G.R. No.

6295 September 1, 1911

THE UNITED STATES, plaintiff-appellee,
vs.
IGNACIO CARLOS, defendant-appellant.
A. D. Gibbs for appellant.
Acting Attorney-General Harvey for appellee.
PER CURIAM:
The information filed in this case is as follows:
The undersigned accuses Ignacio Carlos of the crime of theft, committed as follows:
That on, during, and between the 13th day of February, 1909, and the 3d day of March, 1910, in the
city of Manila, Philippine Islands, the said Ignacio Carlos, with intent of gain and without violence or
intimidation against the person or force against the thing, did then and there, willfully, unlawfully, and
feloniously, take, steal , and carry away two thousand two hundred and seventy-three (2,273) kilowatts
of electric current, of the value of nine hundred and nine (909) pesos and twenty (20) cents Philippine
currency, the property of the Manila Electric Railroad and Light Company, a corporation doing business
in the Philippine Islands, without the consent of the owner thereof; to the damage and prejudice of the
said Manila Electric Railroad and Light Company in the said sum of nine hundred and nine (909) pesos
and twenty (20) cents Philippine currency, equal to and equivalent of 4,546 pesetas Philippine
currency. All contrary to law.
(Sgd.) L. M. SOUTWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine
Islands, by L. M. Southworth, prosecuting attorney for the city of Manila.
(Sgd.) CHARLES S. LOBINGIER,
Judge, First Instance.
A preliminary investigation has heretofore been conducted in this case, under my direction, having
examined the witness under oath, in accordance with the provisions of section 39 of Act No. 183 of the
Philippine Commission, as amended by section 2 of Act No. 612 of the Philippine Commission.
(Sgd) L. M. SOUTHWORTH,
Prosecuting Attorney.
Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine
Islands, by L. M. Southworth, prosecuting attorney for the city of Manila.
(Sgd.) CHARLES LOBINGIER,
Judge, First Instance.
A warrant for the arrest of the defendant was issued by the Honorable J. C. Jenkins on the 4th of March and
placed in the hands of the sheriff. The sheriff's return shows that the defendant gave bond for his appearance.
On the 14th of the same month counsel for the defendant demurrer to the complaint on the following grounds:
1 That the court has no jurisdiction over the person of the accused nor of the offense charged because
the accused has not been accorded a preliminary investigation or examination as required by law and
no court, magistrate, or other competent authority has determined from a sworn complaint or
evidence adduced that there is probable cause to believe that a crime has been committed, or that this
defendant has committed any crime.
2 That the facts charged do not constitute a public offense.
The demurrer was overruled on the same day and the defendant having refused to plead, a plea of not guilty was
entered by direction of the court for him and the trial proceeded.
After due consideration of all the proofs presented and the arguments of counsel the trial court found the
defendant guilty of the crime charged and sentenced him to one year eight months and twenty-one
days' presidio correccional, to indemnify the offended party, The Manila Electric Railroad and Light Company, in
the sum of P865.26, to the corresponding subsidiary imprisonment in case of insolvency and to the payment of
the costs. From this judgment the defendant appealed and makes the following assignments of error:
I.
The court erred in overruling the objection of the accused to the jurisdiction of the court, because he
was not given a preliminary investigation as required by law, and in overruling his demurrer for the
same reason.
II.
The court erred in declaring the accused to be guilty, in view of the evidence submitted.
III.
The court erred in declaring that electrical energy may be stolen.
IV.
The court erred in not declaring that the plaintiff consented to the taking of the current.
V.
The court erred in finding the accused guilty of more than one offense.
VI.
The court erred in condemning the accused to pay P865.26 to the electric company as damages.
Exactly the same question as that raised in the first assignment of error, was after a through examination and
due consideration, decided adversely to appellant's contention in the case of U. S. vs. Grant and Kennedy (18
Phil. Rep., 122). No sufficient reason is presented why we should not follow the doctrine enunciated in that case.
The question raised in the second assignment of error is purely one fact. Upon this point the trial court said:
For considerably more than a year previous to the filing of this complaint the accused had been a
consumer of electricity furnished by the Manila Electric Railroad and Light Company for a building
containing the residence of the accused and three other residences, and which was equipped,
according to the defendant's testimony, with thirty electric lights. On March 15, 1909, the
representatives of the company, believing that more light was being used than their meter showed,
installed an additional meter (Exhibit A) on a pole outside of defendant's house, and both it and the
meter (Exhibit B) which had been previously installed in the house were read on said date. Exhibit A
read 218 kilowatt hours; Exhibit B, 745 kilowatt hours. On March 3, 1910 each was read again, Exhibit
A showing 2,718 kilowatt hours and Exhibit B, 968. It is undisputed that the current which supplied the
house passed through both meters and the city electrician testifies that each meter was tested on the
date of the last reading and was "in good condition." The result of this registration therefore is that
while the outsider meter (Exhibit A) showed a consumption in defendant's building of 2,500 kilowatt
hours of electricity, this inside meter (Exhibit B) showed but 223 kilowatt hours. In other words the
actual consumption, according to the outside meter, was more than ten times as great as that
registered by the one inside. Obviously this difference could not be due to normal causes, for while the
electrician called by the defense (Lanusa) testifies to the possibility of a difference between two such
meters, he places the extreme limit of such difference between them 5 per cent. Here, as we have
seen, the difference is more than 900 per cent. Besides, according to the defendant's electrician, the
outside meter should normally run faster, while according to the test made in this case the inside
meter (Exhibit B) ran the faster. The city electrician also testifies that the electric current could have
been deflected from the inside meter by placing thereon a device known as a "jumper" connecting the
two outside wires, and there is other testimony that there were marks on the insulation of the meter
Exhibit B which showed the use of such a device. There is a further evidence that the consumption of
223 kilowatt hours, registered by the inside meter would not be a reasonable amount for the number
of lights installed in defendant's building during the period in question, and the accused fails to explain
why he should have had thirty lights installed if he needed but four or five.
On the strength of this showing a search warrant was issued for the examination of defendant's
premises and was duly served by a police officer (Hartpence). He was accompanied at the time by
three employees of the Manila Electric Railroad and Light Company, and he found there the accused,
his wife and son, and perhaps one or two others. There is a sharp conflict between the several
spectators on some points but on one there is no dispute. All agree that the "jumper" (Exhibit C) was
found in a drawer of a small cabinet in the room of defendant's house where the meter was installed
and not more than 20 feet therefrom. In the absence of a satisfactory explanation this constituted
possession on defendant's part, and such possession, under the Code of Civil Procedure, section 334
(10), raises the presumption that the accused was the owner of a device whose only use was to deflect
the current from the meter.
Is there any other "satisfactory explanation" of the "jumper's" presence? The only one sought to be
offered is the statement by the son of the accused, a boy of twelve years, that he saw the "jumper"
placed there by the witness Porter, an employee of the Light Company. The boy is the only witness
who so testifies and Porter himself squarely denies it. We can not agree with counsel for the defense
that the boy's interest in the outcome of this case is less than that of the witness for the prosecution. It
seems to us that his natural desire to shield his father would far outweight any interest such an
employee like Porter would have and which, at most, would be merely pecuniary.
There is, however, one witness whom so far as appears, has no interest in the matter whatsoever. This
is officer Hartpence, who executed the search warrant. He testifies that after inspecting other articles
and places in the building as he and the other spectators, including the accused, approached the
cabinet in which the "jumper" was found, the officer's attention was called to the defendant's
appearance and the former noticed that the latter was becoming nervous. Where the only two
witnesses who are supposed to know anything of the matter thus contradict each other this item of
testimony by the officer is of more than ordinary significance; for if, as the accused claims, the
"jumper" was placed in the cabinet for the first time by Porter there would be no occasion for any
change of demeanor on the part of the accused. We do not think that the officer's declination to wait
until defendant should secure a notary public shows bias. The presence of such an official was neither
required nor authorized by law and the very efficacy of a search depends upon its swiftness.
We must also agree with the prosecuting attorney that the attending circumstances do not strengthen
the story told by the boy; that the latter would have been likely to call out at the time he saw the
"jumper" being placed in the drawer, or at least directed his father's attention to it immediately
instead of waiting, as he says, until the latter was called by the officer. Finally, to accept the boy's story
we must believe that this company or its representatives deliberately conspired not merely to lure the
defendant into the commission of a crime but to fasten upon him a crime which he did not commit and
thus convict an innocent man by perjured evidence. This is a much more serious charge than that
contained in the complaint and should be supported by very strong corroborating circumstances which
we do not find here. We are, accordingly, unable to consider as satisfactory defendant's explanation of
the "jumper's" presence.
The only alternative is the conclusion that the "jumper" was placed there by the accused or by some
one acting for him and that it was the instrument by which the current was deflected from the matter
Exhibit B and the Light Company deprived of its lawful compensation.
After a careful examination of the entire record we are satisfied beyond peradventure of a doubt that the proofs
presented fully support the facts as set forth in the foregoing finding.
Counsel for the appellant insists that the only corporeal property can be the subject of the crime of larceny, and
in the support of this proposition cites several authorities for the purpose of showing that the only subjects of
larceny are tangible, movable, chattels, something which could be taken in possession and carried away, and
which had some, although trifling, intrinsic value, and also to show that electricity is an unknown force and can
not be a subject of larceny.
In the U. S. vs. Genato (15 Phi. Rep., 170) the defendant, the owner of the store situated at No. 154 Escolta,
Manila, was using a contrivance known as a "jumper" on the electric meter installed by the Manila Electric
Railroad and the Light Company. As a result of the use of this "jumper" the meter, instead of making one
revolution in every four seconds, registered one in seventy-seven seconds, thereby reducing the current
approximately 95 per cent. Genato was charged in the municipal court with a violation of a certain ordinance of
the city of Manila, and was sentenced to pay a fine of P200. He appealed to the Court of First Instance, was again
tried and sentenced to pay the same fine. An appeal was taken from the judgment of the Court of First Instance
to the Supreme Court on the ground that the ordinance in question was null and void. It is true that the only
question directly presented was of the validity of the city ordinance. The court, after holding that said ordinance
was valid, said:
Even without them (ordinances), the right of ownership of electric current is secured by articles 517
and 518 of the Penal Code; the application of these articles in case of subtraction of gas, a fluid used
for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the
decisions of the supreme court of Spain January 20, 1887, and April 1, 1897, construing and enforcing
the provisions of articles 530 and 531 of the penal code of that country, articles identical with articles
517 and 518 of the code in force in these Islands.
Article 517 of the Penal Code above referred to reads as follows:
The following are guilty of larceny:
(1) Those who with intent of gain and without violence or intimidation against the person, or force
against things, shall take another's personal property without the owner's consent.
And article 518 fixes the penalty for larceny in proportion to the value of the personal property stolen.
It is true that electricity is no longer, as formerly, regarded by electricians as a fluid, but its manifestation and
effects, like those of gas, may be seen and felt. The true test of what is a proper subject of larceny seems to be
not whether the subject is corporeal, but whether it is capable of appropriation by another than the owner.
It is well-settled that illuminating gas may be the subject of larceny, even in the absence of a statute so
providing. (Decisions of supreme court of Spain, January 20, 1887, and April 1, 1897, supra; also (England)
Queen vs. Firth, L. R. 1 C. C., 172, 11 Cox C. C., 234; Queen vs. White, 3 C. & K., 363, 6 Cox C. C., 213;
Woods vs. People, 222 III., 293, 7 L. R. A., 520; Commonwealth vs. Shaw, 4 Allen (Mass), 308; State vs. Wellman,
34 Minn., 221, N. W. Rep., 385, and 25 Cyc., p. 12, note 10.)
In the case of Commonwealth vs. Shaw, supra, the court, speaking through Chief Justice Bigelow, said:
There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being
feloniously taken and carried away. It is a valuable article of merchandise, bought and sold like other
personal property, susceptible of being severed from a mass or larger quantity, and of being
transported from place to place. In the present case it appears that it was the property of the Boston
Gas Light Company; that it was in their possession by being confined in conduits and tubes which
belonged to them, and that the defendant severed a portion of that which was in the pipes of the
company by taking it into her house and there consuming it. All this being proved to have been done
by her secretly and with intent to deprive the company of their property and to appropriate it to her
own use, clearly constitutes the crime of larceny.
Electricity, the same as gas, is a valuable article of merchandise, bought and sold like other personal property
and is capable of appropriation by another. So no error was committed by the trial court in holding that
electricity is a subject of larceny.
It is urged in support of the fourth assignment of error that if it be true that the appellant did appropriate to his
own use the electricity as charged he can not be held guilty of larceny for any part of the electricity thus
appropriated, after the first month, for the reason that the complaining party, the Manila Electric Road and Light
Company, knew of this misappropriation and consented thereto.
The outside meter was installed on March 15, 1909, and read 218 kilowatt hours. On the same day the inside
meter was read and showed 745 kilowatt hours. Both meters were again read on March 3, 1910, and the outside
one showed 2,718 kilowatt hours while the one on the inside only showed 968, the difference in consumption
during this time being 2,277 kilowatt hours. The taking of this current continued over a period of one year, less
twelve days. Assuming that the company read both meters at the end of each month; that it knew the defendant
was misappropriating the current to that extent; and that t continued to furnish the current, thereby giving the
defendant an opportunity to continue the misppropriation, still, we think, that the defendant is criminally
responsible for the taking of the whole amount, 2,277 kilowatt hours. The company had a contract with the
defendant to furnish him with current for lighting purposes. It could not stop the misappropriation without
cutting off the current entirely. It could not reduce the current so as to just furnish sufficient for the lighting of
two, three, or five lights, as claimed by the defendant that he used during the most of this time, but the current
must always be sufficiently strong to furnish current for the thirty lights, at any time the defendant desired to
use them.
There is no pretense that the accused was solicited by the company or any one else to commit the acts charged.
At most there was a mere passive submission on the part of the company that the current should be taken and
no indication that it wished it to be taken, and no knowledge by the defendant that the company wished him to
take the current, and no mutual understanding between the company and the defendant, and no measures of
inducement of any kind were employed by the company for the purpose of leading the defendant into
temptation, and no preconcert whatever between him and company. The original design to misappropriate this
current was formed by the defendant absolutely independent of any acts on the part of the company or its
agents. It is true, no doubt, as a general proposition, that larceny is not committed when the property is taken
with the consent of its owner. It may be difficult in some instances to determine whether certain acts constitute,
in law, such "consent." But under the facts in the case at bar it is not difficult to reach a conclusion that the acts
performed by the plaintiff company did not constitute a consent on its part the defendant take its property. We
have been unable to find a well considered case holding contrary opinion under similar facts, but, there are
numerous cases holding that such acts do not constitute such consent as would relieve the taker of criminal
responsibility. The fourth assignment of error is, therefore, not well founded.
It is also contended that since the "jumper" was not used continuously, the defendant committed not a single
offense but a series of offenses. It is, no doubt, true that the defendant did not allow the "jumper" to remain in
place continuously for any number of days as the company inspected monthly the inside meter. So the "jumper"
was put on and taken off at least monthly, if not daily, in order to avoid detection, and while the "jumper" was
off the defendant was not misappropriating the current. The complaint alleged that the defendant did on,
during, and between the 13th day of February, 1909, and the 3d of March, 1910. willfully, unlawfully, and
feloniously take, steal, and carry away 2,277 kilowatts of electric current of the value of P909. No demurrer was
presented against this complaint on the ground that more than one crime was charged. The Government had no
opportunity to amend or correct this error, if error at all. In the case of U. S. vs. Macaspac (12 Phil. Rep., 26), the
defendant received from one Joquina Punu the sum of P31.50, with the request to deliver it to Marcelina Dy-
Oco. The defendant called upon Marcelina, but instead of delivering the said amount she asked Marcelina for
P30 in the name of Joaquina who had in no way authorized her to do so. Marcelina gave her P30, believing that
Joaquina had sent for it. Counsel for the defendant insisted that the complaint charged his client with two
different crimes ofestafa in violation of section 11 of General Orders, No. 58. In disposing of this question this
court said:
The said defect constitutes one of the dilatory pleas indicated by section 21, and the accused ought to
have raised the point before the trial began. Had this been done, the complaint might have been
amended in time, because it is merely a defect of form easily remedied. . . . Inasmuch as in the first
instance the accused did not make the corresponding dilatory plea to the irregularity of the complaint,
it must be understood that has waived such objection, and is not now entitled to raise for the first time
any question in reference thereto when submitting to this court her assignment of errors. Apart from
the fact that the defense does not pretend that any of the essential rights of the accused have been
injured, the allegation of the defect above alluded to, which in any case would only affect form of the
complaint, can not justify a reversal of the judgment appealed from, according to the provisions of
section 10 of General Orders, No. 58.
In the case at bar it is not pointed out wherein any of the essential rights of the defendant have been prejudiced
by reason of the fact that the complaint covered the entire period. If twelve distinct and separate complaints had
been filed against the defendant, one for each month, the sum total of the penalties imposed might have been
very much greater than that imposed by the court in this case. The covering of the entire period by one charge
has been beneficial, if anything, and not prejudicial to the rights of the defendant. The prosecuting attorney
elected to cover the entire period with one charge and the accused having been convicted for this offense, he
can not again be prosecuted for the stealing of the current at any time within that period. Then, again, we are of
the opinion that the charge was properly laid. The electricity was stolen from the same person, in the same
manner, and in the same place. It was substantially one continuous act, although the "jumper" might have been
removed and replaced daily or monthly. The defendant was moved by one impulse to appropriate to his own use
the current, and the means adopted by him for the taking of the current were in the execution of a general
fraudulent plan.
A person stole gas for the use of a manufactory by means of pipe, which drew off the gas from the
main without allowing it to pass through the meter. The gas from this pipe was burnt every day, and
turned off at night. The pipe was never closed at this junction with the main, and consequently always
remained full of gas. It was held, that if the pipe always remained full, there was, in fact, a continuous
taking of the gas and not a series of separate talkings. It was held also that even if the pipe had not
been kept full, the taking would have been continuous, as it was substantially all one transaction.
(Regina vs. Firth, L. R., 1 C. C., 172; 11 Cox C. C., 234. Cited on p. 758 of Wharton's Criminal Law, vol. 1,
10th ed.)
The value of the electricity taken by the defendant was found by the trial court to be P865.26. This finding is fully
in accordance with the evidence presented. So no error was committed in sentencing the defendant to
indemnify the company in this amount, or to suffer the corresponding subsidiary imprisonment in case of
insolvency.
The judgment being strictly in accordance with the law and the merits of the case, same is hereby affirmed, with
costs against the appellant.
LUIS MARCOS P. LAUREL, Petitioner, v. HON. ZEUS C. ABROGAR
G.R. No. 155076
On February 27, 2006, this Courts First Division rendered judgment in this case as follows:

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of
the Regional Trial Court and the Decision of the Court of Appeals are REVERSED and SET
ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the
petitioner to quash the Amended Information.

