest
bidder. x x x. (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or
disposable lands of the public domain.[58]
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of
Waters of 1866. Private parties could still reclaim portions of the sea with government permission.
However, the reclaimed land could become private land only if classified as alienable agricultural land of
the public domain open to disposition under CA No. 141. The 1935 Constitution prohibited the
alienation of all natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the
Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or for public service, shall
form part of the patrimonial property of the State.
Again, the government must formally declare that the property of public dominion is no longer needed
for public use or public service, before the same could be classified as patrimonial property of the State.
[59] In the case of government reclaimed and marshy lands of the public domain, the declaration of their
being disposable, as well as the manner of their disposition, is governed by the applicable provisions of
CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those
properties of the State which, without being for public use, are intended for public service or the
development of the national wealth. Thus, government reclaimed and marshy lands of the State, even if
not employed for public use or public service, if developed to enhance the national wealth, are classified
as property of public dominion.
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine.
Section 8, Article XIV of the 1973 Constitution stated that
Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces
of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State.
With the exception of agricultural, industrial or commercial, residential, and resettlement lands of the
public domain, natural resources shall not be alienated, and no license, concession, or lease for the
exploration, development, exploitation, or utilization of any of the natural resources shall be granted for
a period exceeding twenty-five years, renewable for not more than twenty-five years, except as to water
rights for irrigation, water supply, fisheries, or industrial uses other than the development of water
power, in which cases, beneficial use may be the measure and the limit of the grant. (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception of
agricultural, industrial or commercial, residential, and resettlement lands of the public domain. In
contrast, the 1935 Constitution barred the alienation of all natural resources except public agricultural
lands. However, the term public agricultural lands in the 1935 Constitution encompassed industrial,
commercial, residential and resettlement lands of the public domain.[60] If the land of public domain
were neither timber nor mineral land, it would fall under the classification of agricultural land of the
public domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural
resources except agricultural lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who
were citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were
no longer allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution.
Section 11, Article XIV of the 1973 Constitution declared that
Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development
requirements of the natural resources, shall determine by law the size of land of the public domain
which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or
association, and the conditions therefor. No private corporation or association may hold alienable lands
of the public domain except by lease not to exceed one thousand hectares in area nor may any citizen
hold such lands by lease in excess of five hundred hectares or acquire by purchase, homestead or grant,
in excess of twenty-four hectares. No private corporation or association may hold by lease, concession,
license or permit, timber or forest lands and other timber or forest resources in excess of one hundred
thousand hectares. However, such area may be increased by the Batasang Pambansa upon
recommendation of the National Economic and Development Authority. (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain
only through lease. Only individuals could now acquire alienable lands of the public domain, and private
corporations became absolutely barred from acquiring any kind of alienable land of the public domain.
The constitutional ban extended to all kinds of alienable lands of the public domain, while the statutory
ban under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable lands of
the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating
PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of
PD No. 1084, vests PEA with the following purposes and powers:
Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to
acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds
of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or
operated by the government;
(c) To provide for, operate or administer such service as may be necessary for the efficient, economical
and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for which
it is created, have the following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to private corporations by statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal, ditch,
flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for the attainment of the
purposes and objectives herein specified. (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain.
Foreshore areas are those covered and uncovered by the ebb and flow of the tide.[61] Submerged areas
are those permanently under water regardless of the ebb and flow of the tide.[62] Foreshore and
submerged areas indisputably belong to the public domain[63] and are inalienable unless reclaimed,
classified as alienable lands open to disposition, and further declared no longer needed for public
service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public
domain did not apply to PEA since it was then, and until today, a fully owned government corporation.
The constitutional ban applied then, as it still applies now, only to private corporations and associations.
PD No. 1084 expressly empowers PEA to hold lands of the public domain even in excess of the area
permitted to private corporations by statute. Thus, PEA can hold title to private lands, as well as title to
lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain,
there must be legislative authority empowering PEA to sell these lands. This legislative authority is
necessary in view of Section 60 of CA No.141, which states
Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch or
subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a manner
affecting its title, except when authorized by Congress; x x x. (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and
submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to PEA
to sell its reclaimed alienable lands of the public domain would be subject to the constitutional ban on
private corporations from acquiring alienable lands of the public domain. Hence, such legislative
authority could only benefit private individuals.
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all natural resources are owned by the State, and except
for alienable agricultural lands of the public domain, natural resources cannot be alienated. Sections 2
and 3, Article XII of the 1987 Constitution state that
Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and utilization of natural resources shall be under
the full control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and
national parks. Agricultural lands of the public domain may be further classified by law according to the
uses which they may be devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable lands of the public domain
except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more
than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead,
or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor. (Emphasis
supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations
from acquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold alienable lands of the public domain only through lease.
As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of
reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except through lease,
alienable lands of the public domain is not well understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed the rationale behind this ban, thus:
FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:
`No private corporation or association may hold alienable lands of the public domain except by lease, not
to exceed one thousand hectares in area.
If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the 1973
Constitution. In effect, it prohibits private corporations from acquiring alienable public lands. But it has
not been very clear in jurisprudence what the reason for this is. In some of the cases decided in 1982
and 1983, it was indicated that the purpose of this is to prevent large landholdings. Is that the intent of
this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the Iglesia ni
Cristo was not allowed to acquire a mere 313-square meter land where a chapel stood because the
Supreme Court said it would be in violation of this. (Emphasis supplied)
In Ayog v. Cusi,[64] the Court explained the rationale behind this constitutional ban in this way:
Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands by
private corporations is to equitably diffuse land ownership or to encourage owner-cultivatorship and the
economic family-size farm and to prevent a recurrence of cases like the instant case. Huge landholdings
by corporations or private persons had spawned social unrest.
However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply
limited the size of alienable lands of the public domain that corporations could acquire. The Constitution
could have followed the limitations on individuals, who could acquire not more than 24 hectares of
alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under
the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a
corporation would be more effective in preventing the break-up of farmlands. If the farmland is
registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in
the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-
up of farmlands into smaller and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from
acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional
ban, individuals who already acquired the maximum area of alienable lands of the public domain could
easily set up corporations to acquire more alienable public lands. An individual could own as many
corporations as his means would allow him. An individual could even hide his ownership of a corporation
by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to
circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public
domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a
limited area of alienable land of the public domain to a qualified individual. This constitutional intent is
safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public
domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable
public lands are gradually decreasing in the face of an ever-growing population. The most effective way
to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public
domain only to individuals. This, it would seem, is the practical benefit arising from the constitutional
ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:
1. [T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;
2. [A]nother area of 2,421,559 square meters contiguous to the three islands; and
3. [A]t AMARIs option as approved by PEA, an additional 350 hectares more or less to regularize the
configuration of the reclaimed area.[65]
PEA confirms that the Amended JVA involves the development of the Freedom Islands and further
reclamation of about 250 hectares x x x, plus an option granted to AMARI to subsequently reclaim
another 350 hectares x x x.[66]
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-
hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are still
submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEAs actual cost
in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the
reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the
other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the proportion
of 70 percent and 30 percent, respectively, the total net usable area which is defined in the Amended
JVA as the total reclaimed area less 30 percent earmarked for common areas. Title to AMARIs share in
the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI. Section 5.2 (c) of the
Amended JVA provides that
x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or conveyance of
the title pertaining to AMARIs Land share based on the Land Allocation Plan. PEA, when requested in
writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering
AMARIs Land Share in the name of AMARI, x x x; provided, that if more than seventy percent (70%) of
the titled area at any given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent
(70%) of the titles pertaining to AMARI, until such time when a corresponding proportionate area of
additional land pertaining to PEA has been titled. (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of
reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEAs
statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay.
Section 3.2.a of the Amended JVA states that
PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation and
Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture the full
and exclusive right, authority and privilege to undertake the Project in accordance with the Master
Development Plan.
The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its
supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended
JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and
3, Article XII of the 1987 Constitution which state that:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain except by lease, x x
x.(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its Memorandum,[67] PEA admits that
Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and
disposable lands of the public domain:
(a) Lands reclaimed by the government by dredging, filling, or other means;
x x x. (Emphasis supplied)
Likewise, the Legal Task Force[68] constituted under Presidential Administrative Order No. 365 admitted
in its Report and Recommendation to then President Fidel V. Ramos, [R]eclaimed lands are classified as
alienable and disposable lands of the public domain.[69] The Legal Task Force concluded that
D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of ownership
and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA, as owner,
may validly convey the same to any qualified person without violating the Constitution or any statute.
The constitutional provision prohibiting private corporations from holding public land, except by lease
(Sec. 3, Art. XVII,[70] 1987 Constitution), does not apply to reclaimed lands whose ownership has passed
on to PEA by statutory grant.
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay
are part of the lands of the public domain, waters x x x and other natural resources and consequently
owned by the State. As such, foreshore and submerged areas shall not be alienated, unless they are
classified as agricultural lands of the public domain. The mere reclamation of these areas by PEA does
not convert these inalienable natural resources of the State into alienable or disposable lands of the
public domain. There must be a law or presidential proclamation officially classifying these reclaimed
lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands
cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-
public use.[71]
Section 8 of CA No. 141 provides that only those lands shall be declared open to disposition or
concession which have been officially delimited and classified.[72] The President has the authority to
classify inalienable lands of the public domain into alienable or disposable lands of the public domain,
pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,[73] the Executive Department attempted to sell
the Roppongi property in Tokyo, Japan, which was acquired by the Philippine Government for use as the
Chancery of the Philippine Embassy. Although the Chancery had transferred to another location thirteen
years earlier, the Court still ruled that, under Article 422[74] of the Civil Code, a property of public
dominion retains such character until formally declared otherwise. The Court ruled that
The fact that the Roppongi site has not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property
continues to be part of the public domain, not available for private appropriation or ownership until
there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]. (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands
reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then
President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares
comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds
of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to
Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents.
To this day, these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering the Freedom
Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or
disposable lands of the public domain. PD No. 1085 and President Aquinos issuance of a land patent also
constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom
Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to
qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the
Freedom Islands although subsequently there were partial erosions on some areas. The government had
also completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of
Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the
public domain into agricultural, forest or timber, mineral lands, and national parks. Being neither timber,
mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification
of agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public
domain are the only natural resources that the State may alienate to qualified private parties. All other
natural resources, such as the seas or bays, are waters x x x owned by the State forming part of the
public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation,
reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public
Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that if the ownership of
reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed
lands are lands of the public domain which the State may not alienate.[75] Article 5 of the Spanish Law
of Waters reads as follows:
Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the
provinces, pueblos or private persons, with proper permission, shall become the property of the party
constructing such works, unless otherwise provided by the terms of the grant of authority. (Emphasis
supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only
with proper permission from the State. Private parties could own the reclaimed land only if not
otherwise provided by the terms of the grant of authority. This clearly meant that no one could reclaim
from the sea without permission from the State because the sea is property of public dominion. It also
meant that the State could grant or withhold ownership of the reclaimed land because any reclaimed
land, like the sea from which it emerged, belonged to the State. Thus, a private person reclaiming from
the sea without permission from the State could not acquire ownership of the reclaimed land which
would remain property of public dominion like the sea it replaced.[76] Article 5 of the Spanish Law of
Waters of 1866 adopted the time-honored principle of land ownership that all lands that were not
acquired from the government, either by purchase or by grant, belong to the public domain.[77]
Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first
be classified as alienable or disposable before the government can alienate them. These lands must not
be reserved for public or quasi-public purposes.[78] Moreover, the contract between CDCP and the
government was executed after the effectivity of the 1973 Constitution which barred private
corporations from acquiring any kind of alienable land of the public domain. This contract could not have
converted the Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of
areas under water and revested solely in the National Government the power to reclaim lands. Section 1
of PD No. 3-A declared that
The provisions of any law to the contrary notwithstanding, the reclamation of areas under water,
whether foreshore or inland, shall be limited to the National Government or any person authorized by it
under a proper contract. (Emphasis supplied)
x x x.
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under
water could now be undertaken only by the National Government or by a person contracted by the
National Government. Private parties may reclaim from the sea only under a contract with the National
Government, and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters
of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Governments
implementing arm to undertake all reclamation projects of the government, which shall be undertaken
by the PEA or through a proper contract executed by it with any person or entity. Under such contract, a
private party receives compensation for reclamation services rendered to PEA. Payment to the
contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the
constitutional ban on private corporations from acquiring alienable lands of the public domain. The
reclaimed land can be used as payment in kind only if the reclaimed land is first classified as alienable or
disposable land open to disposition, and then declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are
still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying these
submerged areas as alienable or disposable lands of the public domain open to disposition. These
submerged areas are not covered by any patent or certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in their present state are inalienable and outside
the commerce of man. Until reclaimed from the sea, these submerged areas are, under the Constitution,
waters x x x owned by the State, forming part of the public domain and consequently inalienable. Only
when actually reclaimed from the sea can these submerged areas be classified as public agricultural
lands, which under the Constitution are the only natural resources that the State may alienate. Once
reclaimed and transformed into public agricultural lands, the government may then officially classify
these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare
these lands no longer needed for public service. Only then can these reclaimed lands be considered
alienable or disposable lands of the public domain and within the commerce of man.
The classification of PEAs reclaimed foreshore and submerged lands into alienable or disposable lands
open to disposition is necessary because PEA is tasked under its charter to undertake public services that
require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA
include the following: [T]o own or operate railroads, tramways and other kinds of land transportation, x x
x; [T]o construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o
construct, maintain and operate such storm drains as may be necessary. PEA is empowered to issue rules
and regulations as may be necessary for the proper use by private parties of any or all of the highways,
roads, utilities, buildings and/or any of its properties and to impose or collect fees or tolls for their use.
Thus, part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed
for public use or service since many of the functions imposed on PEA by its charter constitute essential
public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government. The same section also states that [A]ll reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3-A
and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government
entity to undertake the reclamation of lands and ensure their maximum utilization in promoting public
welfare and interests.[79] Since large portions of these reclaimed lands would obviously be needed for
public service, there must be a formal declaration segregating reclaimed lands no longer needed for
public service from those still needed for public service.
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA shall belong to or be owned by the
PEA, could not automatically operate to classify inalienable lands into alienable or disposable lands of
the public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would
automatically become alienable once reclaimed by PEA, whether or not classified as alienable or
disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the
Department of Environment and Natural Resources (DENR for brevity) the following powers and
functions:
Sec. 4. Powers and Functions. The Department shall:(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and disposable public lands, mineral
resources and, in the process of exercising such control, impose appropriate taxes, fees, charges, rentals
and any such form of levy and collect such revenues for the exploration, development, utilization or
gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits, concessions, lease
agreements and such other privileges concerning the development, exploration and utilization of the
countrys marine, freshwater, and brackish water and over all aquatic resources of the country and shall
continue to oversee, supervise and police our natural resources; cancel or cause to cancel such privileges
upon failure, non-compliance or violations of any regulation, order, and for all other causes which are in
furtherance of the conservation of natural resources and supportive of the national interest;
(15) Exercise exclusive jurisdiction on the management and disposition of all lands of the public domain
and serve as the sole agency responsible for classification, sub-classification, surveying and titling of
lands in consultation with appropriate agencies.[80] (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR exercises supervision
and control over alienable and disposable public lands. DENR also exercises exclusive jurisdiction on the
management and disposition of all lands of the public domain. Thus, DENR decides whether areas under
water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any
part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence,
DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 6[81] and
7[82] of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then
recommends to the President the issuance of a proclamation classifying the lands as alienable or
disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio
S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative
Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is
vested with the power to undertake the physical reclamation of areas under water, whether directly or
through private contractors. DENR is also empowered to classify lands of the public domain into
alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked
to develop, sell or lease the reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the
reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA.
Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not
make the lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA.
Absent two official acts a classification that these lands are alienable or disposable and open to
disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA
remain inalienable lands of the public domain. Only such an official classification and formal declaration
can convert reclaimed lands into alienable or disposable lands of the public domain, open to disposition
under the Constitution, Title I and Title III[83] of CA No. 141 and other applicable laws.[84]
PEAs Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the
reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing
Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the
government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title,
except when authorized by Congress: x x x.[85] (Emphasis by PEA)
In Laurel vs. Garcia,[86] the Court cited Section 48 of the Revised Administrative Code of 1987, which
states that
Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
government by the following: x x x.
Thus, the Court concluded that a law is needed to convey any real property belonging to the
Government. The Court declared that -
It is not for the President to convey real property of the government on his or her own sole will. Any such
conveyance must be authorized and approved by a law enacted by the Congress. It requires executive
and legislative concurrence. (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell
its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that
The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract for the
reclamation and construction of the Manila-Cavite Coastal Road Project between the Republic of the
Philippines and the Construction and Development Corporation of the Philippines dated November 20,
1973 and/or any other contract or reclamation covering the same area is hereby transferred, conveyed
and assigned to the ownership and administration of the Public Estates Authority established pursuant
to PD No. 1084; Provided, however, That the rights and interests of the Construction and Development
Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the
Republic of the Philippines (Department of Public Highways) arising from, or incident to, the aforesaid
contract between the Republic of the Philippines and the Construction and Development Corporation of
the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in
favor of the Republic of the Philippines the corresponding shares of stock in said entity with an issued
value of said shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public Estates Authority shall execute
such contracts or agreements, including appropriate agreements with the Construction and
Development Corporation of the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of the Public
Estates Authority without prejudice to the subsequent transfer to the contractor or his assignees of such
portion or portions of the land reclaimed or to be reclaimed as provided for in the above-mentioned
contract. On the basis of such patents, the Land Registration Commission shall issue the corresponding
certificate of title. (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -
Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible for
its administration, development, utilization or disposition in accordance with the provisions of
Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use of
reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084.
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands.
PD No. 1085 merely transferred ownership and administration of lands reclaimed from Manila Bay to
PEA, while EO No. 525 declared that lands reclaimed by PEA shall belong to or be owned by PEA. EO No.
525 expressly states that PEA should dispose of its reclaimed lands in accordance with the provisions of
Presidential Decree No. 1084, the charter of PEA.
PEAs charter, however, expressly tasks PEA to develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by
the government.[87] (Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell
its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private parties its
patrimonial properties in accordance with the PEA charter free from constitutional limitations. The
constitutional ban on private corporations from acquiring alienable lands of the public domain does not
apply to the sale of PEAs patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private individuals since, with
the legislative authority, there is no longer any statutory prohibition against such sales and the
constitutional ban does not apply to individuals. PEA, however, cannot sell any of its alienable or
disposable lands of the public domain to private corporations since Section 3, Article XII of the 1987
Constitution expressly prohibits such sales. The legislative authority benefits only individuals. Private
corporations remain barred from acquiring any kind of alienable land of the public domain, including
government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to
the contractor or his assignees (Emphasis supplied) would not apply to private corporations but only to
individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate
both the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition,
and further declared no longer needed for public service, PEA would have to conduct a public bidding in
selling or leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141
requiring public auction, in the absence of a law exempting PEA from holding a public auction.[88]
Special Patent No. 3517 expressly states that the patent is issued by authority of the Constitution and PD
No. 1084, supplemented by Commonwealth Act No. 141, as amended. This is an acknowledgment that
the provisions of CA No. 141 apply to the disposition of reclaimed alienable lands of the public domain
unless otherwise provided by law. Executive Order No. 654,[89] which authorizes PEA to determine the
kind and manner of payment for the transfer of its assets and properties, does not exempt PEA from the
requirement of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment,
whether in kind and in installment, but does not authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the
government is required to sell valuable government property through public bidding. Section 79 of PD
No. 1445 mandates that
Section 79. When government property has become unserviceable for any cause, or is no longer needed,
it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or
his duly authorized representative in the presence of the auditor concerned and, if found to be valueless
or unsaleable, it may be destroyed in their presence. If found to be valuable, it may be sold at public
auction to the highest bidder under the supervision of the proper committee on award or similar body in
the presence of the auditor concerned or other authorized representative of the Commission, after
advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any
newspaper of general circulation, or where the value of the property does not warrant the expense of
publication, by notices posted for a like period in at least three public places in the locality where the
property is to be sold. In the event that the public auction fails, the property may be sold at a private sale
at such price as may be fixed by the same committee or body concerned and approved by the
Commission.
It is only when the public auction fails that a negotiated sale is allowed, in which case the Commission on
Audit must approve the selling price.[90] The Commission on Audit implements Section 79 of the
Government Auditing Code through Circular No. 89-296[91] dated January 27, 1989. This circular
emphasizes that government assets must be disposed of only through public auction, and a negotiated
sale can be resorted to only in case of failure of public auction.
At the public auction sale, only Philippine citizens are qualified to bid for PEAs reclaimed foreshore and
submerged alienable lands of the public domain. Private corporations are barred from bidding at the
auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a
condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize
the shape of the Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in favor of the
winning bidder.[92] No one, however, submitted a bid. On December 23, 1994, the Government
Corporate Counsel advised PEA it could sell the Freedom Islands through negotiation, without need of
another public bidding, because of the failure of the public bidding on December 10, 1991.[93]
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional
250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares.
The original JVA, a negotiated contract, enlarged the reclamation area to 750 hectares.[94] The failure of
public bidding on December 10, 1991, involving only 407.84 hectares,[95] is not a valid justification for a
negotiated sale of 750 hectares, almost double the area publicly auctioned. Besides, the failure of public
bidding happened on December 10, 1991, more than three years before the signing of the original JVA
on April 25, 1995. The economic situation in the country had greatly improved during the intervening
period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear:
Private corporations or associations may not hold such alienable lands of the public domain except by
lease, x x x. Even Republic Act No. 6957 (BOT Law, for brevity), cited by PEA and AMARI as legislative
authority to sell reclaimed lands to private parties, recognizes the constitutional ban. Section 6 of RA No.
6957 states
Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any
infrastructure projects undertaken through the build-operate-and-transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary payments, such as, but not
limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of the land: x x x. (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a government BOT project,
cannot acquire reclaimed alienable lands of the public domain in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:
Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure

Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the repayment plan may consist of the
grant of a portion or percentage of the reclaimed land or the industrial estate constructed.
Although Section 302 of the Local Government Code does not contain a proviso similar to that of the
BOT Law, the constitutional restrictions on land ownership automatically apply even though not
expressly mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor or
developer is an individual, portions of the reclaimed land, not exceeding 12 hectares[96] of non-
agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing such
conveyance. This is the only way these provisions of the BOT Law and the Local Government Code can
avoid a direct collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the act of conveying the ownership of the reclaimed lands to public
respondent PEA transformed such lands of the public domain to private lands. This theory is echoed by
AMARI which maintains that the issuance of the special patent leading to the eventual issuance of title
takes the subject land away from the land of public domain and converts the property into patrimonial
or private property. In short, PEA and AMARI contend that with the issuance of Special Patent No. 3517
and the corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands have
become private lands of PEA. In support of their theory, PEA and AMARI cite the following rulings of the
Court:
1. Sumail v. Judge of CFI of Cotabato,[97] where the Court held
Once the patent was granted and the corresponding certificate of title was issued, the land ceased to be
part of the public domain and became private property over which the Director of Lands has neither
control nor jurisdiction.
2. Lee Hong Hok v. David,[98] where the Court declared -
After the registration and issuance of the certificate and duplicate certificate of title based on a public
land patent, the land covered thereby automatically comes under the operation of Republic Act 496
subject to all the safeguards provided therein.
3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,[99] where the Court ruled -
While the Director of Lands has the power to review homestead patents, he may do so only so long as
the land remains part of the public domain and continues to be under his exclusive control; but once the
patent is registered and a certificate of title is issued, the land ceases to be part of the public domain and
becomes private property over which the Director of Lands has neither control nor jurisdiction.
4. Manalo v. Intermediate Appellate Court,[100] where the Court held
When the lots in dispute were certified as disposable on May 19, 1971, and free patents were issued
covering the same in favor of the private respondents, the said lots ceased to be part of the public
domain and, therefore, the Director of Lands lost jurisdiction over the same.
5.Republic v. Court of Appeals,[101] where the Court stated

Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land grant to the
Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the whole lot, validly
sufficient for initial registration under the Land Registration Act. Such land grant is constitutive of a fee
simple title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section 122 of the Act,
which governs the registration of grants or patents involving public lands, provides that Whenever public
lands in the Philippine Islands belonging to the Government of the United States or to the Government
of the Philippines are alienated, granted or conveyed to persons or to public or private corporations, the
same shall be brought forthwith under the operation of this Act (Land Registration Act, Act 496) and
shall become registered lands.
The first four cases cited involve petitions to cancel the land patents and the corresponding certificates
of titles issued to private parties. These four cases uniformly hold that the Director of Lands has no
jurisdiction over private lands or that upon issuance of the certificate of title the land automatically
comes under the Torrens System. The fifth case cited involves the registration under the Torrens System
of a 12.8-hectare public land granted by the National Government to Mindanao Medical Center, a
government unit under the Department of Health. The National Government transferred the 12.8-
hectare public land to serve as the site for the hospital buildings and other facilities of Mindanao Medical
Center, which performed a public service. The Court affirmed the registration of the 12.8-hectare public
land in the name of Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is an
example of a public land being registered under Act No. 496 without the land losing its character as a
property of public dominion.
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly
government owned corporation performing public as well as proprietary functions. No patent or
certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel
PEAs patent or certificates of title. In fact, the thrust of the instant petition is that PEAs certificates of
title should remain with PEA, and the land covered by these certificates, being alienable lands of the
public domain, should not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public
ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of
ownership previously conferred by any of the recognized modes of acquiring ownership. Registration
does not give the registrant a better right than what the registrant had prior to the registration.[102] The
registration of lands of the public domain under the Torrens system, by itself, cannot convert public lands
into private lands.[103]
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to government
units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the
provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino,
to wit:
NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in conformity
with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act No. 141, as
amended, there are hereby granted and conveyed unto the Public Estates Authority the aforesaid tracts
of land containing a total area of one million nine hundred fifteen thousand eight hundred ninety four
(1,915,894) square meters; the technical description of which are hereto attached and made an integral
part hereof. (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084.
Section 60 of CA No. 141 prohibits, except when authorized by Congress, the sale of alienable lands of
the public domain that are transferred to government units or entities. Section 60 of CA No. 141
constitutes, under Section 44 of PD No. 1529, a statutory lien affecting title of the registered land even if
not annotated on the certificate of title.[104] Alienable lands of the public domain held by government
entities under Section 60 of CA No. 141 remain public lands because they cannot be alienated or
encumbered unless Congress passes a law authorizing their disposition. Congress, however, cannot
authorize the sale to private corporations of reclaimed alienable lands of the public domain because of
the constitutional ban. Only individuals can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does
not automatically convert alienable lands of the public domain into private or patrimonial lands. The
alienable lands of the public domain must be transferred to qualified private parties, or to government
entities not tasked to dispose of public lands, before these lands can become private or patrimonial
lands. Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public
domain as private or patrimonial lands in the hands of a government agency tasked to dispose of public
lands. This will allow private corporations to acquire directly from government agencies limitless areas of
lands which, prior to such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim
foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that
EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation Projects
Whereas, there are several reclamation projects which are ongoing or being proposed to be undertaken
in various parts of the country which need to be evaluated for consistency with national programs;
Whereas, there is a need to give further institutional support to the Governments declared policy to
provide for a coordinated, economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the
National Government or any person authorized by it under proper contract;
Whereas, a central authority is needed to act on behalf of the National Government which shall ensure a
coordinated and integrated approach in the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government corporation
to undertake reclamation of lands and ensure their maximum utilization in promoting public welfare and
interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing authority to reorganize
the national government including the transfer, abolition, or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers
vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby order and
direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the National Government. All reclamation
projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken
by the PEA or through a proper contract executed by it with any person or entity; Provided, that,
reclamation projects of any national government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the President.
xxx.
As the central implementing agency tasked to undertake reclamation projects nationwide, with authority
to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or
selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not
private lands, in the same manner that DENR, when it disposes of other alienable lands, does not
dispose of private lands but alienable lands of the public domain. Only when qualified private parties
acquire these lands will the lands become private lands. In the hands of the government agency tasked
and authorized to dispose of alienable of disposable lands of the public domain, these lands are still
public, not private lands.
Furthermore, PEAs charter expressly states that PEA shall hold lands of the public domain as well as any
and all kinds of lands. PEA can hold both lands of the public domain and private lands. Thus, the mere
fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued
land patents or certificates of title in PEAs name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will
sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain. PEA will simply turn around, as PEA has now done under the
Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed
lands to a single private corporation in only one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse
equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over
80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since
PEA can acquire x x x any and all kinds of lands. This will open the floodgates to corporations and even
individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that
in the hands of PEA these lands are private lands. This will result in corporations amassing huge
landholdings never before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional development in
this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024
hectares of public lands.[105] The 1973 Constitution prohibited private corporations from acquiring any
kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529,
automatically become private lands is contrary to existing laws. Several laws authorize lands of the public
domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their
character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively,
provide as follows:
Act No. 496
Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the
Philippine Islands are alienated, granted, or conveyed to persons or the public or private corporations,
the same shall be brought forthwith under the operation of this Act and shall become registered lands.
PD No. 1529
Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated, granted or
conveyed to any person, the same shall be brought forthwith under the operation of this Decree.
(Emphasis supplied)
Based on its legislative history, the phrase conveyed to any person in Section 103 of PD No. 1529
includes conveyances of public lands to public corporations.
Alienable lands of the public domain granted, donated, or transferred to a province, municipality, or
branch or subdivision of the Government, as provided in Section 60 of CA No. 141, may be registered
under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is
expressly subject to the condition in Section 60 of CA No. 141 that the land shall not be alienated,
encumbered or otherwise disposed of in a manner affecting its title, except when authorized by
Congress. This provision refers to government reclaimed, foreshore and marshy lands of the public
domain that have been titled but still cannot be alienated or encumbered unless expressly authorized by
Congress. The need for legislative authority prevents the registered land of the public domain from
becoming private land that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be
registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states
Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in the name of any political
Thus, private property purchased by the National Government for expansion of a public wharf may be
titled in the name of a government corporation regulating port operations in the country. Private
property purchased by the National Government for expansion of an airport may also be titled in the
name of the government agency tasked to administer the airport. Private property donated to a
municipality for use as a town plaza or public school site may likewise be titled in the name of the
municipality.[106] All these properties become properties of the public domain, and if already registered
under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in any
existing law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the
Register of Deeds to issue in the name of the National Government new certificates of title covering such
expropriated lands. Section 85 of PD No. 1529 states
Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is
expropriated or taken by eminent domain, the National Government, province, city or municipality, or
any other agency or instrumentality exercising such right shall file for registration in the proper Registry a
certified copy of the judgment which shall state definitely by an adequate description, the particular
property or interest expropriated, the number of the certificate of title, and the nature of the public use.
A memorandum of the right or interest taken shall be made on each certificate of title by the Register of
Deeds, and where the fee simple is taken, a new certificate shall be issued in favor of the National
Government, province, city, municipality, or any other agency or instrumentality exercising such right for
the land so taken. The legal expenses incident to the memorandum of registration or issuance of a new
certificate of title shall be for the account of the authority taking the land or interest therein. (Emphasis
supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or
patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of
the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended
JVA is not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by
PEA for the earlier reclamation and construction works performed by the CDCP under its 1973 contract
with the Republic. Whether the Amended JVA is a sale or a joint venture, the fact remains that the
Amended JVA requires PEA to cause the issuance and delivery of the certificates of title conveying
AMARIs Land Share in the name of AMARI.[107]
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that
private corporations shall not hold such alienable lands of the public domain except by lease. The
transfer of title and ownership to AMARI clearly means that AMARI will hold the reclaimed lands other
than by lease. The transfer of title and ownership is a disposition of the reclaimed lands, a transaction
considered a sale or alienation under CA No. 141,[108] the Government Auditing Code,[109] and Section
3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part
of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also
form part of the public domain and are also inalienable, unless converted pursuant to law into alienable
or disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis,
not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their
inherent potential as areas for public use or public service. Alienable lands of the public domain,
increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing
population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private
corporations from acquiring any kind of alienable land of the public domain. Those who attempt to
dispose of inalienable natural resources of the State, or seek to circumvent the constitutional ban on
alienation of lands of the public domain to private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates
of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to
private corporations but may not sell or transfer ownership of these lands to private corporations. PEA
may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987
Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the
public domain until classified as alienable or disposable lands open to disposition and declared no longer
needed for public service. The government can make such classification and declaration only after PEA
has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the
public domain, which are the only natural resources the government can alienate. In their present state,
the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34
hectares[110] of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of
the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of
the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares[111] of still
submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the
1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the
public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the
reclaimed lands as alienable or disposable, and further declare them no longer needed for public
service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in
view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring
any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under
Article 1409[112] of the Civil Code, contracts whose object or purpose is contrary to law, or whose object
is outside the commerce of men, are inexistent and void from the beginning. The Court must perform its
duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab
initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether the Amended JVA is
grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last
issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual
matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay Development
Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint Venture Agreement
which is hereby declared NULL and VOID ab initio.
SO ORDERED.
7. THIRD DIVISION
[G.R. No. 136438. November 11, 2004]
TEOFILO C. VILLARICO, petitioner, vs. VIVENCIO SARMIENTO, SPOUSES BESSIE SARMIENTO-DEL MUNDO
& BETH DEL MUNDO, ANDOKS LITSON CORPORATION and MARITES CARINDERIA, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated December
7, 1998 in CA-G.R. CV No. 54883, affirming in toto the Decision[2] of the Regional Trial Court (RTC) of
Paraaque City, Branch 259, dated November 14, 1996, in Civil Case No. 95-044.
The facts of this case, as gleaned from the findings of the Court of Appeals, are:
Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, Paraaque City, Metro Manila with an
area of sixty-six (66) square meters and covered by Transfer Certificate of Title (T.C.T.) No. 95453 issued
by the Registry of Deeds, same city.
Petitioners lot is separated from the Ninoy Aquino Avenue (highway) by a strip of land belonging to the
government. As this highway was elevated by four (4) meters and therefore higher than the adjoining
areas, the Department of Public Works and Highways (DPWH) constructed stairways at several portions
of this strip of public land to enable the people to have access to the highway.
Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and her husband Beth Del
Mundo, respondents herein, had a building constructed on a portion of said government land. In
November that same year, a part thereof was occupied by Andoks Litson Corporation and Marites
Carinderia, also impleaded as respondents.
In 1993, by means of a Deed of Exchange of Real Property, petitioner acquired a 74.30 square meter
portion of the same area owned by the government. The property was registered in his name as T.C.T.
No. 74430 in the Registry of Deeds of Paraaque City.
In 1995, petitioner filed with the RTC, Branch 259, Paraaque City, a complaint for accion publiciana
against respondents, docketed as Civil Case No. 95-044. He alleged inter alia that respondents structures
on the government land closed his right of way to the Ninoy Aquino Avenue; and encroached on a
portion of his lot covered by T.C.T. No. 74430.
Respondents, in their answer, specifically denied petitioners allegations, claiming that they have been
issued licenses and permits by Paraaque City to construct their buildings on the area; and that petitioner
has no right over the subject property as it belongs to the government.
After trial, the RTC rendered its Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring the defendants to have a better right of possession over the subject land except the
portion thereof covered by Transfer Certificate of Title No. 74430 of the Register of Deeds of Paraaque;
2. Ordering the defendants to vacate the portion of the subject premises described in Transfer
Certificate of Title No. 74430 and gives its possession to plaintiff; and
3. Dismissing the claim for damages of the plaintiff against the defendants, and likewise dismissing the
claim for attorneys fees of the latter against the former.
Without pronouncement as to costs.
SO ORDERED.[3]
The trial court found that petitioner has never been in possession of any portion of the public land in
question. On the contrary, the defendants are the ones who have been in actual possession of the area.
According to the trial court, petitioner was not deprived of his right of way as he could use the Kapitan
Tinoy Street as passageway to the highway.
On appeal by petitioner, the Court of Appeals issued its Decision affirming the trial courts Decision in
toto, thus:
WHEREFORE, the judgment hereby appealed from is hereby AFFIRMED in toto, with costs against the
plaintiff-appellant.
SO ORDERED.[4]
In this petition, petitioner ascribes to the Court of Appeals the following assignments of error:
THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS CONTAINED A CONCLUSION WITHOUT
CITATION OF SPECIFIC EVIDENCE ON WHICH THE SAME WAS BASED.
II
THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE ONLY ISSUE IN THIS CASE IS WHETHER
OR NOT THE PLAINTIFF-APPELLANT HAS ACQUIRED A RIGHT OF WAY OVER THE LAND OF THE
GOVERNMENT WHICH IS BETWEEN HIS PROPERTY AND THE NINOY AQUINO AVENUE.
III
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT ACCION PUBLICIANA IS NOT THE PROPER
REMEDY IN THE CASE AT BAR.
IV
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE EXISTENCE OF THE PLAINTIFF-
APPELLANTS RIGHT OF WAY DOES NOT CARRY POSSESSION OVER THE SAME.
THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE OF WHO HAS THE BETTER RIGHT OF
POSSESSION OVER THE SUBJECT LAND BETWEEN THE PLAINTIFF-APPELLANT AND THE DEFENDANT-
APPELLEES.[5]
In their comment, respondents maintain that the Court of Appeals did not err in ruling that petitioners
action for accion publiciana is not the proper remedy in asserting his right of way on a lot owned by the
government.
Here, petitioner claims that respondents, by constructing their buildings on the lot in question, have
deprived him of his right of way and his right of possession over a considerable portion of the same lot,
which portion is covered by his T.C.T. No. 74430 he acquired by means of exchange of real property.
It is not disputed that the lot on which petitioners alleged right of way exists belongs to the state or
property of public dominion. Property of public dominion is defined by Article 420 of the Civil Code as
follows:
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 other of similar character.
Public use is use that is not confined to privileged individuals, but is open to the indefinite public.[6]
Records show that the lot on which the stairways were built is for the use of the people as passageway
to the highway. Consequently, it is a property of public dominion.
Property of public dominion is outside the commerce of man and hence it: (1) cannot be alienated or
leased or otherwise be the subject matter of contracts; (2) cannot be acquired by prescription against
the State; (3) is not subject to attachment and execution; and (4) cannot be burdened by any voluntary
easement.[7]
Considering that the lot on which the stairways were constructed is a property of public dominion, it can
not be burdened by a voluntary easement of right of way in favor of herein petitioner. In fact, its use by
the public is by mere tolerance of the government through the DPWH. Petitioner cannot appropriate it
for himself. Verily, he can not claim any right of possession over it. This is clear from Article 530 of the
Civil Code which provides:
ART. 530. Only things and rights which are susceptible of being appropriated may be the object of
possession.
Accordingly, both the trial court and the Court of Appeals erred in ruling that respondents have better
right of possession over the subject lot.
However, the trial court and the Court of Appeals found that defendants buildings were constructed on
the portion of the same lot now covered by T.C.T. No. 74430 in petitioners name. Being its owner, he is
entitled to its possession.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated December 7,
1998 in CA-G.R. CV No. 54883 is AFFIRMED with MODIFICATION in the sense that neither petitioner nor
respondents have a right of possession over the disputed lot where the stairways were built as it is a
property of public dominion. Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Carpio Morales and Garcia, JJ., concur.
Corona, J., on leave.
[1] CA Rollo, pp. 81-85. Penned by Associate Justice Hector L. Hofilea (ret.) and concurred in by Associate
Justices Jorge B. Imperial (now deceased) and Omar U. Amin (ret.).
[2] Id. at 45-50.
[3] Id. at 49-50.
[4] Id. at 84.
[5] Rollo at 10.
[6] US vs. Tan Piaco, 40 Phil. 853, 856 (1920).
[7] Tolentino II, Civil Code (1992 ed.), 31-32.