SO ORDERED.
[1]


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

On or about September 10-19, 1999, or prior thereto in Makati City, and within the
jurisdiction of this Honorable Court, the accused, conspiring and confederating together and
all of them mutually helping and aiding one another, with intent to gain and without the
knowledge and consent of the Philippine Long Distance Telephone (PLDT), did then and there
willfully, unlawfully and feloniously take, steal and use the international long distance calls
belonging to PLDT by conducting International Simple Resale (ISR), which is a method of
routing and completing international long distance calls using lines, cables, antenae, and/or
air wave frequency which connect directly to the local or domestic exchange facilities of the
country where the call is destined, effectively stealing this business from PLDT while using its
facilities in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in
the said amount.

CONTRARY TO LAW.
[2]


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

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

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

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

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

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

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

According to respondent, the international phone calls which are electric currents or sets of electric
impulses transmitted through a medium, and carry a pattern representing the human voice to a receiver, are
personal properties which may be subject of theft. Article 416(3) of the Civil Code deems forces of nature
(which includes electricity) which are brought under the control by science, are personal property.

In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a telephone call is a
conversation on the phone or a communication carried out using the telephone. It is not synonymous to electric
current or impulses. Hence, it may not be considered as personal property susceptible of
appropriation. Petitioner claims that the analogy between generated electricity and telephone calls is
misplaced. PLDT does not produce or generate telephone calls. It only provides the facilities or services for the
transmission and switching of the calls. He also insists that business is not personal property. It is not the
business that is protected but the right to carry on a business. This right is what is considered as
property. Since the services of PLDT cannot be considered as property, the same may not be subject of theft.

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

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

Considering the gravity and complexity of the novel questions of law involved in this case, the Special First
Division resolved to refer the same to the Banc.

We resolve to grant the Motion for Reconsideration but remand the case to the trial court for proper
clarification of the Amended Information.

Article 308 of the Revised Penal Code provides:

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


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

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

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

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

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


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



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

As early as 1910, the Court declared in Genato that ownership over electricity (which an international long
distance call consists of), as well as telephone service, is protected by the provisions on theft of the Penal
Code. The pertinent provision of the Revised Ordinance of the City of Manila, which was involved in the said
case, reads as follows:

Injury to electric apparatus; Tapping current; Evidence. No person shall destroy,
mutilate, deface, or otherwise injure or tamper with any wire, meter, or other apparatus
installed or used for generating, containing, conducting, or measuring electricity, telegraph
or telephone service, nor tap or otherwise wrongfully deflect or take any electric current
from such wire, meter, or other apparatus.

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


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

Even without them (ordinance), the right of the ownership of electric current is
secured by articles 517 and 518 of the Penal Code; the application of these articles in cases of
subtraction of gas, a fluid used for lighting, and in some respects resembling electricity, is
confirmed by the rule laid down in the decisions of the supreme court of Spain of January 20,
1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of
the Penal Code of that country, articles 517 and 518 of the code in force in these islands.

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

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

The business of providing telecommunication or telephone service is likewise personal property which can
be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section
2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft:

Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares,
merchandise, provisions, or materials otherwise than in the ordinary course of trade and the
regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any
sale, transfer, mortgage, or assignment of all, or substantially all, of the business or trade
theretofore conducted by the vendor, mortgagor, transferor or assignor, or all, or
substantially all, of the fixtures and equipment used in and about the business of the vendor,
mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bulk, in
contemplation of the Act. x x x.


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

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


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


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

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


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

38. The role of telecommunication companies is not limited to merely providing
the medium (i.e. the electric current) through which the human voice/voice signal of the
caller is transmitted. Before the human voice/voice signal can be so transmitted, a
telecommunication company, using its facilities, must first break down or decode the human
voice/voice signal into electronic impulses and subject the same to further augmentation and
enhancements. Only after such process of conversion will the resulting electronic impulses
be transmitted by a telecommunication company, again, through the use of its
facilities. Upon reaching the destination of the call, the telecommunication company will
again break down or decode the electronic impulses back to human voice/voice signal before
the called party receives the same. In other words, a telecommunication company both
converts/reconverts the human voice/voice signal and provides the medium for transmitting
the same.

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

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



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


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

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

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

SO ORDERED.











G.R. No. L-9069 March 31, 1915
THE MUNICIPALITY OF CAVITE, plaintiff-appellant,
vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-appellees.
Attorney-General Villamor for appellant.
J. Y. Pinzon for appellees.
TORRES, J.:
Appeal filed through bill of exceptions by the Attorney-General, representing the plaintiff municipality of Cavite,
from the judgment of March 27, 1913, whereby the Honorable Herbert D. Gale, judge, dismissed the complaint
with costs against the plaintiff party, declaring that the said municipality had no right to require that the
defendants vacate the land in question.
By an instrument dated December 5, 1911, afterwards amended on March 14, 1912, the provincial fiscal of
Cavite, representing the municipality of that name, filed a complaint in the Court of First Instance of said
province alleging that the plaintiff municipal corporation, duly organized and constituted in accordance with Act
No. 82, and as the successor to the rights s aid entity had under the late Spanish government, and by virtue of
Act No. 1039, had exclusive right, control and administration over the streets, lanes, plazas, and public places of
the municipality of Cavite; that the defendants, by virtue of a lease secured from the plaintiff municipality,
occupy a parcel of land 93 square meters in area that forms part o the public plaza known under the name of
Soledad, belonging to the municipality of Cavite, the defendants having constructed thereon a house, through
payment to the plaintiff for occupation thereof of a rental of P5,58 a quarter in advance, said defendants being
furthermore obligated to vacate the leased land within sixty days subsequent to plaintiff's demand to that effect;
that the defendants have been required by the municipality to vacate and deliver possession of the said land, but
more than the sixty days within which they having done so to date; that the lease secured from the municipality
of Cavite, by virtue whereof the defendants occupy the land that is the subject matter of the complaint, is ultra
vires and therefore ipso factonull and void and of no force or effect, for the said land is an integral portion of a
public plaza of public domain and use, and the municipal council of Cavite has never at any time had any power
or authority to withdraw it from public use, and to lease it to a private party for his own use, and so the
defendants have never had any right or occupy or to retain the said land under leasehold, or in any other way,
their occupation of the parcel being furthermore illegal; and therefore prayed that judgment be rendered
declaring that possession of the sad land lies with the plaintiff and ordering the defendants to vacate the land
and deliver possession thereof to said plaintiff, with the costs against the defendants.
The demurrer filed to the foregoing complaint having been overruled, with exception on the part of the
defendants, in their answer of April 10, 1912, they admitted some of the allegations contained in the complaint
but denied that the parcel of land which they occupy and to which the complaint refers forms and integral part
of Plaza Soledad, or that the lease secured by them from the municipality of Cavite was null and void and ultra
vires, stating if they refused to vacate said land it was because they had acquired the right of possession thereof.
As a special defense they alleged that, according to the lease, they could only be ordered to vacate the land
leased when the plaintiff municipality might need it for decoration or other public use, which does not apply in
the present case; and in a cross-complaint they alleged that on the land which is the subject matter of the
complaint the defendants have erected a house of strong materials, assessed at P3,000, which was constructed
under a license secured from the plaintiff municipality; that if they should be ordered to vacate the said land
they would suffer damages to the extent of P3,000, wherefore they prayed that they be absolved from the
complaint, or in the contrary case that the plaintiff be sentenced to indemnify them in the sum of P3,000 as
damages, and to pay the costs.
After hearing of the case, wherein both parties submitted parol and documentary evidence, the court rendered
the judgment that he been mentioned, whereto counsel for the municipality excepted and in writing asked for a
reopening of the case and the holding of a new trial. This motion was denied, with exception on the part of the
appellant, and the forwarded to the clerk of this court.
It is duly proven in the record that, upon presentation of an application by Hilaria Rojas, he municipal council of
Cavite by resolution No. 10, dated July 3, 107, Exhibit C, leased to the said Rojas some 70 or 80 square meters of
Plaza Soledad, on condition that she pay rent quarterly in advance according to the schedule fixed in Ordinance
No. 43, land within sixty days subsequent to notification to that effect. The record shows (receipts, Exhibit 1) that
she has paid the land tax on the house erected on the lot.
The boundary line between the properties of the municipality of Cavite and the naval reservation, as fixed in Act
No. 1039 of the Philippine Commission, appears in the plan prepared by a naval engineer and submitted as
evidence by the plaintiff, Exhibit C of civil case No. 274 of the Cavite court and registered in this court as No.
9071. According to said plan, defendant's house is erected on a plat of ground that forms part of the promenade
called Plaza Soledad, and this was also so proven by the testimony of the plaintiff's witnesses.
By section 3 of the said Act No. 1039, passed January 12, 1904, the Philippine Commission granted to the
municipality of Cavite all the land included in the tract called Plaza Soledad. In the case of Nicolas vs. Jose (6 Phil.
Rep., 589), wherein the municipality of Cavite, represented by its president Catalino Nicolas, sought inscription in
its name of the land comprised in the said Palza Soledad, with objection on the part of Maria Jose et al. who is
sought that inscription be decreed in their name of the parcels of land in this plaza occupied by them, this court
decided that neither the municipality nor the objectors were entitled to inscription, for with respect to the
objectors said plaza belonged to the municipality of Cavite and with respect to the latter the said Plaza Soledad
was not transferable property of that municipality to be inscribed in its name, because he intention of Act No.
1039 was that the said plaza and other places therein enumerated should be kept open for public transit;
herefore there can be no doubt that the defendant has no right to continue to occupy the land of the
municipality leased by her, for it is an integral portion of Plaza Soledad, which if for public use and is reserved for
the common benefit.
According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the
provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works
of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907
withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant
Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it
could not dispose, nor is it empowered so to do.
The Civil Code, articles 1271, prescribes that everything which is not outside he commerce of man may be the
object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court
of Spain in its decision of February 12, 195, which says: "Communal things that cannot be soud because they are
by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands,
rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby he municipality of Cavite leased to Hilaria
Rojas a portion of the Plaza Soledad is null and void and of no force or effect, because it is contrary to the law
and the thing leased cannot be the object of a contract. On the hyphotesis that the said lease is null and void in
accordance with the provisions of article 1303 of the Civil Code, the defendant must restore and deliver
possession of the land described in the complaint to the municipality of Cavite, which in its turn must restore to
the said defendant all the sums it may have received from her in the nature of rentals just as soon as she
restores the land improperly leased. For the same reasons as have been set forth, and as said contract is null and
void in its origin, it can produce no effect and consequently the defendant is not entitled to claim that the
plaintiff municipality indemnity her for the damages she may suffer by the removal of her house from the said
land.
For all the foregoing reasons we must reverse the judgment appealed from and declare, as we do declare, that
the land occupied by Hilaria Rojas forms part of the public plaza called Soledad, and as the lease of said parcel of
land is null and void, we order the defendant to vacate it and release the land in question within thirty days,
leaving it cleared as it was before hr occupation. There is no ground for the indemnity sought in the nature of
damages, but the municipality must in its turn to the defendant the rentals collected; without finding as to the
costs. So ordered.
G.R. No. L-66575 September 30, 1986
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES, TEODORO and MYRNA, all surnamed
MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO CASTRO, SALOME RODRIGUEZ,
EDUCARDO CUISON, FERNANDO ZARCILLA, MARIANO GABRIEL, NICOMEDES CORDERO, CLETO PEDROZO, FELIX
SALARY and JOSE PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.

FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the then Court of First Instance of Pangasinan, Branch XI a
complaint for quieting of title over a certain fishpond located within the four [41 parcels of land belonging to
them situated in Barrio Salomague, Bugallon, Pangasinan, and the annulment of Resolutions Nos. 38 and 95 of
the Municipal Council of Bugallon Pangasinan. The trial court dismissed the complaint in a decision dated August
15, 1975 upon a finding that the body of water traversing the titled properties of petitioners is a creek
constituting a tributary of the Agno River; therefore public in nature and not subject to private appropriation.
The lower court likewise held that Resolution No. 38, ordering an ocular inspection of the Cayangan Creek
situated between Barrios Salomague Sur and Salomague Norte, and Resolution No. 95 authorizing public bidding
for the lease of all municipal ferries and fisheries, including the fishpond under consideration, were passed by
respondents herein as members of the Municipal Council of Bugallon, Pangasinan in the exercise of their
legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court, which affirmed the same on April 29,
1983. Hence, this petition for review on certiorari.
Acting on the petition, the Court required the respondents to comment thereon. However, before respondents
could do so, petitioners manifested that for lack of interest on the part of respondent Alfredo Maza, the awardee
in the public bidding of the fishpond, the parties desire to amicably settle the case by submitting to the Court a
Compromise Agreement praying that judgment be rendered recognizing the ownership of petitioners over the
land the body of water found within their titled properties, stating therein, among other things, that "to pursue
the case, the same will not amount to any benefit of the parties, on the other hand it is to the advantage and
benefit of the municipality if the ownership of the land and the water found therein belonging to petitioners be
recognized in their favor as it is now clear that after the National Irrigation Administration [NIA] had built the
dike around the land, no water gets in or out of the land.
1

The stipulations contained in the Compromise Agreement partake of the nature of an adjudication of ownership
in favor of herein petitioners of the fishpond in dispute, which, as clearly found by the lower and appellate
courts, was originally a creek forming a tributary of the Agno River. Considering that as held in the case
of Mercado vs. Municipal President of Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm
extending from a river and participating in the ebb and flow of the sea, is a property belonging to the public
domain which is not susceptible to private appropriation and acquisitive prescription, and as a public water, it
cannot be registered under the Torrens System in the name of any individual [Diego v. Court of Appeals, 102 Phil.
494; Mangaldan v. Manaoag, 38 Phil. 4551; and considering further that neither the mere construction of
irrigation dikes by the National Irrigation Administration which prevented the water from flowing in and out of
the subject fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a property of
the public domain, the Court finds the Compromise Agreement null and void and of no legal effect, the same
being contrary to law and public policy.
The finding that the subject body of water is a creek belonging to the public domain is a factual determination
binding upon this Court. The Municipality of Bugallon, acting thru its duly-constituted municipal council is
clothed with authority to pass, as it did the two resolutions dealing with its municipal waters, and it cannot be
said that petitioners were deprived of their right to due process as mere publication of the notice of the public
bidding suffices as a constructive notice to the whole world.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise Agreement and declare the same
null and void for being contrary to law and public policy. The Court further resolved to DISMISS the instant
petition for lack of merit.
SO ORDERED.
REPUBLIC OF THEPHILIPPINES, Petitioner,
Vs. DEMOCRITO T. MENDOZA
G.R. No. 153726
Before Us are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Civil
Procedure, assailing the Decision
[1]
of the Court of Appeals in CA-G.R. CV No. 57069, dated 30 March
2001, which reversed and set aside the Decision
[2]
of the Regional Trial Court (RTC) of Cebu, Branch 14, and
dismissed for lack of merit Civil Case No. CEB-9563.

The present controversy involves a considerable spread of Silot Bay situated in Liloan, Cebu, and
originally classified as part of Block B-Timberland, Project No. 29 of LC Map 1391-Liloan of the Land Classification
Project of the Province of Cebu, with an area of 87.134 hectares, more or less.

On 13 January 1954, Democrito T. Mendoza, Sr. was accorded Ordinary Fishpond Permit No. F-2166-J
for an area of 6.25 hectares within Silot Bay, which was previously leased by his father who waived the leasehold
rights in his favor. On 26 July of the same year, Democrito Mendoza, Sr. was also issued Ordinary Nipa-
Bacauan Permit No. NB 642 for an area of 2.635 hectares, also in Silot Bay. Several years later, on 7 May
1969, Democrito Mendoza, Sr. was issued Ordinary Fishpond Permit No. F-6029-Y encompassing an estimated
area of 70.07 hectares within Silot Bay. This new permit covers the combined areas under Ordinary Nipa-
Bacauan Permit No. NB 642 and Ordinary Fishpond Permit No. F-2166-J, as well as other areas previously
managed by other fishpond permit grantees which Democrito Mendoza, Sr. acquired for valuable consideration.

Meanwhile, on 16 January 1967, then President Ferdinand E. Marcos issued a Memorandum
addressed to the Secretary of Agriculture and Natural Resources, the Chairman of the Board of Governors of the
Development Bank of the Philippines, the Undersecretary of Natural Resources, and the Directors of the Bureaus
of Fishery, Forestry, and Lands, respectively, thereby constituting a continuing committee to accomplish the
following:

1. Identify the exact locations and area of these 700,000 hectares of fishpond areas
on or before February 28, 1967. x x x.

2. Within the month of March 1967, all these fishpond areas shall be released by the
Bureau of Forestry to the Bureau of Lands as alienable and disposable, but subject
to the disposal of the Bureau of Fisheries for fishpond purposes.
[3]



Thereafter, on 24 September 1969, Democrito Mendoza, Sr. filed an application for sales patent
[4]
to
purchase the area covered by Ordinary Fishpond Permit No. F-6029-Y.
[5]
The fishpond permit indicated that the
area covered by said permit was only 70.07 hectares; however, upon resurvey by the Bureau of Lands, the area
was reported to be measuring 92.3881 hectares. Later, still another survey by the same bureau disclosed that
the area applied for was only a little over 89 hectares.

On 17 August 1970, then Acting Director of Forestry Jose Viado issued a Letter Certification addressed
to the Director of Lands regarding the classification of the property covered by Ordinary Fishpond Permit No. F-
6029-Y subject of the sales patent application applied for by Democrito Mendoza, Sr., to wit:

Please be informed that the tract of land situated in Silot-Poblacion, Liloan, Cebu,
containing an area of 70.07 hectares xxx, is within the Timberland Block-B of LC Project No.
29 of Liloan, Cebu, per BF Map LC-1391. However, since the said area has already been
certified as available for fishpond development and is thus no longer needed for forest
purposes, the same (the 70.07 hectares shown on CebuPMD No. 1379) is, therefore, hereby
certified as such and released as Alienable or Disposable for fishpond purposes only pursuant
to the directive of the President dated January 16, 1967 and for disposition under the Public
Land Act, as amended, subject nevertheless, to the following conditions:

x x x x

2. That the area herein certified as Alienable or Disposable be solely
developed and used for fishpond purposes in consonance with the
approved scientific practices and assistance of the personnel of the
Philippine Fisheries Commission (Presidential Directive of January 16,
1967).
[6]
[Emphasis ours]


In compliance with the process for sales patent application, Democrito Mendoza, Sr. secured and
submitted separate certifications from concerned government agencies such as the Provincial Engineer of Cebu,
the District Engineer of Cebu, the Municipal Council of Liloan, Cebu, the Commissioner of Customs, the Secretary
of Public Works and Highways, among other offices, to determine if there were objections to his
application. Based on these certifications issued upon Democrito Mendoza, Sr.s request, it was ascertained that
there was no objection to said application and that the same did not interfere with any function or proposed
project of the government.