8.
FIRST DIVISION
REPUBLIC OF THE PHILIPPINES, G.R. No. 154953
Petitioner,
Present:
PUNO, C.J., Chairperson,
CARPIO,
- versus - CORONA,
AZCUNA, and
LEONARDO-DE CASTRO, JJ.

T.A.N. PROPERTIES, INC., Promulgated:
Respondent. June 26, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review[1] assailing the 21 August 2002 Decision[2] of the Court of
Appeals in CA-G.R. CV No. 66658. The Court of Appeals affirmed in toto the 16 December 1999
Decision[3] of the Regional Trial Court of Tanauan, Batangas, Branch 6 (trial court) in Land Registration
Case No. T-635.
The Antecedent Facts
This case originated from an Application for Original Registration of Title filed by T.A.N. Properties, Inc.
covering Lot 10705-B of the subdivision plan Csd-04-019741 which is a portion of the consolidated Lot
10705, Cad-424, Sto. Tomas Cadastre. The land, with an area of 564,007 square meters, or 56.4007
hectares, is located at San Bartolome, Sto. Tomas, Batangas.
On 31 August 1999, the trial court set the case for initial hearing at 9:30 a.m. on 11 November 1999. The
Notice of Initial Hearing was published in the Official Gazette, 20 September 1999 issue, Volume 95, No.
38, pages 6793 to 6794,[4] and in the 18 October 1999 issue of Peoples Journal Taliba,[5] a newspaper of
general circulation in the Philippines. The Notice of Initial Hearing was also posted in a conspicuous place
on the bulletin board of the Municipal Building of Sto. Tomas, Batangas, as well as in a conspicuous place
on the land.[6] All adjoining owners and all government agencies and offices concerned were notified of
the initial hearing.[7]
On 11 November 1999, when the trial court called the case for initial hearing, there was no oppositor
other than the Opposition dated 7 October 1999 of the Republic of the Philippines represented by the
Director of Lands (petitioner). On 15 November 1999, the trial court issued an Order[8] of General
Default against the whole world except as against petitioner.
During the hearing on 19 November 1999, Ceferino Carandang (Carandang) appeared as oppositor. The
trial court gave Carandang until 29 November 1999 within which to file his written opposition.[9]
Carandang failed to file his written opposition and to appear in the succeeding hearings. In an Order[10]
dated 13 December 1999, the trial court reinstated the Order of General Default.
During the hearings conducted on 13 and 14 December 1999, respondent presented three witnesses:
Anthony Dimayuga Torres (Torres), respondents Operations Manager and its authorized representative in
the case; Primitivo Evangelista (Evangelista), a 72-year old resident of San Bartolome, Sto. Tomas,
Batangas since birth; and Regalado Marquez, Records Officer II of the Land Registration Authority (LRA),
Quezon City.
The testimonies of respondents witnesses showed that Prospero Dimayuga (Kabesang Puroy) had
peaceful, adverse, open, and continuous possession of the land in the concept of an owner since 1942.
Upon his death, Kabesang Puroy was succeeded by his son Antonio Dimayuga (Antonio). On 27
September 1960, Antonio executed a Deed of Donation covering the land in favor of one of his children,
Fortunato Dimayuga (Fortunato). Later, however, Antonio gave Fortunato another piece of land. Hence,
on 26 April 1961, Antonio executed a Partial Revocation of Donation, and the land was adjudicated to
one of Antonios children, Prospero Dimayuga (Porting).[11] On 8 August 1997, Porting sold the land to
respondent.
The Ruling of the Trial Court
In its 16 December 1999 Decision, the trial court adjudicated the land in favor of respondent.
The trial court ruled that a juridical person or a corporation could apply for registration of land provided
such entity and its predecessors-in-interest have possessed the land for 30 years or more. The trial court
ruled that the facts showed that respondents predecessors-in-interest possessed the land in the concept
of an owner prior to 12 June 1945, which possession converted the land to private property.
The dispositive portion of the trial courts Decision reads:
WHEREFORE, and upon previous confirmation of the Order of General Default, the Court hereby
adjudicates and decrees Lot 10705-B, identical to Lot 13637, Cad-424, Sto. Tomas Cadastre, on plan Csd-
04-019741, situated in Barangay of San Bartolome, Municipality of Sto. Tomas, Province of Batangas,
with an area of 564,007 square meters, in favor of and in the name of T.A.N. Properties, Inc., a domestic
corporation duly organized and existing under Philippine laws with principal office at 19th Floor, PDCP
Bank Building, 8737 Paseo de Roxas, Makati City.
Once this Decision shall have become final, let the corresponding decree of registration be issued.
SO ORDERED.[12]
Petitioner appealed from the trial courts Decision. Petitioner alleged that the trial court erred in granting
the application for registration absent clear evidence that the applicant and its predecessors-in-interest
have complied with the period of possession and occupation as required by law. Petitioner alleged that
the testimonies of Evangelista and Torres are general in nature. Considering the area involved, petitioner
argued that additional witnesses should have been presented to corroborate Evangelistas testimony.
The Ruling of the Court of Appeals
In its 21 August 2002 Decision, the Court of Appeals affirmed in toto the trial courts Decision.
The Court of Appeals ruled that Evangelistas knowledge of the possession and occupation of the land
stemmed not only from the fact that he worked there for three years but also because he and Kabesang
Puroy were practically neighbors. On Evangelistas failure to mention the name of his uncle who
continuously worked on the land, the Court of Appeals ruled that Evangelista should not be faulted as he
was not asked to name his uncle when he testified. The Court of Appeals also ruled that at the outset,
Evangelista disclaimed knowledge of Fortunatos relation to Kabesang Puroy, but this did not affect
Evangelistas statement that Fortunato took over the possession and cultivation of the land after
Kabesang Puroys death. The Court of Appeals further ruled that the events regarding the acquisition and
disposition of the land became public knowledge because San Bartolome was a small community. On the
matter of additional witnesses, the Court of Appeals ruled that petitioner failed to cite any law requiring
the corroboration of the sole witness testimony.
The Court of Appeals further ruled that Torres was a competent witness since he was only testifying on
the fact that he had caused the filing of the application for registration and that respondent acquired the
land from Porting.
Petitioner comes to this Court assailing the Court of Appeals Decision. Petitioner raises the following
grounds in its Memorandum:
The Court of Appeals erred on a question of law in allowing the grant of title to applicant corporation
despite the following:
1. Absence of showing that it or its predecessors-in-interest had open, continuous, exclusive, and
notorious possession and occupation in the concept of an owner since 12 June 1945 or earlier; and
2. Disqualification of applicant corporation to acquire the subject tract of land.[13]
The Issues
The issues may be summarized as follows:

1. Whether the land is alienable and disposable;
2. Whether respondent or its predecessors-in-interest had open, continuous, exclusive, and notorious
possession and occupation of the land in the concept of an owner since June 1945 or earlier; and
3. Whether respondent is qualified to apply for registration of the land under the Public Land Act.
The Ruling of this Court
The petition has merit.
Respondent Failed to Prove
that the Land is Alienable and Disposable

Petitioner argues that anyone who applies for registration has the burden of overcoming the
presumption that the land forms part of the public domain. Petitioner insists that respondent failed to
prove that the land is no longer part of the public domain.
The well-entrenched rule is that all lands not appearing to be clearly of private dominion presumably
belong to the State.[14] The onus to overturn, by incontrovertible evidence, the presumption that the
land subject of an application for registration is alienable and disposable rests with the applicant.[15]
In this case, respondent submitted two certifications issued by the Department of Environment and
Natural Resources (DENR). The 3 June 1997 Certification by the Community Environment and Natural
Resources Offices (CENRO), Batangas City,[16] certified that lot 10705, Cad-424, Sto. Tomas Cadastre
situated at Barangay San Bartolome, Sto. Tomas, Batangas with an area of 596,116 square meters falls
within the ALIENABLE AND DISPOSABLE ZONE under Project No. 30, Land Classification Map No. 582
certified [on] 31 December 1925. The second certification[17] in the form of a memorandum to the trial
court, which was issued by the Regional Technical Director, Forest Management Services of the DENR
(FMS-DENR), stated that the subject area falls within an alienable and disposable land, Project No. 30 of
Sto. Tomas, Batangas certified on Dec. 31, 1925 per LC No. 582.
The certifications are not sufficient. DENR Administrative Order (DAO) No. 20,[18] dated 30 May 1988,
delineated the functions and authorities of the offices within the DENR. Under DAO No. 20, series of
1988, the CENRO issues certificates of land classification status for areas below 50 hectares. The
Provincial Environment and Natural Resources Offices (PENRO) issues certificate of land classification
status for lands covering over 50 hectares. DAO No. 38,[19] dated 19 April 1990, amended DAO No. 20,
series of 1988. DAO No. 38, series of 1990 retained the authority of the CENRO to issue certificates of
land classification status for areas below 50 hectares, as well as the authority of the PENRO to issue
certificates of land classification status for lands covering over 50 hectares.[20] In this case, respondent
applied for registration of Lot 10705-B. The area covered by Lot 10705-B is over 50 hectares (564,007
square meters). The CENRO certificate covered the entire Lot 10705 with an area of 596,116 square
meters which, as per DAO No. 38, series of 1990, is beyond the authority of the CENRO to certify as
alienable and disposable.
The Regional Technical Director, FMS-DENR, has no authority under DAO Nos. 20 and 38 to issue
certificates of land classification. Under DAO No. 20, the Regional Technical Director, FMS-DENR:
1. Issues original and renewal of ordinary minor products (OM) permits except rattan;
2. Approves renewal of resaw/mini-sawmill permits;
3. Approves renewal of special use permits covering over five hectares for public infrastructure
projects; and
4. Issues renewal of certificates of registration for logs, poles, piles, and lumber dealers.
Under DAO No. 38, the Regional Technical Director, FMS-DENR:

1. Issues original and renewal of ordinary minor [products] (OM) permits except rattan;
2. Issues renewal of certificate of registration for logs, poles, and piles and lumber dealers;
3. Approves renewal of resaw/mini-sawmill permits;
4. Issues public gratuitous permits for 20 to 50 cubic meters within calamity declared areas for public
infrastructure projects; and
5. Approves original and renewal of special use permits covering over five hectares for public
infrastructure projects.
Hence, the certification issued by the Regional Technical Director, FMS-DENR, in the form of a
memorandum to the trial court, has no probative value.
Further, it is not enough for the PENRO or CENRO to certify that a land is alienable and disposable. The
applicant for land registration must prove that the DENR Secretary had approved the land classification
and released the land of the public domain as alienable and disposable, and that the land subject of the
application for registration falls within the approved area per verification through survey by the PENRO
or CENRO. In addition, the applicant for land registration must present a copy of the original
classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the
official records. These facts must be established to prove that the land is alienable and disposable.
Respondent failed to do so because the certifications presented by respondent do not, by themselves,
prove that the land is alienable and disposable.
Only Torres, respondents Operations Manager, identified the certifications submitted by respondent. The
government officials who issued the certifications were not presented before the trial court to testify on
their contents. The trial court should not have accepted the contents of the certifications as proof of the
facts stated therein. Even if the certifications are presumed duly issued and admissible in evidence, they
have no probative value in establishing that the land is alienable and disposable.
Public documents are defined under Section 19, Rule 132 of the Revised Rules on Evidence as follows:
(a) The written official acts, or records of the official acts of the sovereign authority, official bodies and
tribunals, and public officers, whether of the Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills and testaments; and
(c) Public records, kept in the Philippines, of private documents required by law to be entered therein.
Applying Section 24 of Rule 132, the record of public documents referred to in Section 19(a), when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by
the officer having legal custody of the record, or by his deputy x x x. The CENRO is not the official
repository or legal custodian of the issuances of the DENR Secretary declaring public lands as alienable
and disposable. The CENRO should have attached an official publication[21] of the DENR Secretarys
issuance declaring the land alienable and disposable.
Section 23, Rule 132 of the Revised Rules on Evidence provides:
Sec. 23. Public documents as evidence. Documents consisting of entries in public records made in the
performance of a duty by a public officer are prima facie evidence of the facts stated therein. All other
public documents are evidence, even against a third person, of the fact which gave rise to their execution
and of the date of the latter.
The CENRO and Regional Technical Director, FMS-DENR, certifications do not fall within the class of
public documents contemplated in the first sentence of Section 23 of Rule 132. The certifications do not
reflect entries in public records made in the performance of a duty by a public officer, such as entries
made by the Civil Registrar[22] in the books of registries, or by a ship captain in the ships logbook.[23]
The certifications are not the certified copies or authenticated reproductions of original official records in
the legal custody of a government office. The certifications are not even records of public documents.
[24] The certifications are conclusions unsupported by adequate proof, and thus have no probative
value.[25] Certainly, the certifications cannot be considered prima facie evidence of the facts stated
therein.
The CENRO and Regional Technical Director, FMS-DENR, certifications do not prove that Lot 10705-B falls
within the alienable and disposable land as proclaimed by the DENR Secretary. Such government
certifications do not, by their mere issuance, prove the facts stated therein.[26] Such government
certifications may fall under the class of documents contemplated in the second sentence of Section 23
of Rule 132. As such, the certifications are prima facie evidence of their due execution and date of
issuance but they do not constitute prima facie evidence of the facts stated therein.
The Court has also ruled that a document or writing admitted as part of the testimony of a witness does
not constitute proof of the facts stated therein.[27] Here, Torres, a private individual and respondents
representative, identified the certifications but the government officials who issued the certifications did
not testify on the contents of the certifications. As such, the certifications cannot be given probative
value.[28] The contents of the certifications are hearsay because Torres was incompetent to testify on
the veracity of the contents of the certifications.[29] Torres did not prepare the certifications, he was not
an officer of CENRO or FMS-DENR, and he did not conduct any verification survey whether the land falls
within the area classified by the DENR Secretary as alienable and disposable.
Petitioner also points out the discrepancy as to when the land allegedly became alienable and
disposable. The DENR Secretary certified that based on Land Classification Map No. 582, the land
became alienable and disposable on 31 December 1925. However, the certificate on the blue print plan
states that it became alienable and disposable on 31 December 1985.
We agree with petitioner that while the certifications submitted by respondent show that under the
Land Classification Map No. 582, the land became alienable and disposable on 31 December 1925, the
blue print plan states that it became alienable and disposable on 31 December 1985. Respondent
alleged that the blue print plan merely serves to prove the precise location and the metes and bounds of
the land described therein x x x and does not in any way certify the nature and classification of the land
involved.[30] It is true that the notation by a surveyor-geodetic engineer on the survey plan that the land
formed part of the alienable and disposable land of the public domain is not sufficient proof of the lands
classification.[31] However, respondent should have at least presented proof that would explain the
discrepancy in the dates of classification. Marquez, LRA Records Officer II, testified that the documents
submitted to the court consisting of the tracing cloth plan, the technical description of Lot 10705-B, the
approved subdivision plan, and the Geodetic Engineers certification were faithful reproductions of the
original documents in the LRA office. He did not explain the discrepancy in the dates. Neither was the
Geodetic Engineer presented to explain why the date of classification on the blue print plan was different
from the other certifications submitted by respondent.
There was No Open, Continuous, Exclusive, and Notorious
Possession and Occupation in the Concept of an Owner
Petitioner alleges that the trial courts reliance on the testimonies of Evangelista and Torres was
misplaced. Petitioner alleges that Evangelistas statement that the possession of respondents
predecessors-in-interest was open, public, continuous, peaceful, and adverse to the whole world was a
general conclusion of law rather than factual evidence of possession of title. Petitioner alleges that
respondent failed to establish that its predecessors-in-interest had held the land openly, continuously,
and exclusively for at least 30 years after it was declared alienable and disposable.
We agree with petitioner.