Subsequently, notices of sale were published in the Nueva Era and the Mindanao Mail, in addition to
the publication in the Official Gazette. The same were posted in conspicuous places within the vicinity of the
property subject of the sale and on the bulletin boards of the Municipal Hall of Liloan, Cebu, and of the Bureau
of Lands, District VII-I, both in Cebu City.

In the interim, Presidential Decree No. 43, Providing for the Accelerated Development of the Fishery
Industry of the Philippines,
[7]
was issued on 9 November 1972. Whereupon all public lands, such as tidal
swamps, mangrove and other swamps, marshes, ponds and streams within public lands, including public lands
left dry during the lowest low tide and covered by water during the highest tide; and which are not needed for
forestry purposes were declared available for fishpond purposes and automatically transferred to the Bureau of
Fisheries for its administration and disposition.
[8]


On 18 January 1973, a day before the scheduled auction sale of the disputed property,
then Liloan Mayor Cesar Bugtai filed a letter-protest with the Director of Lands objecting to the proposed sale of
the property. According to Mayor Bugtai, the area was intended for development by the local government as a
tourist attraction. Despite said opposition by the municipal mayor, the District Land Office of Cebu City
proceeded with the scheduled auction sale on 19 January 1973, wherein Democrito Mendoza, Sr. was declared
winner, being the sole bidder thereat. The opposition of Mayor Bugtai was subsequently recommended for
dismissal by the Bureau of Lands for lack of merit.

Thereafter, then Acting Director of the Bureau of Lands Ramon N. Casanova recommended the
approval of Democrito Mendoza, Sr.s request for the issuance of a patent to the land covered by Sales
(Fishpond) Application No. (VI-I) 41-A on grounds of justice and equity.

In the First Indorsement of then Secretary of Agriculture and Natural Resources Arturo Tanco, Jr.,
dated 5 March 1974 to the Office of the President, the recommendation of Acting Director of the Bureau of
Lands Ramon N. Casanova was favorably endorsed.

On 21 May 1974, then Presidential Executive Assistant Jacobo C. Clave issued a Memorandum
informing the Secretary of the Department of Natural Resources that President Marcos had approved the
recommendation advising approval of the request of Democrito Mendoza, Sr. for the issuance of a patent over
the disputed property.

Prior to the formal award of the subject property, Democrito Mendoza, Sr., however, had caused the
property to be subdivided into Lots 1 and 2. Lot 1 was further subdivided into four, namely Lots 1-A, 1-B, 1-C,
and 1-D. Thereafter, Democrito Mendoza, Sr. made an assignment of his rights and interests over Lots 1-B, 1-C,
and 1-D in favor of his three children Gwendolyn,
[9]
Vilma,
[10]
and Democrito, Jr.,
[11]
all surnamed Mendoza. For
himself, Democrito Mendoza, Sr. retained Lot 1-A
[12]
with an area of 215,838 square meters and Lot 2 with an
area of 241.61 square meters. Subsequently, Gwendolyn, Vilma, and Democrito, Jr. filed their respective sales
patent applications for the property assigned to them by their father.

On 26 June 1974, Acting Director of the Bureau of Lands Ramon N. Casanova issued an Order awarding
the sales patents over the disputed property to Democrito Mendoza, Sr. and his three children
Gwendolyn, Vilma, and Democrito, Jr., respectively, to wit:

It appearing that the proceedings had in connection with the above-noted
applications were in accordance with law and existing regulations, the portions of the land
applied for which correspond to Lot No. 1-A & Lot No. 2, Si(F) (VI-I) 42-D are hereby awarded
to Democrito T. Mendoza at P200.00 per hectare or P4,800.00 for the whole tract of 24.0000
hectares; Lot No. 1-B, Si(F) (VI-I) 42-D, to Gwendolyn C. Mendoza at P200.00 per hectare
or P4,600.00 for the whole tract of 23.0000 hectares; Lot No. 1-C Si(F) (VI-I) 42-D, to Vilma C.
Mendoza at P200.00 per hectare or P4,600.00 for the whole tract of 23.0000 hectares and
Lot No. 1-D Si(F) (VI-I) 42-D, to Democrito C. Mendoza, Jr. at P200.00 per hectare
or P4,477.62 for the whole tract of 23.3881 hectares.
[13]


Following the registration of the sales patents with the Register of Deeds of Cebu, Original Certificates of Title
were each issued to Democrito, Sr.,
[14]
Gwendolyn,
[15]
Vilma,
[16]
andDemocrito, Jr.
[17]


On 8 January 1982, in consideration of shares of stock in MENCA Development Corporation (MENCA)
worth P77,283.00, Democrito Mendoza, Sr. executed a Contract of Exchange of Real Properties for Shares of
Stock on 8 January 1982, whereby he ceded to MENCA Lot No. 2 and a portion of Lot No. 1-A. The portion
tendered to MENCA was later on known as Lot No. 1-A-1, while the lot retained by Democrito Mendoza, Sr. was
denominated as Lot No. 1-A-2.

On 9 July 1982, Democrito Mendoza, Sr., for himself and on behalf of his daughters Gwendolyn
and Vilma, executed a Deed of Exchange wherein Lot No. 1-A-2 and a portion of each lot belonging to
Gwendolyn and Vilma, respectively, were relinquished to Jacinto Velez, Jr. and Carmen Velez-Ting in exchange
for properties enumerated in said instrument. The portion of the lots originally belonging to Gwendolyn
and Vilma that were given to Jacinto Velez, Jr. and Carmen Velez-Ting were thereafter denominated as Lots No.
1-B-1 and 1-C-1, while the lots retained were labeled Lots No. 1-B-2 and 1-C-2.

Finally, on 9 May 1988, Democrito Mendoza, Sr., on behalf of his three children Gwendolyn, Vilma,
and Democrito, Jr., executed another Contract of Exchange of Real Properties for Shares of Stock with MENCA,
trading Lots No. 1-B-2, 1-C-2, and 1-D in exchange for 8,468 shares of stock in said corporation.

Sometime in 1988, a protest was filed by the fisherman-residents of Liloan against the issuance of the
sales patents to the Mendozas. Acting thereon, the Department of Environment and Natural Resources (DENR)
Regional Office No. 7, Cebu City, conducted an investigation. On 23 October 1990, based on the information
gathered by the DENR, showing that there were alleged irregularities in the issuance of the sales patents
awarded to the Mendozas, the Republic of the Philippines, represented by the Director of the Land Management
Bureau, filed with the RTC of Cebu, a complaint for Cancellation of Sales Patents and Titles
against Democrito Mendoza, Sr. and his three children Gwendolyn, Vilma, and Democrito, Jr., together with the
Register of Deeds of Cebu City.

According to the complaint, there was irregularity in the issuance of the sales patents covering the
subject properties since the area in question forms part of Silot Bay and used as communal fishing grounds by
the residents of Liloan, Cebu, and hence, is not alienable and disposable. It is further maintained that the sales
patents were issued in violation of Section 23 of Presidential Decree No. 704, Fisheries Decree of 1975,
[18]
which
prohibits the disposal by sale of public land suitable for fishpond purposes.
[19]
Complainant also contends that
the issuance of the sales patents was attended by fraud and misrepresentation in that it was made to appear in
the applications for sales patents that the areas sought to be patented were alienable and disposable tracts of
land, when in fact the same form part of Silot Bay being used as communal fishing grounds by the residents
of Liloan, Cebu.

On 8 July 1991, herein petitioner Republic of the Philippines filed an Amended Complaint impleading as
additional party-defendants MENCA Development Corporation, Jacinto Velez, Jr., and Carmen Velez-
Ting. Subsequently, the Silot Bay Fishermans Association, Inc. filed a Complaint in Intervention on 24 October
1991, claiming that its members have a legal interest in the cancellation of the sales patents as they are residing
around Silot Bay and deriving their income from fishing in the said disputed area.

After trial on the merits, the trial court, on 3 June 1996, rendered a Decision declaring the sales
patents, as well as the original certificates of title issued to the Mendozas as null and void ab initio. Thus:


WHEREFORE, premises considered, judgment is hereby rendered:

(1) Declaring Sales Patents Nos. 187, 188, 189 and 190
together with its corresponding Original Certificates of Titles Nos. 0-9983,
0-9980, 0-9981 and 0-9982 issued to defendantsDemocrito T. Mendoza,
Sr., Democrito Mendoza, Jr., Gwendolyn Mendoza and Vilma Mendoza,
absolutely null and void ab initio;

(2) Ordering the said defendants to surrender to the defendant
Register of Deeds for the Province of Cebu their respective owners
duplicate copies of Original Certificates of Titles Nos. 0-9983, 0-9980, 0-
9981 and 0-9982, and directing the said defendant Register of Deeds for
the Province of Cebu to cancel the same and all the patent titles
emanating or springing therefrom; and,

(3) Declaring Lot 1-A, Lot 1-B, Lot 1-C and Lot 1-D Psd. 07-01-
00026 as inalienable and non-disposable being parts of Silot Bay.
[20]



Aggrieved by the aforequoted Decision, the Mendozas and MENCA Corporation lodged an appeal with
the Court of Appeals. On 30 March 2001, the appellate court rendered the herein assailed Decision, the
pertinent portions of which state:

The separate appeals interposed by the defendants are impressed with merit.

As We see it, the primordial issue is whether or not appellants are qualified to own
the property subject matter of this controversy. Implied in this issue is a more basic one,
that is whether or not said property is alienable and disposable and, therefore, subject to
private appropriation through modes recognized under the Public Land Act.

The lower court resolved the issue in the negative on the main reasoning
that Silot Bay is a communal fishing ground, and that the area in question is actually part of
the seabed, hence, non-alienable. It added that, assuming the availability for disposition of
the area applied for, appellant Democrito, Sr. is barred from asserting ownership thereof in
view of Section 11, Article XIV of the 1973 Constitution, xxx.

The Court cannot bring itself to agree to the rationale for the trial courts posture.
Our reasons are, as follows:

One, the property involved in this case is not a communal fishing ground, as
erroneously concluded by the court a quo. While Silot Bay is a potential fishpond area, there
must be, for it to come within the termcommunal fishing ground, a declaration to that
effect by the appropriate agency.

We have carefully perused the records before Us and found nothing therein
evidencing such a declaration by the DANR respecting Silot Bay. What the records yield is the
fact that Silot Bay, as shown by a Land Classification (LC) map, was once categorized as
timberland. It cannot be overemphasized that the prerogative of classifying public lands
pertains to administrative agencies which have been specially tasked by statutes to do so,
namely: the DANR, now the DENR, and two (2) of its bureaus, the Bureau of Lands and the
Bureau of Forestry. Hence, consistent with the oft-repeated pronouncements that courts
will not interfere on matters which are addressed to the sound discretion of government
and/or quasi-judicial agencies entrusted with the regulation of activities coming under the
special technical knowledge and training (International Container Terminal Service, Inc. vs.
NLRC, 256 SCRA 124; Alba vs. Nitorreda, 254 SCRA 753, citing other cases), and that issues
involving basically technical matters deserve to be disentangled from undue interference by
the courts (Sta. Ines Melale Forest Products Corp. vs. Macaraig, Jr., 299 SCRA 491,
citing Ynson vs. CA, 257 SCRA 411; Casa Filipinas Realty Corporation vs. Office of the
President, 241 SCRA 165; Rubenecia vs, CSC, 244 SCRA 770), it behooves this Court to refrain
from looking into the underlying reasons or grounds which impelled the classification and
declaration of Silot Bay as timberland or from questioning the wisdom such classification or
declaration.

x x x x

This Court, for argument, may allow that Silot Bay had once upon a time been duly
reserved or declared as a communal fishing ground. It has to be pointed out, however, that
an interplay of events had supervened to alter this reserved nature of the bay. We refer to
the issuance on January 16, 1967 of the Presidential Memorandum, supra, and subsequently
Presidential Decree (PD) No. 43, whereunder then President Marcos, with the end view of
attaining self-sufficiency in fish production, directed the identification of potential fishpond
areas, the same to be declared alienable and disposable to be titled in the name of the actual
occupants thereof. There can hardly be any quibbling regarding the power of the then
President to promulgate the twin issuances, or to undo, by way of reclassification, what a
subordinate has done.

Second, the Mendozas, or Democrito, Sr. in his behalf and in behalf of his children
appear to have complied with all the documentary, developmental, publication, bidding and
other legal requirements necessary for securing sales patents. Otherwise, the Director of
Lands, during the evaluation process, would have simply denied due course to his
application. The actuality of the Director of Lands recommending and the Secretary of
Agriculture and Natural Resources favorably endorsing the request of Democrito, Sr. for the
issuance of what turned out to be the underlying sales (fishpond) patent is indicative
of Democritoscompliance. Last but not least, the Presidents act of approving the issuance
of the requested sales (fishpond) patent cannot but be viewed as final confirmation
that Democrito, Sr. has indeed met all the requirements to justify a public land award
through sales.

It may be worth mentioning that the Director of Lands had dismissed the protests
filed by then Liloan Municipal Mayor Bugtai, et al., against the Sales (Fishpond) Patent
application of Democrito, Sr. on the consistent ground that the applicant had complied with
all the requirements of the law for a sales patent grant. In this regard, jurisprudence reminds
that decisions of the Director of Lands on disputes involving patents to public lands, if
supported by substantial evidence and approved by the DENR Secretary of Agriculture, are
generally conclusive. xxx.

Third, as a necessary consequence of Democrito, Sr.s compliance with the legal
requirements referred to above, the sales patents and the original certificates of titles issued
in favor of the Mendozas are presumptively legal and valid.

Much was made by the trial court of the splitting up of the sales patent issued
to Democrito, Sr., into four (4) parts, with each part containing an area not exceeding
twenty-four (24) hectares in the names ofDemocrito, Sr., Democrito, Jr., Gwendolyn
Mendoza and Vilma Mendoza. It may well be noted, however, that the split obviously
effected in view of Section 11, Article XIV of the 1973 Constitution, supra, limiting the
acquisition of alienable land by individuals to twenty-four (24) hectares came with the
approval of the Director of Lands and the Secretary of Agriculture and Natural Resources. In
a very real sense, therefore, the flaw, if any there be, in the manner the Mendoza children
acquired their sales patents was remedied by the positive actions of the very officials charged
by law with the administration and disposition of alienable public lands.

The unyielding posture of the appellee, as adopted by the trial court, that the area
in question cannot be legally titled because it is underwater may be accorded some cogency
but for the hard fact that it is being titled for fishpond purposes only, as what precisely
appears in the sales patents. Fish do not thrive on dry land. Fish are born and grow in water.
x x x x

Fourth, the sales patents and certificates of titles issued in the name of
the Mendozas cannot, after the lapse of one (1) year from their issuance, be successfully
challenged on the ground of fraud or misrepresentation. The reason is simple. After the due
registration of a patent and the issuance of the corresponding title, the covered area is
deemed to have been brought under the aegis of the Torrens system entitled to all
guarantees implied in such system of registration. xxx

As may be noted, the one-year prescriptive period in the underscored portion of
Section 32, P.D. No. 1529 applies even to the government. Accordingly, the government if
deprived of property through fraud, as the trial court seems to imply, and as intervenor-
appellee have at every turn postulated, must institute the proper petition in court for the
reopening and review of the decree of registration including of course the patent issued
within one (1) year from and after the date of entry of such decree of registration. Failing in
this, the decree becomes inconvertible even as against the government itself. Hence, since
the sales patents in question were registered a little less than a month after they were issued
on September 25, 1974, the filing of the instant action for cancellation on October 23, 1990,
which in net legal effect partakes of a petition for a reopening or review of the validity of the
issuance of the sales patents, has, with the view We take of the case, definitely prescribed.

Fifth, the government is estopped to ask for the cancellation of the sales patents
and titles issued in the names of the Mendozas. To say the least, there is something
disconcerting, if not absurd, in the instant case. For, the very same agency the Bureau of
Land Management, formerly called Bureau of Lands, which presumptively evaluated with
thoroughness and recommended the grant of Sales (Fishpond) Application No. (VI-I) 41-A
of Democrito Sr., he having complied with all the requirements of the law for the grant,
would now trifle with its own processes, execute a 180 degree turn to argue and say that the
same is not valid and illegal. Suffice it to state that to go back on ones word and to change a
stand volte face, as what the Bureau of Land Management has done in this case, goes against
well-settled principles of justice and fair play. While concededly, there is the legal stricture
that the government is not estopped by the mistakes committed by its agents, the Supreme
Court in Commissioner of Internal Revenue v. Court of Appeals, 303 SCRA 508, 516, pointedly
stated that:

This Court is mindful of the well entrenched principle that the
government is never estopped from the collecting of taxes because of the
mistakes or errors on the part of its agents, but this rule admits of
exceptions in the interest of justice and fair play x x x.

x x x x

Then, too, it has been the long standing policy and practice of
this Court to respect the conclusions arrived at by quasi-judicial agencies
x x x which by the nature of its functions, is dedicated exclusively to the
study and consideration of x x x problems, and which has thus developed
an expertise on the subject, unless an abuse or improvident exercise of
its authority is shown. x x x

The Bureau of Land Management and the intervenor-appellee, at this late hour,
can no longer assail the issuance of the patents and titles to the Mendozas on the ground of
fraud or irregularity. This is as it should be, because the sales patents in question, and the
certificates of title issued by virtue thereof, have become incontrovertible and are binding
against all persons, including the government and its branches, given that those who may be
minded to question their validity have not done so within the period of one (1) year from the
date of their registration.

Moreover, by reason of the lapse of more that sixteen (16) years from the issuance
of the patents and the titles in question up to the filing on October 23, 1990 of the complaint
contesting their validity on the ground of fraud, the government agency concerned and
the intervenor are guilty of laches and are now precluded from questioning the validity of
such grants. x x x.

It is indeed illogical and a cruel breach of the sporting idea of fair play, if the very
same government agency which vigorously recommended, through indubitable public
documents and authentic writings, the issuance of Sales Patents to Democrito Sr., would now
be permitted to deny and successfully impugn in this action its official acts. What
compounds matters is that the same agency led Democrito Sr. to believe that he has truly
complied with the law and who, acting on such belief, participated in the bidding held on
January 19, 1973 and paid the price for the area sold.

x x x x

Finally, We note that the primary basis of the lower court in declaring the nullity of
the sales patent and titles of the appellants is its finding that the area covered thereby
is beyond the commerce of man, and, therefore, could not have been declared as alienable
and disposable. x x x.

It bears stressing herein that LC map 1391-Liloan of the Land Classification Project
of the Province of Cebu classified Silot Bay as timberland. Evidently, the lower court makes
light of LC Map 1391 prepared in 1940. To Our mind, the evidentiary value of antique map
like Map 1391 ought to be accorded weighty consideration. Precisely, under the Revised
Rules on Evidence, the antiquity of documents impart then with greater probative value.
x x x.

The trial court deduced that the 1940 map wherein Silot Bay is classified as
timberland is incorrect due to misleading information wittingly or unwittingly supplied by the
government agencies concerned.