Evangelista testified that Kabesang Puroy had been in possession of the land before 1945. Yet,
Evangelista only worked on the land for three years. Evangelista testified that his family owned a lot near
Kabesang Puroys land. The Court of Appeals took note of this and ruled that Evangelistas knowledge of
Kabesang Puroys possession of the land stemmed not only from the fact that he had worked thereat but
more so that they were practically neighbors.[32] The Court of Appeals observed:
In a small community such as that of San Bartolome, Sto. Tomas, Batangas, it is not difficult to
understand that people in the said community knows each and everyone. And, because of such
familiarity with each other, news or events regarding the acquisition or disposition for that matter, of a
vast tract of land spreads like wildfire, thus, the reason why such an event became of public knowledge
to them.[33]
Evangelista testified that Kabesang Puroy was succeeded by Fortunato. However, he admitted that he did
not know the exact relationship between Kabesang Puroy and Fortunato, which is rather unusual for
neighbors in a small community. He did not also know the relationship between Fortunato and Porting.
In fact, Evangelistas testimony is contrary to the factual finding of the trial court that Kabesang Puroy was
succeeded by his son Antonio, not by Fortunato who was one of Antonios children. Antonio was not
even mentioned in Evangelistas testimony.
The Court of Appeals ruled that there is no law that requires that the testimony of a single witness needs
corroboration. However, in this case, we find Evangelistas uncorroborated testimony insufficient to prove
that respondents predecessors-in-interest had been in possession of the land in the concept of an owner
for more than 30 years. We cannot consider the testimony of Torres as sufficient corroboration. Torres
testified primarily on the fact of respondents acquisition of the land. While he claimed to be related to
the Dimayugas, his knowledge of their possession of the land was hearsay. He did not even tell the trial
court where he obtained his information.
The tax declarations presented were only for the years starting 1955. While tax declarations are not
conclusive evidence of ownership, they constitute proof of claim of ownership.[34] Respondent did not
present any credible explanation why the realty taxes were only paid starting 1955 considering the claim
that the Dimayugas were allegedly in possession of the land before 1945. The payment of the realty
taxes starting 1955 gives rise to the presumption that the Dimayugas claimed ownership or possession of
the land only in that year.
Land Application by a Corporation
Petitioner asserts that respondent, a private corporation, cannot apply for registration of the land of the
public domain in this case.
We agree with petitioner.
Section 3, Article XII of the 1987 Constitution provides:

Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and
national parks. Agricultural lands of the public domain may be further classified by law according to the
uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable lands of the public domain
except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more
than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead
or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor.
The 1987 Constitution absolutely prohibits private corporations from acquiring any kind of alienable land
of the public domain. In Chavez v. Public Estates Authority,[35] the Court traced the law on disposition of
lands of the public domain. Under the 1935 Constitution, there was no prohibition against private
corporations from acquiring agricultural land. The 1973 Constitution limited the alienation of lands of
the public domain to individuals who were citizens of the Philippines. Under the 1973 Constitution,
private corporations, even if wholly owned by Filipino citizens, were no longer allowed to acquire
alienable lands of the public domain. The present 1987 Constitution continues the prohibition against
private corporations from acquiring any kind of alienable land of the public domain.[36] The Court
explained in Chavez:
The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations
from acquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold alienable lands of the public domain only through lease.
xxxx
[I]f the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited
the size of alienable lands of the public domain that corporations could acquire. The Constitution could
have followed the limitations on individuals, who could acquire not more than 24 hectares of alienable
lands of the public domain under the 1973 Constitution, and not more than 12 hectares under the 1987
Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a
corporation would be more effective in preventing the break-up of farmlands. If the farmland is
registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in
the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-
up of farmlands into smaller and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from
acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional
ban, individuals who already acquired the maximum area of alienable lands of the public domain could
easily set up corporations to acquire more alienable public lands. An individual could own as many
corporations as his means would allow him. An individual could even hide his ownership of a corporation
by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to
circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public
domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a
limited area of alienable land of the public domain to a qualified individual. This constitutional intent is
safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public
domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable
public lands are gradually decreasing in the face of an ever-growing population. The most effective way
to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public
domain only to individuals. This, it would seem, is the practical benefit arising from the constitutional
ban.[37]
In Director of Lands v. IAC,[38] the Court allowed the land registration proceeding filed by Acme Plywood
& Veneer Co., Inc. (Acme) for five parcels of land with an area of 481,390 square meters, or 48.139
hectares, which Acme acquired from members of the Dumagat tribe. The issue in that case was whether
the title could be confirmed in favor of Acme when the proceeding was instituted after the effectivity of
the 1973 Constitution which prohibited private corporations or associations from holding alienable lands
of the public domain except by lease not to exceed 1,000 hectares. The Court ruled that the land was
already private land when Acme acquired it from its owners in 1962, and thus Acme acquired a
registrable title. Under the 1935 Constitution, private corporations could acquire public agricultural lands
not exceeding 1,024 hectares while individuals could acquire not more than 144 hectares.[39]
In Director of Lands, the Court further ruled that open, exclusive, and undisputed possession of alienable
land for the period prescribed by law created the legal fiction whereby the land, upon completion of the
requisite period, ipso jure and without the need of judicial or other sanction ceases to be public land and
becomes private property. The Court ruled:
Nothing can more clearly demonstrate the logical inevitability of considering possession of public land
which is of the character and duration prescribed by statute as the equivalent of an express grant from
the State than the dictum of the statute itself that the possessor(s) x x x shall be conclusively presumed
to have performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title x x x. No proof being admissible to overcome a conclusive presumption, confirmation
proceedings would, in truth be little more than a formality, at the most limited to ascertaining whether
the possession claimed is of the required character and length of time; and registration thereunder
would not confer title, but simply recognize a title already vested. The proceedings would not originally
convert the land from public to private land, but only confirm such a conversion already effected by
operation of law from the moment the required period of possession became complete.
x x x [A]lienable public land held by a possessor, personally or through his predecessors-in-interest,

openly, continuously and exclusively for the prescribed statutory period of (30 years under The Public
Land Act, as amended) is converted to private property by the mere lapse or completion of said period,
ipso jure. Following that rule and on the basis of the undisputed facts, the land subject of this appeal
was already private property at the time it was acquired from the Infiels by Acme. Acme thereby
acquired a registrable title, there being at the time no prohibition against said corporations holding or
owning private land. x x x.[40] (Emphasis supplied)
Director of Lands is not applicable to the present case. In Director of Lands, the land x x x was already
private property at the time it was acquired x x x by Acme. In this case, respondent acquired the land on
8 August 1997 from Porting, who, along with his predecessors-in-interest, has not shown to have been,
as of that date, in open, continuous, and adverse possession of the land for 30 years since 12 June 1945.
In short, when respondent acquired the land from Porting, the land was not yet private property.
For Director of Lands to apply and enable a corporation to file for registration of alienable and disposable
land, the corporation must have acquired the land when its transferor had already a vested right to a
judicial confirmation of title to the land by virtue of his open, continuous and adverse possession of the
land in the concept of an owner for at least 30 years since 12 June 1945. Thus, in Natividad v. Court of
Appeals,[41] the Court declared:
Under the facts of this case and pursuant to the above rulings, the parcels of land in question had
already been converted to private ownership through acquisitive prescription by the predecessors-in-
interest of TCMC when the latter purchased them in 1979. All that was needed was the confirmation of
the titles of the previous owners or predecessors-in-interest of TCMC.
Being already private land when TCMC bought them in 1979, the prohibition in the 1973 Constitution
against corporations acquiring alienable lands of the public domain except through lease (Article XIV,
Section 11, 1973 Constitution) did not apply to them for they were no longer alienable lands of the
public domain but private property.
What is determinative for the doctrine in Director of Lands to apply is for the corporate applicant for
land registration to establish that when it acquired the land, the same was already private land by
operation of law because the statutory acquisitive prescriptive period of 30 years had already lapsed.
The length of possession of the land by the corporation cannot be tacked on to complete the statutory
30 years acquisitive prescriptive period. Only an individual can avail of such acquisitive prescription since
both the 1973 and 1987 Constitutions prohibit corporations from acquiring lands of the public domain.
Admittedly, a corporation can at present still apply for original registration of land under the doctrine in
Director of Lands. Republic Act No. 9176[42] (RA 9176) further amended the Public Land Act[43] and
extended the period for the filing of applications for judicial confirmation of imperfect and incomplete
titles to alienable and disposable lands of the public domain until 31 December 2020. Thus:
Sec. 2. Section 47, Chapter VIII of the same Act, as amended, is hereby further amended to read as
follows:
Sec. 47. The persons specified in the next following section are hereby granted time, not to extend
beyond December 31, 2020 within which to avail of the benefits of this Chapter: Provided, That this
period shall apply only where the area applied for does not exceed twelve (12) hectares: Provided,
further, That the several periods of time designated by the President in accordance with Section Forty-
five of this Act shall apply also to the lands comprised in the provisions of this Chapter, but this Section
shall not be construed as prohibiting any of said persons from acting under this Chapter at any time prior
to the period fixed by the President.
Sec. 3. All pending applications filed before the effectivity of this amendatory Act shall be treated as
having been filed in accordance with the provisions of this Act.
Under RA 9176, the application for judicial confirmation is limited only to 12 hectares, consistent with
Section 3, Article XII of the 1987 Constitution that a private individual may only acquire not more than 12
hectares of alienable and disposable land. Hence, respondent, as successor-in-interest of an individual
owner of the land, cannot apply for registration of land in excess of 12 hectares. Since respondent
applied for 56.4007 hectares, the application for the excess area of 44.4007 hectares is contrary to law,
and thus void ab initio. In applying for land registration, a private corporation cannot have any right
higher than its predecessor-in-interest from whom it derived its right. This assumes, of course, that the
corporation acquired the land, not exceeding 12 hectares, when the land had already become private
land by operation of law. In the present case, respondent has failed to prove that any portion of the land
was already private land when respondent acquired it from Porting in 1997.
WHEREFORE, we SET ASIDE the 21 August 2002 Decision of the Court of Appeals in CA-G.R. CV No.
66658 and the 16 December 1999 Decision of the Regional Trial Court of Tanauan, Batangas, Branch 6 in
Land Registration Case No. T-635. We DENY the application for registration filed by T.A.N. Properties, Inc.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Courts Division.
REYNATO S. PUNO
Chief Justice
[1] Under Rule 45 of the 1997 Rules of Civil Procedure.
[2] Rollo, pp. 63-70. Penned by Associate Justice Buenaventura J. Guerrero with Associate Justices
Rodrigo V. Cosico and Perlita J. Tria Tirona, concurring.
[3] Id. at 56-61. Penned by Judge Flordelis Ozaeta Navarro.
[4] Records, p. 78.
[5] Id. at 81.
[6] Id. at 66.
[7] Id. at 69.
[8] Id. at 99.

[9] Id. at 101.
[10] Id. at 111.
[11] Also referred to as Forting.
[12] Rollo, pp. 60-61.
[13] Id. at 173-174.
[14] Republic v. Naguiat, G.R. No. 134209, 24 January 2006, 479 SCRA 585.
[15] Id.
[16] Records, p. 143. Signed by CENR Officer Pancrasio M. Alcantara.
[17] Id. at 91. Signed by Wilfredo M. Ria.
[18] Delineation of Regulatory Functions and Authorities.
[19] Revised Regulations on the Delineation of Functions and Delineation of Authorities.

[20] On 2 June 1998, DAO No. 98-24 was issued, adopting a DENR Manual of Approvals delegating
authorities and delineating functions in the DENR Central and Field Offices. DAO No. 98-24 superseded
DAO Nos. 38 and 38-A and all inconsistent orders and circulars involving delegated authority. DAO No.
98-24 is silent on the authority to issue certificates of land classification status, whether for areas below
50 hectares or for lands covering over 50 hectares. The CENRO certification in this case was issued prior
to the adoption of the DENR Manual of Approvals.
[21] Salic v. Comelec, 469 Phil. 775 (2004).
[22] Article 410, Civil Code.
[23] Haverton Shipping Ltd. v. NLRC, 220 Phil. 356 (1985).
[24] Delfin v. Billones, G.R. No. 146550, 17 March 2006, 485 SCRA 38.
[25] Ambayec v. Court of Appeals, G.R. No. 162780, 21June 2005, 460 SCRA 537.
[26] Supra note 23.
[27] Id.
[28] Id.
[29] People v. Patamama, 321 Phil. 193 (1995).
[30] Rollo, p. 152.