The conclusion reached by the lower court is assumed, not demonstrated; it is
absolutely wanting in factual support, what with the reality that no evidence whatsoever was
adduced by the Republic to sustain such a finding. It cannot be taken to overturn the legal
presumption that official duties have been regularly performed.

x x x x

As between the aforesaid official findings of experts and the bare unsupported
conclusions of the lower court, the choice is not hard to make. As it were, only the executive
and possibly the legislative departments have the power to transfer, any time, lands of the
public domain from one class to another, and, in like manner, to classify, for purposes of
administration and disposition, such land as disposable and alienable by sale or other modes
of ownership transfer. x x x.

Unquestionably, then, the lower court committed a serious error in ruling
that Silot Bay cannot be declared as alienable and disposable.

Foregoing premises considered, We rule and so hold that (1) Sales Patents Nos.
187, 188, 189 and 190 issued in favor of the Mendozas; (2) the corresponding Original
Certificates of Titles Nos. 0-9980, 0-9981, 0-9982 and 0-9983 issued in favor of
the Mendozas; and (3) all the derivative titles emanating therefrom in the names of MENCA
Development Corporation and Carmen Velez-Teng and Jacinto Velez, Jr., are all valid, legal
and binding as against the whole world.
[21]



The trial courts Decision having been reversed and the Sales Patents, as well as the Original
Certificates of Title issued to the Mendozas having been declared valid, petitionersRepublic of
the Philippines and Silot Bay Fishermans Association, Inc. filed their separate appeals before this Court.

Petitioners maintain that the Court of Appeals erred in declaring that the area covered by the sales
patents are not communal fishing grounds due to the absence of any declaration to that effect by the
appropriate government agency. According to petitioners, the appellate court failed to consider that Silot Bay is
a navigable body of water and by its very nature and inherent character is of public dominion, thus there is no
need for a declaration by any appropriate government agency that it is a communal fishing ground
before Silot Bay may be recognized as such. Furthermore, petitioners assert that the Court of Appeals failed to
give weight to the testimony of Edgardo Lipang, a former Geodetic Engineer of the Community and Environment
Resources Office in Cebu City, who was authorized by the trial court to conduct a resurvey of the disputed
area. His testimony established that the disputed area were found to be at the center of Silot Bay, the waters of
which flow from Camotes Sea where marine organisms like sea urchins thrive, and not on marshy lands, rivers or
lakes. Additionally, EdgardoLipang explained in his testimony that the subject property is deep even during low
tide and navigable by boats which further indicate that the area is part of the seabed rather than the foreshore.

Petitioner Republic of the Philippines added that it was erroneous for the appellate court to conclude
that the Mendozas complied with all the requirements for the issuance of sales patents. According to petitioner,
the Court of Appeals did not consider the findings of the investigation team from the DENR which discovered
irregularities in the issuance of the sales patents, to wit:

(a) The areas covered by the sales patents are part of Silot Bay and used as communal
fishing grounds by Liloan residents and, therefore, is not alienable and disposable;

(b) The sales patents were issued in violation of Section 23 0f Presidential Decree No. 704,
which provides that no public land suitable for fishpond purposes shall be disposed by
sale except sales patent already processed and approved on or before November 9,
1972 subject to the condition that such application covers a fully developed fishpond
not exceeding twenty-four (24) hectares. (The questioned sales patents do not fall
within the exception as they were issued on September 25, 1974);

(c) The issuance of the sales patents was attended by fraud and misrepresentation
committed by the applicants in that it was made to appear that the areas applied for
are alienable and disposable tracts of land, when in truth and in fact, they form part
of Silot Bay being used as communal fishing grounds by the residents of Liloan, Cebu.

Moreover, the government stresses the fact that the sales patent application of Democrito Mendoza, Sr. was for
an area of 92.3881 hectares, clearly in violation of the constitutional limitation of 24 hectares; and that his act of
circumventing the constitutional prohibition by distributing the area applied for to his three children cannot be
legally authorized since his children were not qualified to apply for sales patents because not one of them had
an existing lease over the property, which is a condition that must first be complied with before the grant of a
sales patent.

On the Court of Appeals ruling that the government is now precluded from bringing an action for
annulment of title after the lapse of one year from the issuance of the certificate of title, petitioners contend
that said ruling is diametrically opposed to the pronouncement of this Court that the Republic of the Philippines
is not precluded from bringing an action for annulment of title and reversion of land to the public domain even
after the lapse of the one-year period.

Lastly, petitioners call attention to the previous rulings of this Court that estoppel does not operate
against the government. In the case at bar, petitioner explains that the court a quofound that the sales patents
were issued on the basis of false and misleading information supplied by the Mendozas to the government
agencies which processed and granted their application; hence, it is erroneous for the appellate court to say that
the government is already estopped from seeking the cancellation of these sales patents since the Republic of
the Philippines is never estopped by the mistakes or error committed by its officials or agent.

In resolving the instant controversy, we shall foremost settle the issue of whether or not the
government is now precluded from bringing an action for the annulment of title and reversion of the disputed
property to the public domain after the lapse of the one-year period from registration thereof. We answer in
the negative. It is true that, as the Court of Appeals upheld, the sales patents and certificates of title issued in
the name of the Mendozas cannot, after the lapse of one year from their issuance, be successfully challenged on
the ground of fraud or misrepresentation for the reason that after the due registration of a patent and the
issuance of the corresponding title, the covered area is deemed to have been brought under the aegis of the
Torrens system entitled to all guarantees implied in such system of registration. It is equally true however, that
this Court, on the other hand, has declared too in numerous cases that the lapse of the one-year period within
which a decree of title may be reopened for fraud would not prevent the cancellation thereof by the
government, for to hold that a title may become indefeasible by registration, even if such title had been secured
through fraud or in violation of the law would be the height of absurdity.
[22]
As held in the case of Republic v.
Court of Appeals
[23]
:

[T]he indefeasibility of a title over land previously public is not bar to an
investigation by the Director of Lands as to how such title has been acquired, if the purpose
of such investigation is to determine whether or not fraud has been committed in securing
such title in order that the appropriate action for reversion may be filed by the
Government.
[24]



Nevertheless, whilst we agree with petitioners that the government is not precluded from conducting
an investigation as to how titles to property formerly belonging to the public domain has been acquired
notwithstanding the lapse of the one-year period for bringing an action for the annulment of title and reversion
of property to the public domain, in the absence of any showing that there was fraud or a violation of any law,
we are constrained to uphold the ruling of the Court of Appeals regarding the authority of administrative
agencies to classify SilotBay as timberland and its subsequent release as alienable and disposable, and the
findings of the appellate court that the Mendozas have complied with all the necessary requirements under the
law for the issuance of the sales patents.

Despite petitioners assertion that Silot Bay is a navigable body of water and by its very nature and
inherent character is of public dominion, thus, there is no need for a declaration by any appropriate government
agency that it is a communal fishing ground before Silot Bay may be recognized as such, it cannot be gainsaid
that the prerogative of classifying public lands pertains to administrative agencies which have been specially
tasked by statutes to do so and that the courts will not interfere on matters which are addressed to the sound
discretion of government and/or quasi-judicial agencies entrusted with the regulation of activities coming under
their special technical knowledge and training.
[25]
It should be stressed that the function of administering and
disposing of lands of the public domain in the manner prescribed by law is not entrusted to the courts but to
executive officials.
[26]
And as such, courts should refrain from looking into the underlying reasons or grounds
which impelled the classification and declaration of Silot Bay as timberland and its subsequent release as
alienable and disposable land. From the facts of the case, it is evident that the Bureau of Forestry
released Silot Bay as alienable and disposable by virtue of the Memorandum issued by then President Marcos
on 16 January 1967 which clearly empowered said bureau to identify and locate the 700,000 hectares of
fishpond areas and to release said areas as alienable and disposable. Hence, the courts, in view of the clear legal
directive by which said area was released as alienable and disposable, will refrain from questioning the wisdom
of such classification or declaration.

After a careful perusal of the records of the case, We rule that the sales patents handed out
to Democrito T. Mendoza, Sr., Gwendolyn Mendoza, Vilma Mendoza and DemocritoMendoza, Jr., were properly
issued.

Although it may seem that upon the advent of the 1973 Constitution, a conflict had arisen with respect
to the then pending sales patent application of Democrito Mendoza, Sr., yet from the letter of then Acting
Director of the Bureau of Lands Ramon N. Casanova, the approval of the sales patent application of Democrito T.
Mendoza, Sr. was still favorably recommended on grounds of equity and justice, to wit:

Under Opinion No. 64, series of 1973 which was promulgated in the meantime by the
Secretary of Justice and given clearance for implementation by the President per
Memorandum dated February 6, 1974 of Presidential Executive Assistant Jacobo C. Clave, it
has been held that even sales application already awarded are not to be exempted from
constitutional injunction regarding the acquisition of public lands for the reason that other
requirements have still to be satisfied before a patent may be issued. In the case of the
abovementioned application, while the land covered thereby was sold at public auction in
which the applicant is the successful bidder and has been considerably improved and
developed, no formal award has up to now been issued by this Office. In other words, the
applicant may be considered not having acquired vested rights over the land applied for prior
to the advent of the New Constitution which will entitle him to exemption from the
constitutional limitation, following the above-noted ruling of the Secretary of Justice.

It may also be mentioned that this case does not fall under any of the categories of sales
applications which may be given due course and issued patent pursuant to the policy
guidelines prescribed by the Honorable Secretary in his memorandum dated February 18,
1974.

As the applicant, however, has in good faith made considerable investment in the
development and improvement of the fishpond area and could have already obtained a title
thereto were it not for circumstances beyond his control, it is believed that he is entitled, on
considerations of equity and justice, to exemption from constitutional
injunction.
[27]
(Emphasis ours.)

From the abovequoted letter, it can be deduced that had it not been for circumstance beyond the applicants
control, i.e., the adoption of the 1973 Constitution during the pendency of the sales patent application
of Democrito T. Mendoza, Sr., there would not have been any obstacle for its approval by the Office of the
President. Hence, taking into account the fact thatDemocrito T. Mendoza, Sr. had complied with all the
necessary requirements for the issuance of sales patent covering the disputed area, then Acting Director of the
Bureau of Lands Ramon N. Casanova recommended the approval of said application in the spirit of justice and
equity. As stated by the Court of Appeals, Democrito Mendoza, Sr., appears to have complied with all the legal
requirements for securing the sales patents; otherwise, the Acting Director of Lands would not have
recommended the approval of said application despite the seeming constitutional impediment.

Moreover, it is worth noting that in order to conform to the prohibitions imposed by the 1973 Constitution
which limits the purchase of lands of the public dominion to 24 hectares per individual, Democrito Mendoza, Sr.,
subdivided the property in question into four, each comprising an area not more than 24 hectares, and assigned
his rights over three parts to his three children. Accordingly, Democrito Mendoza, Sr. amended his sales patent
application while his three children filed their own applications for their respective parts. The area applied for in
each of the Mendozas sales patent applications were, by then, well-within the constitutional limitation. Such
subdivision of the area originally applied for by Democrito Mendoza, Sr. was made with the full knowledge and
the subsequent approval of all the appropriate government authorities. There is nothing to suggest that it was
done illicitly or fraudulently. That the subdivision was executed overtly actually establish the good faith of
the Mendozas to comply with the Constitutional and statutory provisions on sales patent applications.

Petitioner Republic has failed to prove fraud on the part of the Mendozas with respect to the issuance
of the sales patents. The burden of proving that actual fraud exists rests on the party alleging it. In
this jurisdiction, fraud is never presumed FRAUS EST IDIOSA ET NON PRAESUMENDA.
[28]
It must be stressed
that mere allegations of fraud are not enough. Intentional acts to deceive and deprive another of his right, or in
some manner injure him, must be specifically alleged and proved.
[29]
There is very little evidence in this case to
convince Us that the Mendozas were able to secure their sales patent by fraud or misrepresentation. The
assertion of petitioner Republic that the issuance of the sales patents was attended by fraud and
misrepresentation is based solely on the claim made by the Mendozas in their sales patent applications that the
areas sought to be patented were alienable and disposable tracts of land, when, in fact, the same form part
of Silot Bay which were being used as communal fishing grounds by the residents of Liloan, Cebu. Such an
assertion, however, has been squarely debunked in light of the unmistakable legal basis by which the
appropriate administrative agency classified the areas applied for as alienable and disposable.

In the absence of any evidence of fraud or violation of law, the title of the Mendozas over the
disputed property has now become indefeasible, even as against the petitioner Republic.

While the general rule is that the State cannot be put in estoppel by the mistakes or errors of its
officials or agents, like all general rules, this is also subject to exceptions. We recognized such exceptions
in Republic v. Court of Appeals,
[30]
to wit

The general rule is that the State cannot be put in estoppel by the mistakes or
errors of its officials or agents. However, like all general rules, this is also subject to
exceptions, viz:
"Estoppels against the public are little favored. They should not
be invoked except in rare and unusual circumstances, and may not be
invoked where they would operate to defeat the effective operation of a
policy adopted to protect the public. They must be applied with
circumspection and should be applied only in those special cases where
the interests of justice clearly require it. Nevertheless, the government
must not be allowed to deal dishonorably or capriciously with its citizens,
and must not play an ignoble part or do a shabby thing; and subject to
limitations x x x the doctrine of equitable estoppel may be invoked
against public authorities as well as against private individuals."
In Republic v. Sandiganbayan, the government, in its effort to recover ill-
goten wealth, tried to skirt the application of estoppel against it by invoking a specific
constitutional provision. The Court countered:

"We agree with the statement that the State is immune
from estoppel, but this concept is understood to refer to acts and
mistakes of its officials especially those which are irregular (Sharp
International Marketing vs. Court of Appeals, 201 SCRA 299; 306
[1991]; Republic v. Aquino, 120 SCRA 186 [1983]), which peculiar
circumstances are absent in the case at bar. Although the State's right of
action to recover ill-gotten wealth is not vulnerable to estoppel[;] it
is non sequitur to suggest that a contract, freely and in good faith
executed between the parties thereto is susceptible to disturbance ad
infinitum. A different interpretation will lead to the absurd scenario of
permitting a party to unilaterally jettison a compromise agreement which
is supposed to have the authority of res judicata (Article 2037, New Civil
Code), and like any other contract, has the force of law between parties
thereto (Article 1159, New Civil Code; Hernaez vs. Kao, 17 SCRA 296
[1966]; 6 Padilla, Civil Code Annotated, 7th ed., 198, p. 711; 3 Aquino,
Civil Code, 1990 ed., p. 46.

Based on the foregoing, the State can only be immune from estoppel as regards mistakes, errors or irregularities
committed by its officials or agents. In the absence of mistake, error or irregularity in the performance by the
concerned government officials of their duties, then the State cannot invoke its immunity from estoppel.

In the Petition at bar, the Mendozas were given clearances and certifications on the lack of objections to
their sales patent applications by the Director of Forestry, Provincial Engineer of Cebu, the District Engineer
of Cebu, the Municipal Council of Liloan, Cebu, and the Commissioner of Customs, and the Secretary of Public
Works and Highways. Subsequently, their sales patent applications were approved by the Director of the
Bureau of Lands, the Secretary of the Department of Natural Resources, and the President of the
Republic. Based on their patents, the Mendozas were able to acquire original certificates of tile from the
Registry of Deeds. Without any allegation and evidence that these government officials committed any
mistake, error or irregularity in the approval of the sales patent applications and issuance of the certificates of
title in the name of the Mendozas, then their acts in relation thereto estop the Republic from questioning the
validity of the said sales patents and the certificates of title.


Finally, it should be borne in mind that that the contested areas and titles thereto had already passed
on to third parties who acquired the same from the Mendozas in good faith and for value. When the Mendozas
sales patents were registered, they were brought under the operation of Presidential Decree No. 11529,
otherwise know as the Land Registration Decree.

According to Section 103 of the Land Registration Decree, whenever public lands is by the Government
alienated, granted, or conveyed to any person, the same shall be brought under the operation of the said Decree
and shall be deemed to registered lands to all intents and purposes under the Decree. And a well-settled
doctrine in Our jurisdiction provides that one who deals with property registered under the Torrens system need
not go beyond the same, but only has to rely on the title. He is charged with notice only of such burdens and
claims as are annotated on the title.
[31]
The Mendozas certificates of title were clean and, thus, MENCA
Corporation, Jacinto Velez, Jr. and Carmen Velez-Ting were induced to acquire the same from
the Mendozas. That they did so in good faith and for value was not even questioned herein. Their titles, rights,
and interests to the fishpond area must be respected and protected.

In Republic v. Agunoy, Sr., et al.,
[32]
We refused to revert the land in question to the public domain despite
the fact that the free patent thereto was secured by fraud since the same land already passed on to purchasers
in good faith and for value

There can be no debate at all on petitioners submission that no amount of legal
technicality may serve as a solid foundation for the enjoyment of the fruits of fraud. It is
thus understandable why petitioner chants the dogma of fraus et jus nunquam cohabitant.

Significantly, however, in the cases cited by petitioner Republic, as well as in those
other cases where the doctrine of fraus et jus nunquam cohabitant was applied against a
patent and title procured thru fraud or misrepresentation, we note that the land covered
thereby is either a part of the forest zone which is definitely non-disposable, as in Animas, or
that said patent and title are still in the name of the person who committed the fraud or
misrepresentation, as in Acot, Animas, Republic vs. CA and Del Mundo and Director of Lands
vs. Abanilla, et al. and, in either instance, there were yet no innocent third parties standing
in the way.