[31] Menguito v. Republic, 401 Phil. 274 (2000).
[32] Rollo, p. 67.
[33] Id. at 68.
[34] Ganila v. Court of Appeals, G.R. No. 150755, 28 June 2005, 461 SCRA 435.
[35] 433 Phil. 506 (2002).
[36] Id.
[37] Id. at 557-559.
[38] 230 Phil. 590 (1986).
[39] Section 2, Article XIII of the 1935 Constitution provides: No private corporation or association may
acquire, lease, or hold public agricultural lands in excess of one thousand and twenty four hectares, nor
may any individual acquire such lands by purchase in excess of one hundred and forty four hectares, or
by lease in excess of one thousand and twenty four hectares, or by homestead in excess of twenty-four
hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be leased to an
individual, private corporation, or association.
[40] 230 Phil. 590, 602 and 605 (1986).
[41] G.R. No. 88233, 4 October 1991, 202 SCRA 493.
[42] Approved on 13 November 2002. An earlier law, Republic Act No. 6940, had extended the period up
to 31 December 2000 under the same conditions.
[43] Commonwealth Act No. 141, as amended.
9.
EN BANC
MANILA INTERNATIONAL G.R. No. 155650
AIRPORT AUTHORITY,
Petitioner, Present:
PANGANIBAN, C.J.,
PUNO,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
COURT OF APPEALS, CITY OF TINGA,

PARAAQUE, CITY MAYOR OF CHICO-NAZARIO,
PARAAQUE, SANGGUNIANG GARCIA, and
PANGLUNGSOD NG PARAAQUE, VELASCO, JR., JJ.
CITY ASSESSOR OF PARAAQUE,
and CITY TREASURER OF Promulgated:
PARAAQUE,
Respondents. July 20, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I ON
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport
(NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as the Revised
Charter of the Manila International Airport Authority (MIAA Charter). Executive Order No. 903 was
issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos.
909[1] and 298[2] amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and equipment
within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,[3]
including the runways and buildings (Airport Lands and Buildings) then under the Bureau of Air
Transportation.[4] The MIAA Charter further provides that no portion of the land transferred to MIAA
shall be disposed of through sale or any other mode unless specifically approved by the President of the
Philippines.[5]
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The
OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax
granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of
Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax
already due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque
for the taxable years 1992 to 2001. MIAAs real estate tax delinquency is broken down as follows:
TAX DECLARATION
TAXABLE YEAR
TAX DUE
PENALTY
TOTAL
E-016-01370
1992-2001
19,558,160.00
11,201,083.20
30,789,243.20
E-016-01374
1992-2001
111,689,424.90
68,149,479.59
179,838,904.49
E-016-01375
1992-2001
20,276,058.00
12,371,832.00
32,647,890.00
E-016-01376
1992-2001
58,144,028.00
35,477,712.00
93,621,740.00
E-016-01377
1992-2001
18,134,614.65
11,065,188.59
29,199,803.24
E-016-01378
1992-2001
111,107,950.40
67,794,681.59
178,902,631.99
E-016-01379
1992-2001
4,322,340.00
2,637,360.00
6,959,700.00
E-016-01380
1992-2001
7,776,436.00
4,744,944.00
12,521,380.00
*E-016-013-85
1998-2001
6,444,810.00
2,900,164.50
9,344,974.50
*E-016-01387
1998-2001
34,876,800.00
5,694,560.00
50,571,360.00
*E-016-01396
1998-2001
75,240.00
33,858.00
109,098.00
GRAND TOTAL
P392,435,861.95
P232,070,863.47
P 624,506,725.42
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.00[6]
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of
levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public
auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA
thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC
pointed out that Section 206 of the Local Government Code requires persons exempt from real estate
tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that
MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and
injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to
restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public
sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day
reglementary period. The Court of Appeals also denied on 27 September 2002 MIAAs 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. Marcos[8] where we held
that the Local Government Code has withdrawn the exemption from real estate tax granted to
international airports. Respondents further argue that since MIAA has already paid some of the real
estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are
exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt
from real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the
City of Paraaque, and all proceedings taken pursuant to such assessments, are void. In such event, the
other issues raised in this petition become moot.
The Courts Ruling
We rule that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local
governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from
real estate tax. Respondents claim that the deletion of the phrase any government-owned or controlled
so exempt by its charter in Section 234(e) of the Local Government Code withdrew the real estate tax
exemption of government-owned or controlled corporations. The deleted phrase appeared in Section
40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real estate
tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the
Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled
corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital
stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be organized as a stock or non-stock corporation.
MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has
no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA
Charter[9] provides:
SECTION 10. Capital. The capital of the Authority to be contributed by the National Government shall be
increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00)
Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such other
properties, movable and immovable[,] which may be contributed by the National Government or
transferred by it from any of its agencies, the valuation of which shall be determined jointly with the
Department of Budget and Management and the Commission on Audit on the date of such contribution
or transfer after making due allowances for depreciation and other deductions taking into account the
loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum
(70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the
National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted into the
equity of the National Government in the Authority. Thereafter, the Government contribution to the
capital of the Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code[10] defines a stock corporation as one whose capital stock is divided
into shares and x x x authorized to distribute to the holders of such shares dividends x x x. MIAA has
capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA
is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code
defines a non-stock corporation as one where no part of its income is distributable as dividends to its
members, trustees or officers. A non-stock corporation must have members. Even if we assume that the
Government is considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to their members.
Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the
National Treasury.[11] This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are organized for charitable,
religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service,
or similar purposes, like trade, industry, agriculture and like chambers. MIAA is not organized for any of
these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for
public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-
owned or controlled corporation. What then is the legal status of MIAA within the National
Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative
Code defines a government instrumentality as follows:
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually through a
charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does not
become a corporation. Unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,[12] police
authority[13] and the levying of fees and charges.[14] At the same time, MIAA exercises all the powers of
a corporation under the Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order.[15]
Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with the
department framework. The MIAA Charter expressly states that transforming MIAA into a separate and
autonomous body[16] will make its operation more financially viable.[17]
Many government instrumentalities are vested with corporate powers but they do not become stock or
non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a
government-owned or controlled corporation. Examples are the Mactan International Airport Authority,
the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these
government instrumentalities exercise corporate powers but they are not organized as stock or non-
stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative
Code. These government instrumentalities are sometimes loosely called government corporate entities.
However, they are not government-owned or controlled corporations in the strict sense as understood
under the Administrative Code, which is the governing law defining the legal relationship and status of
government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which
states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
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:
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 users 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 users tax is more equitable a
principle of taxation mandated in the 1987 Constitution.[21]
The Airport Lands and Buildings of MIAA, which its Charter calls the principal airport of the Philippines
for both international and domestic air traffic,[22] are properties of public dominion because they are
intended for public use. As properties of public dominion, they indisputably belong to the State or the
Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce
of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of
man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted
to public use are outside the commerce of man, thus:
According to article 344 of the Civil Code: Property for public use in provinces and in towns comprises
the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and
public works of general service supported by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in
1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the
defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use
the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over
a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may
be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the
supreme court of Spain in its decision of February 12, 1895, which says: Communal things that cannot be
sold because they are by their very nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc. (Emphasis supplied) [23]
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside
the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available
to the public in general. They are outside the commerce of man and cannot be disposed of or even
leased by the municipality to private parties. While in case of war or during an emergency, town plazas
may be occupied temporarily by private individuals, as was done and as was tolerated by the
Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must
also cease, and the town officials should see to it that the town plazas should ever be kept open to the
public and free from encumbrances or illegal private constructions.[24] (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot
be the subject of an auction sale.[25]
Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition
through public or private sale. Any encumbrance, levy on execution or auction sale of any property of
public dominion is void for being contrary to public policy. Essential public services will stop if properties
of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the
City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for
non-payment of real estate tax.
Before MIAA can encumber[26] the Airport Lands and Buildings, the President must first withdraw from
public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth
Act No. 141, which remains to this day the existing general law governing the classification and
disposition of lands of the public domain other than timber and mineral lands,[27] provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the
President may designate by proclamation any tract or tracts of land of the public domain as reservations
for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in
accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the
public interest requires it, including reservations for highways, rights of way for railroads, hydraulic
power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries,
public fishponds, working mens 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
(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.
In MIAAs 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 MIAAs 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;
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local
governments from imposing [t]axes, fees or charges of any kind on the National Government, its
agencies and instrumentalities x x x. The real properties owned by the Republic are titled either in the
name of the Republic itself or in the name of agencies or instrumentalities of the National Government.
The Administrative Code allows real property owned by the Republic to be titled in the name of agencies
or instrumentalities of the national government. Such real properties remain owned by the Republic and
continue to be exempt from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the
national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement does not
result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real
property owned by the Republic loses its tax exemption only if the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person. MIAA, as a government instrumentality, is
not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that
the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does
not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt
from real estate tax. For example, the land area occupied by hangars that MIAA leases to private
corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land
area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In
Lung Center of the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of
the land occupied by the hospital and portions of the hospital used for its patients, whether paying or
non-paying, are exempt from real property taxes.[29]
3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local
Government Code of 1991 withdrew the tax exemption of all persons, whether natural or juridical upon
the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are
hereby withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local
Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from
real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions
from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit
proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the
inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.
The term All persons encompasses the two classes of persons recognized under our laws, natural and
juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just
whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in
the original)
The minority posits that the determinative test whether MIAA is exempt from local taxation is its status
whether MIAA is a juridical person or not. The minority also insists that Sections 193 and 234 may be
examined in isolation from Section 133(o) to ascertain MIAAs 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 minoritys 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 minoritys theory, many national government instrumentalities with juridical personalities will
also be subject to any kind of local tax, and not only real estate tax. Some of the national government
instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,[30] Philippine
Rice Research Institute,[31] Laguna Lake
Development Authority,[32] Fisheries Development Authority,[33] Bases Conversion Development