If the titles of innocent buyers were recognized and protected in the afore-mentioned circumstances, even when
the original title to the property was obtained through fraud, then the titles of the purchasers in good faith and
for value of the fishpond areas in the present case better deserve our recognition and protection considering
that the sales patents and original certificates of title of their predecessors-in-interest were found to be legally
and validly issued.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 57069 is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-12958 May 30, 1960
FAUSTINO IGNACIO, applicant-appellant,
vs.
THE DIRECTOR OF LANDS and LAUREANO VALERIANO, oppositors-appellees.
Acting Assistant Solicitor General Pacifico P. de Castro and Solicitor Crispin V. Bautista for appellee Director of
Lands.
Benjamin H. Aquino for appellee Laureano Veleriano.
MONTEMAYOR, J.:
Faustino Ignacio is appealing the decision of the Court of First Instance of Rizal, dismissing his application for the
registration of a parcel of land.
On January 25, 1950, Ignacio filed an application for the registration of a parcel of land (mangrove), situated in
barrio Gasac, Navotas, Rizal, with an area of 37,877 square meters. Later, he amended his application by alleging
among others that he owned the parcel applied for by right of accretion. To the application, the Director of
Lands, Laureano Valeriano and Domingo Gutierrez filed oppositions. Gutierrez later withdrew his opposition. The
Director of Lands claimed the parcel applied for as a portion of the public domain, for the reason that neither the
applicant nor his predecessor-in-interest possessed sufficient title thereto, not having acquired it either by
composition title from the Spanish government or by possessory information title under the Royal Decree of
February 13, 1894, and that he had not possessed the same openly, continuously and adversely under a bona
fide claim of ownership since July 26, 1894. In his turn, Valeriano alleged he was holding the land by virtue of a
permit granted him by the Bureau of Fisheries, issued on January 13, 1947, and approved by the President.
It is not disputed that the land applied for adjoins a parcel owned by the applicant which he had acquired from
the Government by virtue of a free patent title in 1936. It has also been established that the parcel in question
was formed by accretion and alluvial deposits caused by the action of the Manila Bay which boarders it on the
southwest. Applicant Ignacio claims that he had occupied the land since 1935, planting it with api-api trees, and
that his possession thereof had been continuous, adverse and public for a period of twenty years until said
possession was distributed by oppositor Valeriano.
On the other hand, the Director of Lands sought to prove that the parcel is foreshore land, covered by the ebb
and flow of the tide and, therefore, formed part of the public domain.
After hearing, the trial court dismissed the application, holding that the parcel formed part of the public domain.
In his appeal, Ignacio assigns the following errors:
I. The lower court erred in holding that the land in question, altho an accretion to the land of the
applicant-appellant, does not belong to him but forms part of the public domain.
II. Granting that the land in question forms part of the public domain, the lower court nevertheless
erred in not declaring the same to be the necessary for any public use or purpose and in not ordering
in the present registration proceedings.
III. The lower court erred in not holding that the land in question now belongs to the applicant-
appellant by virtue of acquisitive prescription, the said land having ceased to be of the public domain
and became the private or patrimonial property of the State.
IV. The lower court erred in not holding that the oppositor Director of Lands is now in estoppel from
claiming the land in question as a land of the public domain.
Appellant contends that the parcel belongs to him by the law of accretion, having been formed by gradual
deposit by action of the Manila Bay, and he cites Article 457 of the New Civil Code (Article 366, Old Civil Code),
which provides that:
To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive
from the effects of the current of the waters.
The article cited is clearly inapplicable because it refers to accretion or deposits on the banks of rivers, while the
accretion in the present case was caused by action of the Manila Bay.
Appellant next contends that Articles 1, 4 and 5 of the Law of Waters are not applicable because they refer to
accretions formed by the sea, and that Manila Bay cannot be considered as a sea. We find said contention
untenable. A bay is a part of the sea, being a mere indentation of the same:
Bay. An opening into the land where the water is shut in on all sides except at the entrance; an inlet
of the sea; an arm of the sea, distinct from a river, a bending or curbing of the shore of the sea or of a
lake. 7 C.J. 1013-1014 (Cited in Francisco, Philippine Law of Waters and Water Rights p. 6)
Moreover, this Tribunal has some cases applied the Law of Waters on Lands bordering Manila Bay. (See the cases
of Ker & Co. vs. Cauden, 6 Phil., 732, involving a parcel of land bounded on the sides by Manila Bay, where it was
held that such land formed by the action of the sea is property of the State; Francisco vs. Government of the P.I.,
28 Phil., 505, involving a land claimed by a private person and subject to the ebb and flow of the tides of the
Manila Bay).
Then the applicant argues that granting that the land in question formed part of the public domain, having been
gained from the sea, the trial court should have declared the same no longer necessary for any public use or
purpose, and therefore, became disposable and available for private ownership. Article 4 of the Law of Waters of
1866 reads thus:
ART. 4. Lands added to the shores by accretions and alluvial deposits caused by the action of the sea,
form part of the public domain. When they are no longer washed by the waters of the sea and are not
necessary for purposes of public utility, or for the establishment of special industries, or for the
coastguard service, the Government shall declare them to be the property of the owners of the estates
adjacent thereto and as increment thereof.
Interpreting Article 4 of the Law of Waters of 1866, in the case of Natividad vs. Director of Lands, (CA) 37 Off.
Gaz., 2905, it was there held that:
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 coastguard 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, on 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 vs. Director of
Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde vs.
Director of Lands, 93 Phil., 134, (cited in Velayo's Digest, VI. I, 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.
Appellant next contends that he had acquired the parcel in question through acquisitive prescription, having
possessed the same for over ten years. In answer, suffice it to say that land of the public domain is not subject to
ordinary prescription. In the case of Insular Government vs. Aldecoa & Co., 19 Phil., 505 this Court said:
The occupation or material possession of any land formed upon the shore by accretion, without
previous permission from the proper authorities, although the occupant may have held the same as
owner for seventeen years and constructed a wharf on the land, is illegal and is a mere detainer,
inasmuch as such land is outside of the sphere of commerce; it pertains to the national domain; it is
intended for public uses and for the benefit of those who live nearby.
We deem it unnecessary to discuss the other points raised in the appeal.
In view of the foregoing, the appealed decision is hereby affirmed, with costs.



G.R. No. 97764 August 10, 1992
LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of Makati, Metro Manila,
MUNICIPALITY OF PARAAQUE, METRO MANILA, PALANYAG KILUSANG BAYAN FOR SERVICE,respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Paraaque.

MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the decision of the
Regional Trial Court of Makati, Branch 62, which granted the writ of preliminary injunction applied for by
respondents Municipality of Paraaque and Palanyag Kilusang Bayan for Service (Palanyag for brevity) against
petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which authorized the
closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets located at Baclaran,
Paraaque, Metro Manila and the establishment of a flea market thereon. The said ordinance was approved by
the municipal council pursuant to MMC Ordinance No. 2, Series of 1979, authorizing and regulating the use of
certain city and/or municipal streets, roads and open spaces within Metropolitan Manila as sites for flea market
and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the municipal
council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked
distinctly, and that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the
reclaimed areas are developed and donated by the Public Estate Authority.
On June 20, 1990, the municipal council of Paraaque issued a resolution authorizing Paraaque Mayor Walfrido
N. Ferrer to enter into contract with any service cooperative for the establishment, operation, maintenance and
management of flea markets and/or vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative, entered into an
agreement whereby the latter shall operate, maintain and manage the flea market in the aforementioned streets
with the obligation to remit dues to the treasury of the municipal government of Paraaque. Consequently,
market stalls were put up by respondent Palanyag on the said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan Traffic
Command, ordered the destruction and confiscation of stalls along G.G. Cruz and J. Gabriel St. in Baclaran. These
stalls were later returned to respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag giving the latter
ten (10) days to discontinue the flea market; otherwise, the market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint petition for
prohibition and mandamus with damages and prayer for preliminary injunction, to which the petitioner filed his
memorandum/opposition to the issuance of the writ of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from enforcing his
letter-order of October 16, 1990 pending the hearing on the motion for writ of preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No. 86 s. 1990 of the
Municipality' of Paraaque and enjoining petitioner Brig. Gen. Macasiano from enforcing his letter-order against
respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging grave abuse of
discretion tantamount to lack or excess of jurisdiction on the part of the trial judge in issuing the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by the municipal
council of Paraaque authorizing the lease and use of public streets or thoroughfares as sites for flea markets is
valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public service and are
therefore public properties; that as such, they cannot be subject to private appropriation or private contract by
any person, even by the respondent Municipality of Paraaque. Petitioner submits that a property already
dedicated to public use cannot be used for another public purpose and that absent a clear showing that the
Municipality of Paraaque has been granted by the legislature specific authority to convert a property already in
public use to another public use, respondent municipality is, therefore, bereft of any authority to close municipal
roads for the establishment of a flea market. Petitioner also submits that assuming that the respondent
municipality is authorized to close streets, it failed to comply with the conditions set forth by the Metropolitan
Manila Authority for the approval of the ordinance providing for the establishment of flea markets on public
streets. Lastly, petitioner contends that by allowing the municipal streets to be used by market vendors the
municipal council of respondent municipality violated its duty under the Local Government Code to promote the
general welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of power
given to local government units, the Municipality of Paraaque as such, is empowered under
that law to close its roads, streets or alley subject to limitations stated therein (i.e., that it is
in accordance with existing laws and the provisions of this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its
power is in fact an encroachment of power legally vested to the municipality, precisely
because when the municipality enacted the ordinance in question the authority of the
respondent as Police Superintendent ceases to be operative on the ground that the streets
covered by the ordinance ceases to be a public thoroughfare. (pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed municipal ordinance
authorizing the flea market on the public streets is valid, it is necessary to examine the laws in force during the
time the said ordinance was enacted, namely, Batas Pambansa Blg. 337, otherwise known as Local Government
Code, in connection with established principles embodied in the Civil Code an property and settled jurisprudence
on the matter.
The property of provinces, cities and municipalities is divided into property for public use and patrimonial
property (Art. 423, Civil Code). As to what consists of property for public use, Article 424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities and municipalities, consists of the
provincial roads, city streets, the squares, fountains, public waters, promenades, and public
works for public service paid for by said provinces, cities or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this
Code, without prejudice to the provisions of special laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local roads
used for public service and are therefore considered public properties of respondent municipality. Properties of
the local government which are devoted to public service are deemed public and are under the absolute control
of Congress (Province of Zamboanga del Norte v. City of Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334).
Hence, local governments have no authority whatsoever to control or regulate the use of public properties
unless specific authority is vested upon them by Congress. One such example of this authority given by Congress
to the local governments is the power to close roads as provided in Section 10, Chapter II of the Local
Government Code, which states:
Sec. 10. Closure of roads. A local government unit may likewise, through its head acting
pursuant to a resolution of its sangguniang and in accordance with existing law and the
provisions of this Code, close any barangay, municipal, city or provincial road, street, alley,
park or square. No such way or place or any part of thereof shall be close without
indemnifying any person prejudiced thereby. A property thus withdrawn from public use may
be used or conveyed for any purpose for which other real property belonging to the local
unit concerned might be lawfully used or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units to close roads and
other similar public places should be read and interpreted in accordance with basic principles already established
by law. These basic principles have the effect of limiting such authority of the province, city or municipality to
close a public street or thoroughfare. Article 424 of the Civil Code lays down the basic principle that properties of
public dominion devoted to public use and made available to the public in general are outside the commerce of
man and cannot be disposed of or leased by the local government unit to private persons. Aside from the
requirement of due process which should be complied with before closing a road, street or park, the closure
should be for the sole purpose of withdrawing the road or other public property from public use when
circumstances show that such property is no longer intended or necessary for public use or public service. When
it is already withdrawn from public use, the property then becomes patrimonial property of the local
government unit concerned (Article 422, Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474,
August 29, 1975, 66 SCRA 481). It is only then that the respondent municipality can "use or convey them for any
purpose for which other real property belonging to the local unit concerned might be lawfully used or conveyed"
in accordance with the last sentence of Section 10, Chapter II of Blg. 337, known as Local Government Code. In
one case, the City Council of Cebu, through a resolution, declared the terminal road of M. Borces Street, Mabolo,
Cebu City as an abandoned road, the same not being included in the City Development Plan. Thereafter, the City
Council passes another resolution authorizing the sale of the said abandoned road through public bidding. We
held therein that the City of Cebu is empowered to close a city street and to vacate or withdraw the same from
public use. Such withdrawn portion becomes patrimonial property which can be the object of an ordinary
contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are available to the public in
general and ordinarily used for vehicular traffic are still considered public property devoted to public use. In such
case, the local government has no power to use it for another purpose or to dispose of or lease it to private
persons. This limitation on the authority of the local government over public properties has been discussed and
settled by this Court en banc in "Francisco V. Dacanay, petitioner v. Mayor Macaria Asistio, Jr., et al.,
respondents, G.R. No. 93654, May 6, 1992." This Court ruled:
There is no doubt that the disputed areas from which the private respondents' market stalls
are sought to be evicted are public streets, as found by the trial court in Civil Case No. C-
12921. A public street is property for public use hence outside the commerce of man (Arts.
420, 424, Civil Code). Being outside the commerce of man, it may not be the subject of lease
or others contract (Villanueva, et al. v. Castaeda and Macalino, 15 SCRA 142 citing the
Municipality of Cavite v. Rojas, 30 SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102
Phil. 869; And Muyot v. De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the right to occupy portions of the
public street, the City Government, contrary to law, has been leasing portions of the streets
to them. Such leases or licenses are null and void for being contrary to law. The right of the
public to use the city streets may not be bargained away through contract. The interests of a
few should not prevail over the good of the greater number in the community whose health,
peace, safety, good order and general welfare, the respondent city officials are under legal
obligation to protect.
The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del '96
Street as a vending area for stallholders who were granted licenses by the city government
contravenes the general law that reserves city streets and roads for public use. Mayor
Robles' Executive Order may not infringe upon the vested right of the public to use city
streets for the purpose they were intended to serve: i.e., as arteries of travel for vehicles and
pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed
ordinance, the same cannot be validly implemented because it cannot be considered approved by the
Metropolitan Manila Authority due to non-compliance by respondent municipality of the conditions imposed by
the former for the approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do(es) not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked
distinctly, and that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the
reclaimed areas are developed and donated by the Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the foregoing conditions
precedent to the approval of the ordinance. The allegations of respondent municipality that the closed streets
were not used for vehicular traffic and that the majority of the residents do not oppose the establishment of a
flea market on said streets are unsupported by any evidence that will show that this first condition has been
met. Likewise, the designation by respondents of a time schedule during which the flea market shall operate is
absent.
Further, it is of public notice that the streets along Baclaran area are congested with people, houses and traffic
brought about by the proliferation of vendors occupying the streets. To license and allow the establishment of a
flea market along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not
help in solving the problem of congestion. We take note of the other observations of the Solicitor General when
he said:
. . . There have been many instances of emergencies and fires where ambulances and fire
engines, instead of using the roads for a more direct access to the fire area, have to
maneuver and look for other streets which are not occupied by stalls and vendors thereby
losing valuable time which could, otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the
people rushing their patients to the hospital cannot pass through G.G. Cruz because of the
stalls and the vendors. One can only imagine the tragedy of losing a life just because of a few
seconds delay brought about by the inaccessibility of the streets leading to the hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal
transportation flow is disrupted and school children have to get off at a distance still far from
their schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by vendors on the streets at the end
of the day. Needless to say, these cause further pollution, sickness and deterioration of
health of the residents therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners. Instead,
respondents want this Court to focus its attention solely on the argument that the use of public spaces for the
establishment of a flea market is well within the powers granted by law to a local government which should not
be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down by toe
Constitution and the laws such as our Civil Code. Moreover, the exercise of such powers should be subservient to
paramount considerations of health and well-being of the members of the community. Every local government
unit has the sworn obligation to enact measures that will enhance the public health, safety and convenience,
maintain peace and order, and promote the general prosperity of the inhabitants of the local units. Based on this
objective, the local government should refrain from acting towards that which might prejudice or adversely
affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to demand the demolition of the
illegally constructed stalls in public roads and streets and the officials of respondent municipality have the
corresponding duty arising from public office to clear the city streets and restore them to their specific public
purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for lack of basis and
authority in laws applicable during its time. However, at this point, We find it worthy to note that Batas
Pambansa Blg. 337, known as Local Government Lode, has already been repealed by Republic Act No. 7160
known as Local Government Code of 1991 which took effect on January 1, 1992. Section 5(d) of the new Code
provides that rights and obligations existing on the date of effectivity of the new Code and arising out of
contracts or any other source of prestation involving a local government unit shall be governed by the original
terms and conditions of the said contracts or the law in force at the time such rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial Court dated December
17, 1990 which granted the writ of preliminary injunction enjoining petitioner as PNP Superintendent,
Metropolitan Traffic Command from enforcing the demolition of market stalls along J. Gabriel, G.G. Cruz,
Bayanihan, Lt. Garcia Extension and Opena streets is hereby RESERVED and SET ASIDE.
SO ORDERED.
G.R. No. L40474 August 29, 1975
CEBU OXYGEN & ACETYLENE CO., INC., petitioner,
vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial District, and JOSE L. ESPELETA, Assistant
Provincial Fiscal, Province of Cebu, representing the Solicitor General's Office and the Bureau of
Lands, respondents.
Jose Antonio R Conde for petitioner.
Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General Octavio R. Ramirez and
Trial Attorney David R. Hilario for respondents. .

CONCEPCION, Jr., J.:
This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioner's
application for registration of title over a parcel of land situated in the City of Cebu.
The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu City. On
September 23, 1968, the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968,
declared the terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being
included in the City Development Plan.
1
Subsequently, on December 19, 1968, the City Council of Cebu passed
Resolution No. 2755, authorizing the Acting City Mayor to sell the land through a public bidding.
2
Pursuant
thereto, the lot was awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of
Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a total
consideration of P10,800.00.
3
By virtue of the aforesaid deed of absolute sale, the petitioner filed an application
with the Court of First instance of Cebu to have its title to the land registered.
4

On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground
that the property sought to be registered being a public road intended for public use is considered part of the
public domain and therefore outside the commerce of man. Consequently, it cannot be subject to registration by
any private individual.
5

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioner's
application for registration of title.
6
Hence, the instant petition for review.
For the resolution of this case, the petitioner poses the following questions:
(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph
34, give the City of Cebu the valid right to declare a road as abandoned? and
(2) Does the declaration of the road, as abandoned, make it the patrimonial property of the
City of Cebu which may be the object of a common contract?
(1) The pertinent portions of the Revised Charter of Cebu City provides:
Section 31. Legislative Powers. Any provision of law and executive order to the contrary
notwithstanding, the City Council shall have the following legislative powers:
xxx xxx xxx
(34) ...; to close any city road, street or alley, boulevard, avenue, park or square. Property
thus withdrawn from public servitude may be used or conveyed for any purpose for which
other real property belonging to the City may be lawfully used or conveyed.
From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In
the case of Favis vs. City of Baguio,
7
where the power of the city Council of Baguio City to close city streets and
to vacate or withdraw the same from public use was similarly assailed, this court said:
5. So it is, that appellant may not challenge the city council's act of withdrawing a strip of
Lapu-Lapu Street at its dead end from public use and converting the remainder thereof into
an alley. These are acts well within the ambit of the power to close a city street. The city
council, it would seem to us, is the authority competent to determine whether or not a
certain property is still necessary for public use.
Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily
be controlled or interfered with by the courts, absent a plain case of abuse or fraud or
collusion. Faithfulness to the public trust will be presumed. So the fact that some private
interests may be served incidentally will not invalidate the vacation ordinance.
(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn
from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of
an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states
that: "Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other
real property belonging to the City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner
is valid. Hence, the petitioner has a registerable title over the lot in question.
WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948,
LRC Rec. No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the
hearing of the petitioner's application for registration of title.
SO ORDERED.
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and
CATALINO MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA,
AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN,respondents.
Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from
proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-
ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary restraining order
effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to
compel the respondents to fully disclose to the public the basis of their decision to push through with the sale of
the Roppongi property inspire of strong public opposition and to explain the proceedings which effectively
prevent the participation of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990. After
G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required to file a comment
by the Court's resolution dated February 22, 1990. The two petitions were consolidated on March 27, 1990 when
the memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for an extension of
thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an extension of another
thirty (30) days which we granted on May 8, 1990, a third motion for extension of time granted on May 24, 1990
and a fourth motion for extension of time which we granted on June 5, 1990 but calling the attention of the
respondents to the length of time the petitions have been pending. After the comment was filed, the petitioner
in G.R. No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two
(2) cases.
I
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government
under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately
2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and
categorized as a commercial lot now being used as a warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which
is now vacant.
The properties and the capital goods and services procured from the Japanese government for national
development projects are part of the indemnification to the Filipino people for their losses in life and property
and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20)
years in accordance with annual schedules of procurements to be fixed by the Philippine and Japanese
governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the
national policy on procurement and utilization of reparations and development loans. The procurements are
divided into those for use by the government sector and those for private parties in projects as the then National
Economic Council shall determine. Those intended for the private sector shall be made available by sale to
Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed
under the heading "Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The
Roppongi property consists of the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to
Memorandum for Petitioner, p. 503). As intended, it became the site of the Philippine Embassy until the latter
was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the
failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since
that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J.
Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima Corporation
which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and renovate the present
Philippine Chancery in Nampeidai. The consideration of the construction would be the lease to the foreign
corporation of one (1) of the buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The
other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the lease period,
all the three leased buildings shall be occupied and used by the Philippine government. No change of ownership
or title shall occur. (See Annex "B" to Reply to Comment) The Philippine government retains the title all
throughout the lease period and thereafter. However, the government has not acted favorably on this proposal
which is pending approval and ratification between the parties. Instead, on August 11, 1986, President Aquino
created a committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe,
Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to avail
of separations' capital goods and services in the event of sale, lease or disposition. The four properties in Japan
including the Roppongi were specifically mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great
vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been
set for bidding at a minimum floor price of $225 million. The first bidding was a failure since only one bidder
qualified. The second one, after postponements, has not yet materialized. The last scheduled bidding on
February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed such that the $225
million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013 objects to
the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds as a principal
objection the alleged unjustified bias of the Philippine government in favor of selling the property to non-Filipino
citizens and entities. These petitions have been consolidated and are resolved at the same time for the objective
is the same - to stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi
property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to alienate
the Roppongi property assails the constitutionality of Executive Order No. 296 in making the property available
for sale to non-Filipino citizens and entities. He also questions the bidding procedures of the Committee on the
Utilization or Disposition of Philippine Government Properties in Japan for being discriminatory against Filipino
citizens and Filipino-owned entities by denying them the right to be informed about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were acquired as
part of the reparations from the Japanese government for diplomatic and consular use by the Philippine
government. Vice-President Laurel states that the Roppongi property is classified as one of public dominion, and
not of private ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under "property intended for public service" in
paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any one can
attach to it, not even by the State. The Roppongi and related properties were acquired for "sites for chancery,
diplomatic, and consular quarters, buildings and other improvements" (Second Year Reparations Schedule). The
petitioner states that they continue to be intended for a necessary service. They are held by the State in
anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the
commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of
contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property
at the moment, the petitioner avers that the same remains property of public dominion so long as the
government has not used it for other purposes nor adopted any measure constituting a removal of its original
purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the subject property is not
governed by our Civil Code but by the laws of Japan where the property is located. They rely upon the rule of lex
situs which is used in determining the applicable law regarding the acquisition, transfer and devolution of the
title to a property. They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of
Justice which used the lex situs in explaining the inapplicability of Philippine law regarding a property situated in
Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the Roppongi
property has ceased to become property of public dominion. It has become patrimonial property because it has
not been used for public service or for diplomatic purposes for over thirteen (13) years now (Citing Article 422,
Civil Code) and because the intention by the Executive Department and the Congress to convert it to private
use has been manifested by overt acts, such as, among others: (1) the transfer of the Philippine Embassy to
Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four government
properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act
No. 6657 [the Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision stating that
funds may be taken from the sale of Philippine properties in foreign countries; (5) the holding of the public
bidding of the Roppongi property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the
bidding to a future date; thus an acknowledgment by the Senate of the government's intention to remove the
Roppongi property from the public service purpose; and (7) the resolution of this Court dismissing the petition
in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi
property scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of Executive Order
No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now
avers that the executive order contravenes the constitutional mandate to conserve and develop the national
patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino citizens.
(Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141).itc-asl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national
economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern (Section 7, Article III,
Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino citizens of
capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving public interest (Section
28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order is a
misapplication of public funds He states that since the details of the bidding for the Roppongi property
were never publicly disclosed until February 15, 1990 (or a few days before the scheduled bidding), the bidding
guidelines are available only in Tokyo, and the accomplishment of requirements and the selection of qualified
bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not have the chance
to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum
price of $225 million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price
would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the three
related properties were through reparations agreements, that these were assigned to the government sector
and that the Roppongi property itself was specifically designated under the Reparations Agreement to house the
Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms
of the Reparations Agreement and the corresponding contract of procurement which bind both the Philippine
government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the property has become
patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its
ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of
collective needs, and resides in the social group. The purpose is not to serve the State as a juridical person, but
the citizens; it is intended for the common and public welfare and cannot be the object of appropration. (Taken
from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol.
II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private ownership.
ART. 420. The following things are property of public dominion
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks shores roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property
belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because the lot has been
Idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn
from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be
part of the public domain, not available for private appropriation or ownership until there is a formal declaration
on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials insinuating a change of
intention. We emphasize, however, that an abandonment of the intention to use the Roppongi property for
public service and to make it patrimonial property under Article 422 of the Civil Code must be
definite Abandonment cannot be inferred from the non-use alone specially if the non-use was attributable not to
the government's own deliberate and indubitable will but to a lack of financial support to repair and improve the
property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and
positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi
property's original purpose. Even the failure by the government to repair the building in Roppongi is not
abandonment since as earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of government properties in Japan were
merely directives for investigation but did not in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its text
expressly authorizing the sale of the four properties procured from Japan for the government sector. The
executive order does not declare that the properties lost their public character. It merely intends to make the
properties available to foreigners and not to Filipinos alone in case of a sale, lease or other disposition. It merely
eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold only to Filipino citizens
and one hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the
contrary notwithstanding, the above-mentioned properties can be made available for sale,
lease or any other manner of disposition to non-Filipino citizens or to entities owned by non-
Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three other
properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No. 1789
differentiates the procurements for the government sector and the private sector (Sections 2 and 12, Rep. Act
No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos or entities owned
by Filipinos. It is this nationality provision which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the properties of the Government in foreign countries, did
not withdraw the Roppongi property from being classified as one of public dominion when it mentions Philippine
properties abroad. Section 63 (c) refers to properties which are alienable and not to those reserved for public
use or service. Rep Act No. 6657, therefore, does not authorize the Executive Department to sell the Roppongi
property. It merely enumerates possible sources of future funding to augment (as and when needed) the
Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside of the commerce
of man cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi property by insisting that
Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in the
sale of extremely valuable government property, Japanese law and not Philippine law should prevail. The
Japanese law - its coverage and effects, when enacted, and exceptions to its provision is not presented to the
Court It is simply asserted that the lex loci rei sitae or Japanese law should apply without stating what that law
provides. It is a ed on faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict of
law situation arises only when: (1) There is a dispute over the title or ownership of an immovable, such that the
capacity to take and transfer immovables, the formalities of conveyance, the essential validity and effect of the
transfer, or the interpretation and effect of a conveyance, are to be determined (See Salonga, Private
International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is
asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should
apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the property belongs
to the Philippines. The issue is the authority of the respondent officials to validly dispose of property belonging
to the State. And the validity of the procedures adopted to effect its sale. This is governed by Philippine Law. The
rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situsrule 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 capableof acquiring the lots, the
Secretary merely explains that it is the foreign law which should determinewho 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.
G.R. No. 155650 July 20, 2006
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG PANGLUNGSOD NG
PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF PARAAQUE, respondents.
D E C I S I O N
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. MIAA's 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 MIAA's motion for
reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the
present petition for review.
7

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of
Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the
main lobby of the Paraaque City Hall. The City of Paraaque published the notices in the 3 and 10 January 2003
issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices
announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003,
10:00 a.m., at the Legislative Session Hall Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-
Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain
respondents the City of Paraaque, City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City
Treasurer of Paraaque, and the City Assessor of Paraaque ("respondents") from auctioning the Airport
Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court
ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings.
Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO
only at 1:25 p.m. or three hours after the conclusion of the public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during
the hearing, MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted their
respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA.
However, MIAA points out that it cannot claim ownership over these properties since the real owner of the
Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the
Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are
devoted to public use and public service, the ownership of these properties remains with the State. The Airport
Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real
estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government
Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA
invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of
public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is
also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption
privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government
Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one
person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in
Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport
Lands and Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v. 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 Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real
estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt
by its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of
government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real
Property Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax.
However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-
stock corporation, vested with functions relating to public needs whether governmental or proprietary
in nature, and owned by the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of
its capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA
is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital
stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA 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:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually through
a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains
a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises
the governmental powers of eminent domain,
12
police 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:
x x x x
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.(Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which
historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes
taxation as one of the powers of local governments, local governments may only exercise such power "subject to
such guidelines and limitations as the Congress may provide."
18

When local governments invoke the power to tax on national government instrumentalities, such power is
construed strictly against local governments. The rule is that a tax is never presumed and there must be clear
language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against
taxation. This rule applies with greater force when local governments seek to tax national government
instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However,
when Congress grants an exemption to a national government instrumentality from local taxation, such
exemption is construed liberally in favor of the national government instrumentality. As this Court declared
in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to reduce
the amount of money that has to be handled by government in the course of its operations. For these
reasons, provisions granting exemptions to government agencies may be construed liberally, in favor
of non tax-liability of such agencies.
19

There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling
policy requires such transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national government instrumentalities for rendering
essential public services to inhabitants of local governments. The only exception is when the legislature clearly
intended to tax government instrumentalities for the delivery of essential public services for sound and
compelling policy considerations. There must be express language in the law empowering local governments to
tax national government instrumentalities. Any doubt whether such power exists is resolved against local
governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local
governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat
316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of
power on the part of the States to touch, in that way (taxation) at least, the instrumentalities
of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
political subdivision can regulate a federal instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to seriously burden it in the
accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis
supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which
has the inherent power to wield it.
20

2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or
the Republic of the Philippines. The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads,
canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports"
includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the
State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public
dominion and thus owned by the State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the public for international
and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from
the public does not remove the character of the Airport Lands and Buildings as properties for public use. The
operation by the government of a tollway does not change the character of the road as one for public use.
Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the
government, or only those among the public who actually use the road through the toll fees they pay upon using
the road. The tollway system is even a more efficient and equitable manner of taxing the public for the
maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it is of public
dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public
use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the
road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the
kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not
affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute
the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those
among the public who actually use a public facility instead of taxing all the public including those who never use
the particular public facility. A user's tax is more equitable a principle of taxation mandated in the 1987
Constitution.
21

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both
international and domestic air traffic,"
22
are properties of public dominion because they are intended for public
use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man.
The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as
1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside
the commerce of man, thus:
According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises
the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and
public works of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in
1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of
the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for
private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may
be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the
supreme court of Spain in its decision of February 12, 1895, which says: "Communal things that cannot
be sold because they are by their very nature outside of commerce are those for public use, such as
the plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied)
23

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the
commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to be made
available to the public in general. They are outside the commerce of man and cannot be disposed of or
even leased by the municipality to private parties. While in case of war or during an emergency, town
plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the
Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must
also cease, and the town officials should see to it that the town plazas should ever be kept open to the
public and free from encumbrances or illegal private constructions.
24
(Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the
subject of an auction sale.
25

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through
public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is
void for being contrary to public policy. Essential public services will stop if properties of public dominion are
subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose
and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can 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 men's village and other improvements for the
public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall
be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until
again declared alienable under the provisions of this Act or by proclamation of the President.
(Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use,
these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings
are inalienable in their present status as properties of public dominion, they are not subject to levy on execution
or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership
remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw such public
use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. (1) The
President shall have the power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not otherwise directed by law.
The reserved land shall thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential
proclamation from public use, they are properties of public dominion, owned by the Republic and outside the
commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12,
Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by
the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its
executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic
can sign such deed of conveyance.
28

d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the
Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter
provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x
The land where the Airport is presently located as well as the surrounding land area of
approximately six hundred hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands
and other appropriate government agencies shall undertake an actual survey of the area transferred
within one year from the promulgation of this Executive Order and the corresponding title to be issued
in the name of the Authority. Any portion thereof shall not be disposed through sale or through any
other mode unless specifically approved by the President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities,
runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all
assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating
to airport works or air operations, including all equipment which are necessary for the operation of
crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air
Transportation and Transitory Provisions. The Manila International Airport including the Manila
Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash,
promissory notes or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings
to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both
international and domestic air traffic, is required to provide standards of airport accommodation and
service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to
meet the current and future air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the objectives of providing high
standards of accommodation and service within the context of a financially viable operation, will
best be achieved by a separate and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the
President of the Philippines is given continuing authority to reorganize the National Government,
which authority includes the creation of new entities, agencies and instrumentalities of the
Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to
transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize
a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the
beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims
any ownership rights over MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or
through any other mode unless specifically approved by the President of the Philippines." This only means that
the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of
the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the
Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the
Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who
can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands
and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the
Republic of the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the
real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local
governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies
andinstrumentalities x x x." The real properties owned by the Republic are titled either in the name of the
Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative
Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the
national government. Such real properties remain owned by the Republic and continue to be exempt from real
estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or instrumentality even as
the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax
exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses
its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the
Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the
Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from
real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is
subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a
consideration to ataxable person and therefore such land area is subject to real estate tax. In Lung Center of the
Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of
the hospital leased to private individuals are not exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients, whether
paying or non-paying, are exempt from real property taxes.
29

3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local
Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are
hereby withdrawn upon effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local
Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate
tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the withdrawn
exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down
the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The
reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized under our laws, natural
and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not
just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and
underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status
whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be examined
in isolation from Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew
the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the
Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing
any kind of tax on national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities,
and local government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any kind of tax on
national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the
national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in
the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption
from real estate tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to
tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to
the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly
registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational
institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt
entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code.
This theory will result in gross absurdities. It will make the national government, which itself is a juridical person,
subject to tax by local governments since the national government is not included in the enumeration of exempt
entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real
estate tax, on the national government.
Under the minority's theory, many national government instrumentalities with juridical personalities will also be
subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities
vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,
30
Philippine Rice Research
Institute,
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 minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local
governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities with or without juridical personalities. Where the law
does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from
local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality
under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting
local governments from imposing any kind of tax on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this
Code." This means that unless the Local Government Code grants an express authorization, local governments
have no power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local
governments have no power to tax the national government, its agencies and instrumentalities. As an exception
to this rule, local governments may tax the national government, its agencies and instrumentalities only if the
Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which
makes the national government subject to real estate tax when it gives the beneficial use of its real properties to
a taxable entity. Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this
exemption is when the government gives the beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national government, its
agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the
exemption applies only to real estate tax and not to any other tax. The justification for the exception to the
exemption is that the real property, although owned by the Republic, is not devoted to public use or public
service but devoted to the private gain of a taxable person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the
later provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of
construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a
juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities
under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the
same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193
and 234 on the other. No one has urged that there is such a conflict, much less has any one presenteda
persuasive argument that there is such a conflict. The minority's assumption of an irreconcilable conflict in the
statutory provisions is an egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its
subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this
Code." By its own words, Section 193 admits the superiority of other provisions of the Local Government Code
that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds
such power on certain matters, there is no conflict between the grant of power and the withholding of power.
The grantee of the power simply cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units." Section
133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power
to tax. Section 133 states that the taxing powers of local governments "shall not extend to the levy" of any kind
of tax on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing
power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133
logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and
purpose, the "common limitations" on the taxing power prevail over the grant or exercise of the taxing power. If
the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in
Section 133, then local governments can impose any kind of tax on the national government, its agencies and
instrumentalities a gross absurdity.
Local governments have no power to tax the national government, its agencies and instrumentalities, except as
otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless
otherwise provided in this Code." This exception which is an exception to the exemption of the Republic from
real estate tax imposed by local governments refers to Section 234(a) of the Code. The exception to the
exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the
national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is
given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase "government-owned or
controlled corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of
the Administrative Code admits that its definitions are not controlling when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:
x x x x
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute
may require a different meaning than that defined in the Administrative Code. However, this does not
automatically mean that the definition in the Administrative Code does not apply to the Local Government Code.
Section 2 of the Administrative Code clearly states that "unless the specific words x x x of a particular statute
shall require a different meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless
there is specific language in the Local Government Code defining the phrase "government-owned or controlled
corporation" differently from the definition in the Administrative Code, the definition in the Administrative Code
prevails.
The minority does not point to any provision in the Local Government Code defining the phrase "government-
owned or controlled corporation" differently from the definition in the Administrative Code. Indeed, there is
none. The Local Government Code is silent on the definition of the phrase "government-owned or controlled
corporation." The Administrative Code, however, expressly defines the phrase "government-owned or controlled
corporation." The inescapable conclusion is that the Administrative Code definition of the phrase "government-
owned or controlled corporation" applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document
the major structural, functional and procedural principles and rules of governance." Thus, the Administrative
Code is the governing law defining the status and relationship of government departments, bureaus, offices,
agencies and instrumentalities. Unless a statute expressly provides for a different status and relationship for a
specific government unit or entity, the provisions of the Administrative Code prevail.
The minority also contends that the phrase "government-owned or controlled corporation" should apply only to
corporations organized under the Corporation Code, the general incorporation law, and not to corporations
created by special charters. The minority sees no reason why government corporations with special charters
should have a capital stock. Thus, the minority declares:
I submit that the definition of "government-owned or controlled corporations" under the
Administrative Code refer to those corporations owned by the government or its instrumentalities
which are created not by legislative enactment, but formed and organized under the Corporation Code
through registration with the Securities and Exchange Commission. In short, these are GOCCs without
original charters.
x x x x
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 committee's consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST,"
together with the common good.
45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987
Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition,
however, is the phrase "in the interest of the common good and subject to the test of economic
viability." The addition includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private sector can do better. Moreover,
economic viability is more than financial viability but also includes capability to make profit and
generate benefits not quantifiable in financial terms.
46
(Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate powers and
performing essential public services. The State is obligated to render essential public services regardless of the
economic viability of providing such service. The non-economic viability of rendering such essential public service
does not excuse the State from withholding such essential services from the public.
However, government-owned or controlled corporations with special charters, organized essentially for
economic or commercial objectives, must meet the test of economic viability. These are the government-owned
or controlled corporations that are usually organized under their special charters as stock corporations, like the
Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or
controlled corporations, along with government-owned or controlled corporations organized under the
Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section
2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete
in the market place. MIAA does not compete in the market place because there is no competing international
airport operated by the private sector. MIAA performs an essential public service as the primary domestic and
international airport of the Philippines. The operation of an international airport requires the presence of
personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers,
screening out those without visas or travel documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health, to enforce health measures against the spread of
infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases
into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists
and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft
to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and buildings for the government
personnel, passengers, and airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an international
airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its
revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The
terminal fees that MIAA charges every passenger are regulatory or administrative 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:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not
all corporate powers, administering special funds, and enjoying operational autonomy, usually through
a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or
controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality
under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as
MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is
outside the scope of the phrase "government-owned or controlled corporations" under Section 16, Article XII of
the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled
corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or controlled corporations." The Administrative Code defines
what constitutes a "government-owned or controlled corporation." To belittle this phrase as "clarificatory or
illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the
1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10)
of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject
to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to
the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local
Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is
given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of
public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of
MIAA are intended for public use, and at the very least intended for public service. Whether intended for public
use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax
under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal
relation and status of government units, agencies and offices within the entire government machinery, MIAA is a
government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of
the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not
subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its
real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case
the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and
Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are
properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as
properties of public dominion and owned by the Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5
October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of
the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City of Paraaque.
We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies,
issued by the City of Paraaque on the Airport Lands and Buildings of the Manila International Airport Authority,
except for the portions that the Manila International Airport Authority has leased to private parties. We also
declareVOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila
International Airport Authority.
No costs.
SO ORDERED.
G.R. No. 109791 July 14, 2003
PHILIPPINE PORTS AUTHORITY, petitioner,
vs.
CITY OF ILOILO, respondent.
AZCUNA, J.:
Before us is a petition for review on certiorari assailing the Decision of the Regional Trial Court of Iloilo City,
Branch 39, dated February 26, 1993 in Civil Case No. 18477, a case for collection of a sum of money. Seeking to
raise questions purely of law, petitioner Philippine Ports Authority (PPA) would want us to set aside the ruling
ordering it to pay real property and business taxes to respondent City of Iloilo.
The factual antecedents are summarized by the trial court:
This is an action for the "recovery of sum of money" filed by [respondent] City of Iloilo, a public
corporation organized under the laws of the Republic of the Philippines, represented by the Hon.
Rodolfo T. Ganzon as City Mayor, against petitioner, Philippine Ports Authority (PPA), a government
corporation created by P.D. 857.
[Respondent] seeks to collect from [petitioner] real property taxes as well as business taxes, computed
from the last quarter of 1984 up to fourth quarter of 1988.
[Respondent] alleges that [petitioner] is engaged in the business of arrastre and stevedoring services
and the leasing of real estate for which it should be obligated to pay business taxes. It further alleges
that [petitioner] is the declared and registered owner of a warehouse which is used in the operation of
its business and is also thereby subject to real property taxes.
It demands the aggregate amount of P510,888.86 in realty and business taxes as of December 1988
(real property tax last quarter of 1984 to 1988; business tax- 1984 to 1988) including its
corresponding interests and penalty charges.
On July 19, 1989, [petitioner] filed a motion to dismiss but [it] was denied by this court. A motion for
reconsideration was filed, but the same was still denied, after which [petitioner] filed its answer.
During the pre-trial conference, the following factual and legal issues were defined and clarified.
Factual Issues:
1. Whether or not [petitioner] is engaged in business;
2. Whether or not the assessment of tax by [respondent] is accurate as of 4th quarter of 1988 from the
year 1984; real property tax in the amount of P180,953.93 and business tax in the amount of
P329,934.93 as of December 31, 1988.
Legal Issues:
1. Whether or not Philippine Ports Authority is exempt from the payment of real property tax and
business tax;
2. Whether by filing a motion to dismiss, [petitioner] impliedly admitted the allegations in the
complaint;
3. Whether Philippine Ports Authority is engaged in business. If in the negative, whether or not it is
exempt from payment of business taxes.
During trial, [respondent] presented two witnesses, namely: Mrs. Rizalina F. Tulio and Mr. Leoncio
Macrangala.
x x x x x x x x x
After [respondent] had rested its case, [petitioner] did not present any evidence. Instead, its counsel
asked the court to give him time to file a memorandum, as said counsel is convinced that the issues
involved in this case are purely legal issues.
He has no quarrel as regards the computation of the real property and business taxes made by
[respondent]. He is convinced, however, that the issue in this case involves a question of law and that
[petitioner] is not liable to pay any kind of taxes to the City of Iloilo.
1