Authority,[34] Philippine Ports Authority,[35] Cagayan de Oro Port Authority,[36] San Fernando Port
Authority,[37] Cebu Port Authority,[38] and Philippine National Railways.[39]
The minoritys 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.
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
presented a persuasive argument that there is such a conflict. The minoritys 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 minoritys argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a
statute may require a different meaning than that defined in the Administrative Code. However, this
does not automatically mean that the definition in the Administrative Code does not apply to the Local
Government Code. Section 2 of the Administrative Code clearly states that unless the specific words x x x
of a particular statute shall require a different meaning, the definition in Section 2 of the Administrative
Code shall apply. Thus, unless there is specific language in the Local Government Code defining the
phrase government-owned or controlled corporation differently from the definition in the Administrative
Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the phrase
government-owned or controlled corporation differently from the definition in the Administrative Code.
Indeed, there is none. The Local Government Code is silent on the definition of the phrase government-
owned or controlled corporation. The Administrative Code, however, expressly defines the phrase
government-owned or controlled corporation. The inescapable conclusion is that the Administrative
Code definition of the phrase government-owned or controlled corporation applies to the Local
Government Code.
The third whereas clause of the Administrative Code states that the Code incorporates in a unified
document the major structural, functional and procedural principles and rules of governance. Thus, the
Administrative Code is the governing law defining the status and relationship of government
departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a
different status and relationship for a specific government unit or entity, the provisions of the
Administrative Code prevail.
The minority also contends that the phrase government-owned or controlled corporation should apply
only to corporations organized under the Corporation Code, the general incorporation law, and not to
corporations created by special charters. The minority sees no reason why government corporations
with special charters should have a capital stock. Thus, the minority declares:
I submit that the definition of government-owned or controlled corporations under the Administrative
Code refer to those corporations owned by the government or its instrumentalities which are created
not by legislative enactment, but formed and organized under the Corporation Code through registration
with the Securities and Exchange Commission. In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs
whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered
to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing
legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase government-owned or controlled corporation
does not distinguish between one incorporated under the Corporation Code or under a special charter.
Where the law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned corporations
organized as stock corporations. Prime examples are the Land Bank of the Philippines and the
Development Bank of the Philippines. The special charter[40] of the Land Bank of the Philippines
provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos, divided into
seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully
subscribed by the Government, and one hundred and twenty million preferred shares with a par value of
ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and
eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter[41] of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be Five Billion Pesos to
be divided into Fifty Million common shares with par value of P100 per share. These shares are available
for subscription by the National Government. Upon the effectivity of this Charter, the National
Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five
Hundred Million which shall be deemed paid for by the Government with the net asset values of the
Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis
supplied)
Other government-owned corporations organized as stock corporations under their special charters are
the Philippine Crop Insurance Corporation,[42] Philippine International Trading Corporation,[43] and the
Philippine National Bank[44] before it was reorganized as a stock corporation under the Corporation
Code. All these government-owned corporations organized under special charters as stock corporations
are subject to real estate tax on real properties owned by them. To rule that they are not government-
owned or controlled corporations because they are not registered with the Securities and Exchange
Commission would remove them from the reach of Section 234 of the Local Government Code, thus
exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are those that
meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is
that the government-owned or controlled corporation must be established for the common good. The
second condition is that the government-owned or controlled corporation must meet the test of
economic viability. Section 16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create government-owned or controlled
corporations through special charters only if these entities are required to meet the twin conditions of
common good and economic viability. In other words, Congress has no power to create government-
owned or controlled corporations with special charters unless they are made to comply with the two
conditions of common good and economic viability. The test of economic viability applies only to
government-owned or controlled corporations that perform economic or commercial activities and need
to compete in the market place. Being essentially economic vehicles of the State for the common good
meaning for economic development purposes these government-owned or controlled corporations with
special charters are usually organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing governmental
or public functions need not meet the test of economic viability. These instrumentalities perform
essential public services for the common good, services that every modern State must provide its
citizens. These instrumentalities need not be economically viable since the government may even
subsidize their entire operations. These instrumentalities are not the government-owned or controlled
corporations referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities
vested with corporate powers but performing essential governmental or public functions. Congress has
plenary authority to create government instrumentalities vested with corporate powers provided these
instrumentalities perform essential government functions or public services. However, when the
legislature creates through special charters corporations that perform economic or commercial activities,
such entities known as government-owned or controlled corporations must meet the test of economic
viability because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and
similar government-owned or controlled corporations, which derive their income to meet operating
expenses solely from commercial transactions in competition with the private sector. The intent of the
Constitution is to prevent the creation of government-owned or controlled corporations that cannot
survive on their own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation loses, then it makes its
claim upon the taxpayers money through new equity infusions from the government and what is always
invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the
entire government, about P28 billion of this will go into equity infusions to support a few government
financial institutions. And this is all taxpayers money which could have been relocated to agrarian
reform, to social services like health and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.
Therefore, when we insert the phrase ECONOMIC VIABILITY together with the common good, this
becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committees consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of ECONOMIC VIABILITY OR THE ECONOMIC TEST,
together with the common good.[45]
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook
The 1987 Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition,
however, is the phrase in the interest of the common good and subject to the test of economic viability.
The addition includes the ideas that they must show capacity to function efficiently in business and that
they should not go into activities which the private sector can do better. Moreover, economic viability is
more than financial viability but also includes capability to make profit and generate benefits not
quantifiable in financial terms.[46] (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate
powers and performing essential public services. The State is obligated to render essential public
services regardless of the economic viability of providing such service. The non-economic viability of
rendering such essential public service does not excuse the State from withholding such essential
services from the public.
However, government-owned or controlled corporations with special charters, organized essentially for
economic or commercial objectives, must meet the test of economic viability. These are the government-
owned or controlled corporations that are usually organized under their special charters as stock
corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These
are the government-owned or controlled corporations, along with government-owned or controlled
corporations organized under the Corporation Code, that fall under the definition of government-owned
or controlled corporations in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA to
compete in the market place. MIAA does not compete in the market place because there is no
competing international airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines. The operation of an
international airport requires the presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers,
screening out those without visas or travel documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health, to enforce health measures against the spread
of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases
into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists
and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft
to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and buildings for the government
personnel, passengers, and airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an
international airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA
derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and
airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees[47]
and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code, which provides:
(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:
service or for the development of the national wealth. (Emphasis supplied)
The term ports x x x constructed by the State includes airports and seaports. The Airport Lands and
Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether
intended for public use or public service, the Airport Lands and Buildings are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic
and thus exempt from real estate tax under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs
the legal relation and status of government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a government-owned or controlled
corporation. Under Section 133(o) of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to [t]axes, fees or charges of any kind by
local governments. The only exception is when MIAA leases its real property to a taxable person as
provided in Section 234(a) of the Local Government Code, in which case the specific real property leased
becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to
taxable persons like private parties are subject to real estate tax by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public
use, are properties of public dominion and thus owned by the State or the Republic of the Philippines.
Article 420 specifically mentions ports x x x constructed by the State, which includes public airports and
seaports, as properties of public dominion and owned by the Republic. As properties of public dominion
owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly
exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also
repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5
October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and
Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the
City of Paraaque. We declare VOID all the real estate tax assessments, including the final notices of real
estate tax delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the Manila
International Airport Authority, except for the portions that the Manila International Airport Authority
has leased to private parties. We also declare VOID the assailed auction sale, and all its effects, of the
Airport Lands and Buildings of the Manila International Airport Authority.
No costs.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
REYNATO S. PUNO
Associate Justice
LEONARDO A. QUISUMBING
Associate Justice
CONSUELO YNARES-SANTIAGO
Associate Justice
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
RENATO C. CORONA
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice
ROMEO J. CALLEJO, SR.

Associate Justice
ADOLFO S. AZCUNA
Associate Justice
DANTE O. TINGA
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
CANCIO C. GARCIA
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of
the Court.
ARTEMIO V. PANGANIBAN
Chief Justice
[1] Dated 16 September 1983.
[2] Dated 26 July 1987.
[3] Section 3, MIAA Charter.

[6] Rollo, pp. 22-23.
[7] Under Rule 45 of the 1997 Rules of Civil Procedure.
[8] 330 Phil. 392 (1996).

[9] MIAA Charter as amended by Executive Order No. 298. See note 2.
[10] Batas Pambansa Blg. 68.
[11] Section 11 of the MIAA Charter provides:
Contribution to the General Fund for the Maintenance and Operation of other Airports. Within thirty
(30) days after the close of each quarter, twenty percentum (20%) of the gross operating income,
excluding payments for utilities of tenants and concessionaires and terminal fee collections, shall be
remitted to the General Fund in the National Treasury to be used for the maintenance and operation of
other international and domestic airports in the country. Adjustments in the amount paid by the
Authority to the National Treasury under this Section shall be made at the end of each year based on the
audited financial statements of the Authority.
[12] Section 5(j), MIAA Charter.
[14] Section 5(k), MIAA Charter.

[15] Section 5(o), MIAA Charter.
[16] Third Whereas Clause, MIAA Charter.
[17] Id.
[18] CONSTITUTION, Art. X, Sec. 5.
[19] 274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 STATUTES and STATUTORY CONSTRUCTION
207.
[20] 274 Phil. 323, 339-340 (1991).
[21] CONSTITUTION, Art. VI, Sec. 28(1).

[22] First Whereas Clause, MIAA Charter.
[23] 30 Phil. 602, 606-607 (1915).
[24] 102 Phil. 866, 869-870 (1958).
[25] PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 Phil. 591 (1974).
[26] MIAA Charter, Sec.16.
[27] Chavez v. Public Estates Authority, 433 Phil. 506 (2002).
[29] G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138.
[30] Republic Act No. 7653, 14 June 1993, Sec. 5.
[31] Executive Order No. 1061, 5 November 1985, Sec. 3(p).
[32] Republic Act No. 4850, 18 July 1966, Sec. 5.
[33] Presidential Decree No. 977, 11 August 1976, Section 4(j).
[34] Republic Act No. 7227, 13 March 1992, Sec. 3.
[35] Presidential Decree No. 857, 23 December 1975, Sec. 6(b)(xvi).
[36] Republic Act No. 4663, 18 June 1966, Sec. 7(m).
[39] Republic Act No. 4156, 20 June 1964. Section 4(b).
[40] Republic Act No. 3844, 8 August 1963, as amended by Republic Act No. 7907, 23 February 1995.
[41] Executive Order No. 81, 3 December 1986.

[42] Republic Act No. 8175, 29 December 1995.
[43] Presidential Decree No. 252, 21 July 1973, as amended by Presidential Decree No. 1071, 25 January
1977 and Executive Order No. 1067, 25 November 1985.
[44] Executive Order No. 80, 3 December 1986.
[45] III RECORDS, CONSTITUTIONAL COMMISSION 63 (22 August 1986).
[46] 2003 ed., 1181.
[47] Manila International Airport Authority v. Airspan Corporation, G.R. No. 157581, 1 December 2004,
445 SCRA 471.

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1. LADERA VS. HODGES (G.R. NO. 8027-R, VOL. 48, NO. 12, O.G.

5374, SEPTEMBER 23, 1952)

ISSUE: Was the house movable or immovable?

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

MINDANAO BUS COMPANY, petitioner,

Binamira, Barria and Irabagon for petitioner.

Vicente E. Sabellina for respondents.

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

Art. 415. — The following are immovable properties:

xxx xxx xxx

Art. 415. The following are immovable property:

xxx xxx xxx

Regala, Concepcion and Barrera JJ., took no part.

Today is Monday, August 27, 2018

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner,

WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.

Loreto C. Baduan for petitioner.

Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.

Jose V. Mancella for respondent.

Today is Monday, August 27, 2018

Republic of the Philippines

G.R. No. L-11139 April 23, 1958

SANTOS EVANGELISTA, petitioner,

ALTO SURETY & INSURANCE CO., INC., respondent.

Raul A. Aristorenas and Benjamin Relova for respondent.

This is an appeal by certiorari from a decision of the Court of Appeals.

The Lawphil Project - Arellano Law Foundation

Today is Monday, August 27, 2018

G.R. No. 120098 October 2, 2001

RUBY L. TSAI, petitioner,

[G.R. No. 120109. October 2, 2001.]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

(REAL AND CHATTEL)

xxx xxx xxx

LIST OF MACHINERIES & EQUIPMENT

A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:

Serial Numbers Size of Machines

xxx xxx xxx

B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.

xxx xxx xxx

xxx xxx xxx

D. Four (4) Winding Machines.

xxx xxx xxx

I. TCT # 372097 - RIZAL

xxx xxx xxx

(a) Forty eight sets (48) Vayrow Knitting Machines . . .

(b) Sixteen sets (16) Vayrow Knitting Machines . . .

(c) Two (2) Circular Knitting Machines . . .

(e) Two (2) Winding Machines . . .

xxx xxx xxx3

5. Ordering the dismissal of the counterclaim of the defendants; and

6. Ordering the defendants to proportionately pay the costs of suit.

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN DEEMING PETITIONER A

xxx xxx xxx

Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

3 Folder of Exhibits, pp. 5-12.

4 Rollo, G.R. No. 120098, pp. 23-24.

6 Rollo, G.R. No. 120098, pp. 23-25.

7 Rollo, G.R. No. 120098, pp. 9-10.

8 Rollo, G.R. No. 120098, p. 25.

14 Manlapaz. Court of Appeals, 147 SCRA 236, 239 (1987).

15 Rollo, G.R No. 120109, pp. 62-63.