The court a quo rendered its decision holding petitioner liable for real property taxes from the last quarter of
1984 to December 1986, and for business taxes with respect to petitioners lease of real property from the last
quarter of 1984 up to 1988. It, however, held that respondent may not collect business taxes on petitioners
arrastre and stevedoring services, as these form part of petitioners governmental functions. The dispositive
portion of said decision states:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against
the defendant, ordering the latter to pay the plaintiff, as follows:
1. the amount of P98,519.16 as real property tax, from [the] last quarter of 1984 up to December 1986;
2. the amount of P3,828.07, as business tax, for leasing of real estate from [the] last quarter of 1984 up
to 1988.
2

Petitioner now seeks a review of the case, contending that the court a quo decided a question of substance
which has not been decided by us in that:
(i) It decreed a property of public dominion (port facility) as subject to realty taxes just because the
mentioned property is being administered by what it perceived to be a taxable government
corporation. And,
(ii) It declared that petitioner PPA is subject to "business taxes" for leasing to private persons or
entities real estate without considering that petitioner PPA is not engaged in "business."
3

In its Comment, respondent in addition raises the issue of whether or not petitioner may change its theory on
appeal. It points out that petitioner never raised the issue that the subject property is of public dominion during
the trial nor did it mention it in the memorandum it filed with the lower court. It further contends that such
change of theory patently contradicts petitioners admission in its pleadings and is disallowed under applicable
jurisprudence.
4

The records show that the theory of petitioner before the trial court was different from that of the present
petition. In fact, even while at the trial court stage, petitioner was not consistent in its theory.
5
Initially in its
pleadings therein, it argued that as a government-owned corporation, it is exempt from paying real property
taxes by virtue of its specific exemption in its charter,
6
Section 40 of the Real Property Tax Code and Executive
Order No. 93. Subsequently, in the memorandum it filed with the trial court, it omitted its earlier argument and
changed its theory by alleging that it is a government instrumentality, which, according to applicable
jurisprudence, may not be taxed by the local government. After obtaining an adverse decision from the trial
court, it adopts yet another stance on appeal before us, contesting the taxability of its warehouse. It argued for
the first time that since "ports constructed by the State" are considered under the Civil Code as properties of
public dominion, its warehouse, which it insists to be part of its port, should be treated likewise. To support this,
it invokes Article 420 of the Civil Code, which 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;
x x x x x x x x x
[Emphasis supplied]
Insisting that the subject warehouse is considered as part of its port, it points to Section 3 (e) of its charter
quoted hereunder:
e) "port" means a place where ships may anchor or tie up for the purpose of shelter, repair, loading or
discharge of cargo, or for other such activities connected with water-borne commerce, and including
all the land and water areas and the structures, equipment and facilities related to these functions.
[Emphasis supplied]
A perusal of the records shows that this thesis was never presented nor discussed at the trial stage.
As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower
court will not be permitted to change theory on appeal.
7
Points of law, theories, issues and arguments not
brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing
court, as these cannot be raised for the first time at such late stage. Basic considerations of due process underlie
this rule.
8
It would be unfair to the adverse party who would have no opportunity to present further evidence
material to the new theory, which it could have done had it been aware of it at the time of the hearing before
the trial court.
9
To permit petitioner in this case to change its theory on appeal would thus be unfair to
respondent, and offend the basic rules of fair play, justice and due process.
10

Petitioner however cites an exception to the rule, as enunciated in Lianga Lumber Co. v. Lianga Timber Co.,
Inc.,
11
wherein we said:
[I]n the interest of justice and within the sound discretion of the appellate court, a party may change
his theory on appeal only when the factual bases thereof would not require presentation of any further
evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory.
Petitioner contends that its new theory falls under the aforecited exception, as the issue does not involve any
disputed evidentiary matter.
Contrary to petitioners claim, we find that the new issue raised is not a purely legal question. It must be
emphasized that the enumeration of properties of public dominion under Article 420 of the Civil Code specifically
states "ports constructed by the State." Thus, in order to consider the port in the case at bar as falling under the
said classification, the fact that the port was constructed by the State must first be established by sufficient
evidence. This fact proved crucial in Santos v. Moreno,
12
where the issue raised was whether the canals
constructed by private persons were of public or private ownership. We ruled that the canals were privately
owned, thus:
Under Art. 420, canals constructed by the State and devoted and devoted to public use are of public
ownership. Conversely, canals constructed by private persons within private lands and devoted
exclusively for private use must be of private ownership.
In the case at bar, no proof was adduced to establish that the port was constructed by the State. Petitioner
cannot have us automatically conclude that its port qualified as "property of public dominion." It would be unfair
to respondent, which would be deprived of its opportunity to present evidence to disprove the factual basis of
the new theory. It is thus clear that the Lianga exception cannot apply in the case at bar.
Moreover, as correctly pointed out by respondent, we cannot ignore the fact that petitioners new position runs
contrary to its own admission in the pleadings filed in the trial court. Under paragraph 3 of respondents
complaint quoted hereunder, the fact of petitioners ownership of the property was specifically alleged as
follows:
III
Defendant is likewise the declared and registered owner of a warehouse standing on Lot No. 1065
situated at Bgy. Concepcion, City Proper, declared under Tax Declaration No. 56325. Xerox copy of the
said Tax Declaration is hereto attached as annex "D" and formns] an integral part of herein
complaint;
13

In its Answer, referring to the abovecited complaint, petitioner stated, "Paragraph 3 is admitted."
14
Notably, this
admission was never questioned nor put at issue during the trial.
Now before us, petitioner contradicts its earlier admission by claiming that the subject warehouse is a property
of public dominion. This inconsistency is made more apparent by looking closely at what public dominion means.
Tolentino explains this in this wise:
Private ownership is defined elsewhere in the Code; but the meaning of public dominion is nowhere
defined. From the context of various provisions, it is clear that public dominion does not carry the idea
of ownership; property of public dominion is not owned by the State, but pertains to the State, which
as territorial sovereign exercises certain judicial prerogatives over such property. The ownership of
such property, which has the special characteristics of a collective ownership for the general use and
enjoyment, by virtue of their application to the satisfaction of collective needs, is in the social group,
whether national, provincial, or municipal. Their purpose is not to serve the State as a juridical person,
but the citizens; they are intended for the common and public welfare, and so they cannot be the object
of appropriation, either by the State or by private persons.
15
[Emphasis supplied]
Following the above, properties of public dominion are owned by the general public and cannot be declared to
be owned by a public corporation, such as petitioner.
As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate
fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary
to, or inconsistent, with his pleadings.
16
Unless a party alleges palpable mistake or denies such admission, judicial
admissions cannot be controverted.
17
Petitioner is thus bound by its admission of ownership of the subject
property and is barred from claiming otherwise.
We also note that petitioner failed to raise the issue of ownership during the pre-trial. In its petition, it insists
that to determine liability for real property tax, the ownership of the property must first be ascertained.
18
In the
pre-trial order, however, to which petitioner did not object, nowhere was the issue of ownership included in the
stipulated factual or legal issues.
19

We have ruled that a pre-trial is primarily intended to make certain that all issues necessary to the disposition of
a case are properly raised. Thus to obviate the element of surprise, parties are expected to disclose at the pre-
trial conference all issues of law and fact which they intend to raise at the trial. Consequently, the determination
of issues at a pre-trial conference bars the consideration of other questions on appeal.
20
Hence, in the case at
bar, the fact that the issue of ownership is outside of what has been delimited during the pre-trial further
justifies the disallowance of petitioners new theory.
Therefore, on the basis of the foregoing considerations and in the absence of compelling reasons to rule
otherwise, we hold that petitioner may not be permitted to change its theory at this stage. Well-settled is the
rule that questions that were not raised in the lower court cannot be raised for the first time on appeal.
21

In any case, granting that petitioners present theory is allowed at this stage, we nevertheless find it untenable.
Concededly, "ports constructed by the State" are properties of the public dominion, as Article 420 of the Civil
Code enumerates these as properties "intended for public use." It must be stressed however that what is being
taxed in the present case is petitioners warehouse, which, although located within the port, is distinct from the
port itself. InLight Rail Transit Authority v. Central Board of Assessment Appeals et al.,
22
petitioner therein
similarly sought an exemption from real estate taxes on its passenger terminals, arguing that said properties are
considered as part of the "public roads," which are classified as property of public dominion in the Civil
Code.
23
We ruled therein that:
*T+he properties of petitioner are not exclusively considered as public roads being improvements
placed upon the public road, and this [separable] nature of the structure in itself physically
distinguishes it from a public road. Considering further that carriageways or passenger terminals are
elevated structures which are not freely accessible to the public, vis--vis roads which are public
improvements openly utilized by the public, the former are entirely different from the latter.
Using the same reasoning, the warehouse in the case at bar may not be held as part of the port, considering its
separable nature as an improvement upon the port, and the fact that it is not open for use by everyone and
freely accessible to the public. In the same way that we ruled in one case that the exemption of public property
from taxation does not extend to improvements made thereon by homesteaders or occupants at their own
expense,
24
we likewise uphold the taxability of the warehouse in the instant case, it being a mere improvement
built on an alleged property of public dominion, assuming petitioners port to be so. Moreover, petitioner may
not invoke the definition of "port" in its charter to expand the meaning of "ports constructed by the State" in the
Civil Code to include improvements built thereon. It must be noted that the charter itself limited the use of said
definition only for the interpretation of Presidential Decree (P.D.) No. 857, its by-laws, regulations and
rules,
25
and not of other statutes such as the Civil Code. Given these parameters, therefore, petitioners move to
present its new theory, even if allowed, would nonetheless prove to be futile.
The trial court correctly ruled that for the assessed period of 1984 to 1988, petitioners exemption from real
property taxes was withdrawn by P.D. No. 1931, at least for the period of 1984 to 1986.
Originally, petitioner was exempt from real property taxes on the basis of the Real Property Tax Code
26
then
governing, which provided:
SECTION 40. Exemptions from Real Property Tax. The exemption shall be as follows:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any
government-owned corporation so exempt by its charter: Provided; however, That this exemption shall
not apply to real property of the above-named entities the beneficial use of which has been granted,
for consideration or otherwise, to a taxable person.
Petitioners charter, P.D. 857,
27
further specifically exempted it from real property taxes:
SECTION 25. Exemption from Realty Taxes The Authority shall be exempt from the payment of real
property taxes imposed by the Republic of the Philippines, its agencies, instrumentalities or political
subdivisions; Provided, That no tax exemptions shall be extended to any subsidiaries of the Authority
that may be organized; Provided, finally, That investments in fixed assets shall be deductible for
income tax purposes.
It can thus be seen from the foregoing that petitioner, as a government-owned or controlled corporation,
enjoyed an exemption from real property taxes.
On June 11, 1984, however, P.D. 1931 effectively withdrew all tax exemption privileges granted to government-
owned or controlled corporations as stated in Section 1 thereof, which reads:
Sec. 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from
the payment of duties, taxes, fees, imposts and other charges heretofore granted in favor of
government-owned or controlled corporations including their subsidiaries, are hereby withdrawn.
Under the same law, the exemption can be restored in special cases through an application for restoration with
the Secretary of Finance,
28
which, notably, petitioner did not avail.
Subsequently, Executive Order (E.O.) No. 93 was enacted on December 17, 1986 restoring tax exemptions
provided under certain laws, one of which is the Real Property Tax Code. The pertinent portion of said law
provides:
SECTION 1. The provisions of any general or special law to the contrary notwithstanding, all tax and
duty incentives granted to government and private entities are hereby withdrawn, except:
x x x x x x x x x
e) those conferred under four basic codes namely:
(i) the Tariff and Customs Code, as amended;
(ii) the National Internal Revenue Code, as amended;
(iii) the Local Tax Code, as amended;
(iv) the Real Property Tax Code, as amended;
[Emphasis supplied]
The abovecited laws, therefore, indicate that petitioners tax exemption from real property taxes was withdrawn
by P.D. 1931 effective June 11, 1984, but was subsequently restored by virtue of E.O. 93, starting December 17,
1986.
29
Hence, petitioner is liable for real property taxes on its warehouse, computed from the last quarter of
1984 up to December 1986.
Petitioner, however, seeks to be excused from liability for taxes by invoking the pronouncement in Basco v.
PAGCOR
30
(Basco) quoted hereunder:
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental,
which places it in the category of an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subject to control by a mere Local
government. [Emphasis supplied]
Petitioner points out that its exercise of regulatory functions as decreed by its charter
31
places it within the
category of an "agency or instrumentality of the government," which, according to Basco, is beyond the reach of
local taxation.
Reliance in the abovecited case is unavailing considering that P.D. 1931 was never raised therein, and given that
the issue in said case focused on the constitutionality of P.D. 1869, the charter of PAGCOR. The said decision did
not absolutely prohibit local governments from taxing government instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is always subject to "limitations" which
Congress may provide by law. Since P.D. 1869 remains an "operative" law until "amended, repealed or
revoked"its "exemption clause" remains an exemption to the exercise of the power of local
governments to impose taxes and fees.
32

Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos,
33
where
theBasco case was similarly invoked for tax exemption, we stated: "[N]othing can prevent Congress from
decreeing that even instrumentalities or agencies of the Government performing governmental functions may
be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can
doubt its wisdom." The fact that tax exemptions of government-owned or controlled corporations have been
expressly withdrawn by the present Local Government Code
34
clearly attests against petitioners claim of
absolute exemption of government instrumentalities from local taxation.
Petitioner also contends that the term "government-owned or controlled corporations" referred in P.D. 1931
covers only those not performing governmental functions. This argument is without legal basis for it reads into
the law a distinction that is not there. It runs contrary to the clear intent of the law to withdraw from all units of
the government, including government-owned or controlled corporations, their exemptions from taxes. Had it
been otherwise, the law would have said so.
35

Moreover, the trial court correctly pointed out that if indeed petitioner were not subject to local taxation,
petitioners charter would not have specifically provided for its exemption from the payment of real property
tax. Its exemption therein therefore proves that it was only an exception to the general rule of taxability of
petitioner. Given that said privilege was withdrawn by subsequent law, petitioners claim for exemption from
real property taxes for the entire assessed period fails.
We affirm the finding of the lower court on petitioners liability for business taxes for the lease of its building to
private corporations. During the trial, petitioner did not present any evidence to refute respondents proof of
petitioners income from the lease of its property. Neither did it present any proof of exemption from business
taxes. Instead, it emphasized its charter provisions defining its functions as governmental in nature. It averred
that it allowed port users to occupy certain premises within the port area only to ensure order and convenience
in discharging its governmental functions. It hence claimed that it is not engaged in business, as the act of leasing
out its property was not motivated by profit, but by its duty to manage and control port operations.
The argument is unconvincing. As admitted by petitioner, it leases out its premises to private persons for
"convenience" and not necessarily as part of its governmental function of administering port operations. In fact,
its charter classifies such act of leasing out port facilities as one of petitioners corporate powers.
36
Any income
or profit generated by an entity, even of a corporation organized without any intention of realizing profit in the
conduct of its activities, is subject to tax.
37
What matters is the established fact that it leased out its building to
ten private entities from which it regularly earned substantial income. Thus, in the absence of any proof of
exemption therefrom, petitioner is liable for the assessed business taxes.
In closing, we reiterate that in taxing government-owned or controlled corporations, the State ultimately suffers
no loss. In National Power Corp. v. Presiding Judge, RTC, Br. XXV,
38
we elucidated:
Actually, the State has no reason to decry the taxation of NAPOCORs properties, as and by way of real
property taxes. Real property taxes, after all, form part and parcel of the financing apparatus of the
Government in development and nation-building, particularly in the local government level.
x x x x x x x x x
To all intents and purposes, real property taxes are funds taken by the State with one hand and given
to the other. In no measure can the government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax exemption privileges
granted to government-owned and controlled corporations and all other units of government was that such
privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated
enterprises, hence resulting in the need for these entities to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due from them.
39

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 169836 July 31, 2007
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, OFFICE OF THE PRESIDENT, DEPARTMENT OF FINANCE and the CITY OF
ILOILO,respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the June 21, 2005 Decision
1
of the Court of Appeals in CA-G.R. SP No. 81228,
which held that petitioner Philippine Fisheries Development Authority (hereafter referred to as Authority) is
liable to pay real property taxes on the land and buildings of the Iloilo Fishing Port Complex (IFPC) which are
owned by the Republic of the Philippines but operated and governed by the Authority.
The facts are not disputed.
On August 11, 1976, then President Ferdinand E. Marcos issued Presidential Decree No. 977 (PD 977) creating
the Authority and placing it under the direct control and supervision of the Secretary of Natural Resources. On
February 8, 1982, Executive Order No. 772 (EO 772) was issued amending PD 977, and renaming the Authority as
the now "Philippine Fisheries Development Authority," and attaching said agency to the Ministry of Natural
Resources. Upon the effectivity of the Administrative Code (EO 292), the Authority became an attached agency
of the Department of Agriculture.
2

Meanwhile, beginning October 31, 1981, the then Ministry of Public Works and Highways reclaimed from the sea
a 21-hectare parcel of land in Barangay Tanza, Iloilo City, and constructed thereon the IFPC, consisting of
breakwater, a landing quay, a refrigeration building, a market hall, a municipal shed, an administration building,
a water and fuel oil supply system and other port related facilities and machineries. Upon its completion, the
Ministry of Public Works and Highways turned over IFPC to the Authority, pursuant to Section 11 of PD 977,
which places fishing port complexes and related facilities under the governance and operation of the Authority.
Notwithstanding said turn over, title to the land and buildings of the IFPC remained with the Republic.
The Authority thereafter leased portions of IFPC to private firms and individuals engaged in fishing related
businesses.
Sometime in May 1988, the City of Iloilo assessed the entire IFPC for real property taxes. The assessment
remained unpaid until the alleged total tax delinquency of the Authority for the fiscal years 1988 and 1989
amounted to P5,057,349.67, inclusive of penalties and interests. To satisfy the tax delinquency, the City of Iloilo
scheduled on August 30, 1990, the sale at public auction of the IFPC.
The Authority filed an injunction case with the Regional Trial Court. At the pre-trial, the parties agreed to avail of
administrative proceedings, i.e., for the Authority to file a claim for tax exemption with the Iloilo City Assessors
Office. The latter, however, denied the claim for exemption, hence, the Authority elevated the case to the
Department of Finance (DOF).
In its letter-decision
3
dated March 6, 1992, the DOF ruled that the Authority is liable to pay real property taxes to
the City of Iloilo because it enjoys the beneficial use of the IFPC. The DOF added, however, that in satisfying the
amount of the unpaid real property taxes, the property that is owned by the Authority shall be auctioned, and
not the IFPC, which is a property of the Republic.
4

The Authority filed a petition before the Office of the President but it was dismissed.
5
It also denied the motion
for reconsideration filed by the Authority.
6

On petition with the Court of Appeals, the latter affirmed the decision of the Office of the President. It opined,
however, that the IFPC may be sold at public auction to satisfy the tax delinquency of the Authority.
7
The
dispositive portion thereof, reads:
WHEREFORE, premises considered, the instant Petition for Review is DENIED, and accordingly the June
30, 2003 Decision and December 3, 2003 Order of the Office of the President are hereby AFFIRMED.
SO ORDERED.
8

Hence, this petition.
The issues are as follows: Is the Authority liable to pay real property tax to the City of Iloilo? If the answer is in
the affirmative, may the IFPC be sold at public auction to satisfy the tax delinquency?
To resolve said issues, the Court has to determine (1) whether the Authority is a government owned or
controlled corporation (GOCC) or an instrumentality of the national government; and (2) whether the IFPC is a
property of public dominion.
The Court rules that the Authority is not a GOCC but an instrumentality of the national government which is
generally exempt from payment of real property tax. However, said exemption does not apply to the portions of
the IFPC which the Authority leased to private entities. With respect to these properties, the Authority is liable to
pay real property tax. Nonetheless, the IFPC, being a property of public dominion cannot be sold at public
auction to satisfy the tax delinquency.
In Manila International Airport Authority (MIAA) v. Court of Appeals,
9
the Court made a distinction between a
GOCC and an instrumentality. Thus:
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
(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.
x x x x
Section 3 of the Corporation Code 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. 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.
10
(Emphasis supplied)
Thus, for an entity to be considered as a GOCC, it must either be organized as a stock or non-stock corporation.
Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has capital
stock divided into shares, and (2) that it is authorized to distribute dividends and allotments of surplus and
profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation.
As for non-stock corporations, they must have members and must not distribute any part of their income to said
members.
11

On the basis of the parameters set in the MIAA case, the Authority should be classified as an instrumentality of
the national government. As such, it is generally exempt from payment of real property tax, except those
portions which have been leased to private entities.
In the MIAA case, petitioner Philippine Fisheries Development Authority was cited as among the
instrumentalities of the national government. Thus
Some of the national government instrumentalities vested by law with juridical personalities
are:Bangko Sentral ng Pilipinas, Philippine Rice Research Institute, Laguna Lake Development
Authority,Fisheries Development Authority, Bases Conversion Development Authority, Philippine Ports
Authority, Cagayan de Oro Port Authority, San Fernando Port Authority, Cebu Port Authority, and
Philippine National Railways.
Indeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has a capital stock
but it is not divided into shares of stocks.
12
Also, it has no stockholders or voting shares. Hence, it is not a stock
corporation. Neither it is a non-stock corporation because it has no members.
The Authority is actually a national government instrumentality which is defined as an 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.
13
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, the Authority which is tasked with the special public function to carry out the governments policy "to
promote the development of the countrys fishing industry and improve the efficiency in handling, preserving,
marketing, and distribution of fish and other aquatic products," exercises the governmental powers of eminent
domain,
14
and the power to levy fees and charges.
15
At the same time, the Authority exercises "the general
corporate powers conferred by laws upon private and government-owned or controlled corporations."
16

The MIAA case held
17
that unlike GOCCs, instrumentalities of the national government, like MIAA, are exempt
from local taxes pursuant to Section 133(o) of the Local Government Code. This exemption, however, admits of
an exception with respect to real property taxes. Applying Section 234(a) of the Local Government Code, the
Court ruled that when an instrumentality of the national government grants to a taxable person the beneficial
use of a real property owned by the Republic, said instrumentality becomes liable to pay real property tax. Thus,
while MIAA was held to be an instrumentality of the national government which is generally exempt from local
taxes, it was at the same time declared liable to pay real property taxes on the airport lands and buildings which
it leased to private persons. It was held that the real property tax assessments and notices of delinquencies
issued by the City of Pasay to MIAA are void except those pertaining to portions of the airport which are leased
to private parties. Pertinent portions of the decision, reads:
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
Codeexpressly 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:
x x x x
(o) Taxes, fees or charges of any kinds on the National Government, its agencies
andinstrumentalities, and local government units.
By express mandate of the Local Government Code, local governments cannot impose any kind of
taxon 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. x x x
x x x x
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the
Code, which makes the national government subject to real estate tax when it gives the beneficial
use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax The following are exempted from payment
of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person.
x x x
18
(Emphasis supplied)
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.
x x x x.
19
(Emphasis added)
In light of the foregoing, the Authority should be classified as an instrumentality of the national government
which is liable to pay taxes only with respect to the portions of the property, the beneficial use of which were
vested in private entities. 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.
20

Thus, the real property tax assessments issued by the City of Iloilo should be upheld only with respect to the
portions leased to private persons. In case the Authority fails to pay the real property taxes due thereon, said
portions cannot be sold at public auction to satisfy the tax delinquency. In Chavez v. Public Estates Authority it
was held that reclaimed lands are lands of the public domain and cannot, without Congressional fiat, be subject
of a sale, public or private, thus:
21

The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the
public domain, are as follows:
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x 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)
x x x x
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. (Emphasis supplied)
In the same vein, the port built by the State in the Iloilo fishing complex is a property of the public dominion and
cannot therefore be sold at public auction. Article 420 of the Civil Code, provides:
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
The Iloilo fishing port which was constructed by the State for public use and/or public service falls within the
term "port" in the aforecited provision. Being a property of public dominion the same cannot be subject to
execution or foreclosure sale.
22
In like manner, the reclaimed land on which the IFPC is built cannot be the object
of a private or public sale without Congressional authorization. Whether there are improvements in the fishing
port complexthat should not be construed to be embraced within the term "port," involves evidentiary matters
that cannot be addressed in the present case. As for now, considering that the Authority is a national
government instrumentality, any doubt on whether the entire IFPC may be levied upon to satisfy the tax
delinquency should be resolved against the City of Iloilo.
In sum, the Court finds that the Authority is an instrumentality of the national government, hence, it is liable to
pay real property taxes assessed by the City of Iloilo on the IFPC only with respect to those portions which are
leased to private entities. Notwithstanding said tax delinquency on the leased portions of the IFPC, the latter or
any part thereof, being a property of public domain, cannot be sold at public auction. This means that the City of
Iloilo has to satisfy the tax delinquency through means other than the sale at public auction of the IFPC.
WHEREFORE, the petition is GRANTED and the June 21, 2005 Decision of the Court of Appeals in CA-G.R. SP No.
81228 is SET ASIDE. The real property tax assessments issued by the City Iloilo on the land and buildings of the
Iloilo Fishing Port Complex, is declared VOID except those pertaining to the portions leased to private parties.
The City of Iloilo is DIRECTED to refrain from levying on the Iloilo Fishing Port Complex to satisfy the payment of
the real property tax delinquency.
No costs.
SO ORDERED.
G.R. No. 191109 July 18, 2012
REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY (PRA),Petitioner,
vs.
CITY OF PARANAQUE, Respondent.
D E C I S I O N
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, on pure questions of
law, assailing the January 8, 2010 Order
1
of the Regional Trial Court, Branch 195, Parafiaque City (RTC), which
ruled that petitioner Philippine Reclamation Authority (PRA) is a government-owned and controlled corporation
(GOCC), a taxable entity, and, therefore, . not exempt from payment of real property taxes. The pertinent
portion of the said order reads:
In view of the finding of this court that petitioner is not exempt from payment of real property taxes, respondent
Paraaque City Treasurer Liberato M. Carabeo did not act xxx without or in excess of jurisdiction, or with grave
abuse of discretion amounting to lack or in excess of jurisdiction in issuing the warrants of levy on the subject
properties.
WHEREFORE, the instant petition is dismissed. The Motion for Leave to File and Admit Attached Supplemental
Petition is denied and the supplemental petition attached thereto is not admitted.
The Public Estates Authority (PEA) is a government corporation created by virtue of Presidential Decree (P.D.)
No. 1084 (Creating the Public Estates Authority, Defining its Powers and Functions, Providing Funds Therefor and
For Other Purposes) which took effect on February 4,
1977 to provide a coordinated, economical and efficient reclamation of lands, and the administration and
operation of lands belonging to, managed and/or operated by, the government with the object of maximizing
their utilization and hastening their development consistent with public interest.
On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by then President Ferdinand Marcos,
PEA was designated as the agency primarily responsible for integrating, directing and coordinating all
reclamation projects for and on behalf of the National Government.
On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O. No. 380 transforming PEA into PRA,
which shall perform all the powers and functions of the PEA relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay,
including those located in Paraaque City, and was issued Original Certificates of Title (OCT Nos. 180, 202, 206,
207, 289, 557, and 559) and Transfer Certificates of Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686)
over the reclaimed lands.
On February 19, 2003, then Paraaque City Treasurer Liberato M. Carabeo (Carabeo) issued Warrants of Levy on
PRAs reclaimed properties (Central Business Park and Barangay San Dionisio) located in Paraaque City based on
the assessment for delinquent real property taxes made by then Paraaque City Assessor Soledad Medina Cue
for tax years 2001 and 2002.
On March 26, 2003, PRA filed a petition for prohibition with prayer for temporary restraining order (TRO) and/or
writ of preliminary injunction against Carabeo before the RTC.
On April 3, 2003, after due hearing, the RTC issued an order denying PRAs petition for the issuance of a
temporary restraining order.
On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to proceed with the public auction of the
subject reclaimed properties on April 7, 2003. In response, Carabeo sent a letter stating that the public auction
could not be deferred because the RTC had already denied PRAs TRO application.
On April 25, 2003, the RTC denied PRAs prayer for the issuance of a writ of preliminary injunction for being moot
and academic considering that the auction sale of the subject properties on April 7, 2003 had already been
consummated.
On August 3, 2009, after an exchange of several pleadings and the failure of both parties to arrive at a
compromise agreement, PRA filed a Motion for Leave to File and Admit Attached Supplemental Petition which
sought to declare as null and void the assessment for real property taxes, the levy based on the said assessment,
the public auction sale conducted on April 7, 2003, and the Certificates of Sale issued pursuant to the auction
sale.
On January 8, 2010, the RTC rendered its decision dismissing PRAs petition. In ruling that PRA was not exempt
from payment of real property taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D. No. 1084.
It was organized as a stock corporation because it had an authorized capital stock divided into no par value
shares. In fact, PRA admitted its corporate personality and that said properties were registered in its name as
shown by the certificates of title. Therefore, as a GOCC, local tax exemption is withdrawn by virtue of Section
193 of Republic Act (R.A.) No. 7160 Local Government Code (LGC) which was the prevailing law in 2001 and 2002
with respect to real property taxation. The RTC also ruled that the tax exemption claimed by PRA under E.O. No.
654 had already been expressly repealed by R.A. No. 7160 and that PRA failed to comply with the procedural
requirements in Section 206 thereof.
Not in conformity, PRA filed this petition for certiorari assailing the January 8, 2010 RTC Order based on the
following GROUNDS
I
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THE
SUBJECT RECLAIMED LANDS CONSIDERING
THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF THE NATIONAL GOVERNMENT AND IS,
THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND 133(O) OF
REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE VIS--VIS MANILA INTERNATIONAL AIRPORT
AUTHORITY V. COURT OF APPEALS.
II
THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT RECLAIMED LANDS ARE PART OF THE PUBLIC
DOMAIN AND, HENCE, EXEMPT FROM REAL PROPERTY TAX.
PRA asserts that it is not a GOCC under Section 2(13) of the Introductory Provisions of the Administrative Code.
Neither is it a GOCC under Section 16, Article XII of the 1987 Constitution because it is not required to meet the
test of economic viability. Instead, PRA is a government instrumentality vested with corporate powers and
performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. Although it has a capital stock divided into shares, it is not authorized to distribute
dividends and allotment of surplus and profits to its stockholders. Therefore, it may not be classified as a stock
corporation because it lacks the second requisite of a stock corporation which is the distribution of dividends and
allotment of surplus and profits to the stockholders.
It insists that it may not be classified as a non-stock corporation because it has no members and it is not
organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry, agriculture and like chambers as provided in Section
88 of the Corporation Code.
Moreover, PRA points out that it was not created to compete in the market place as there was no competing
reclamation company operated by the private sector. Also, while PRA is vested with corporate powers under P.D.
No. 1084, such circumstance does not make it a corporation but merely an incorporated instrumentality and that
the mere fact that an incorporated instrumentality of the National Government holds title to real property does
not make said instrumentality a GOCC. Section 48, Chapter 12, Book I of the Administrative Code of 1987
recognizes a scenario where a piece of land owned by the Republic is titled in the name of a department, agency
or instrumentality.
Thus, PRA insists that, as an incorporated instrumentality of the National Government, it is exempt from
payment of real property tax except when the beneficial use of the real property is granted to a taxable person.
PRA claims that based on Section 133(o) of the LGC, local governments cannot tax the national government
which delegate to local governments the power to tax.
It explains that reclaimed lands are part of the public domain, owned by the State, thus, exempt from the
payment of real estate taxes. Reclaimed lands retain their inherent potential as areas for public use or public
service. While the subject reclaimed lands are still in its hands, these lands remain public lands and form part of
the public domain. Hence, the assessment of real property taxes made on said lands, as well as the levy thereon,
and the public sale thereof on April 7, 2003, including the issuance of the certificates of sale in favor of the
respondent Paraaque City, are invalid and of no force and effect.
On the other hand, the City of Paraaque (respondent) argues that PRA since its creation consistently
represented itself to be a GOCC. PRAs very own charter (P.D. No. 1084) declared it to be a GOCC and that it has
entered into several thousands of contracts where it represented itself to be a GOCC. In fact, PRA admitted in its
original and amended petitions and pre-trial brief filed with the RTC of Paraaque City that it was a GOCC.
Respondent further argues that PRA is a stock corporation with an authorized capital stock divided into 3 million
no par value shares, out of which 2 million shares have been subscribed and fully paid up. Section 193 of the LGC
of 1991 has withdrawn tax exemption privileges granted to or presently enjoyed by all persons, whether natural
or juridical, including GOCCs.
Hence, since PRA is a GOCC, it is not exempt from the payment of real property tax.
THE COURTS RULING
The Court finds merit in the petition.
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC 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.
On the other hand, Section 2(10) of the Introductory Provisions of the Administrative Code defines a government
"instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. x x x
From the above definitions, it is clear that a GOCC must be "organized as a stock or non-stock corporation" while
an instrumentality is vested by law with corporate powers. 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.
When the law vests in a government instrumentality corporate powers, the instrumentality does not necessarily
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.
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 GOCC.
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. They are not, however, GOCCs in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal relationship and status of government
entities.
2

Correlatively, Section 3 of the Corporation Code 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." Section 87
thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends to its
members, trustees or officers." Further, Section 88 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."
Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has capital
stock divided into shares; and (2) that it is authorized to distribute dividends and allotments of surplus and
profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation.
As for non-stock corporations, they must have members and must not distribute any part of their income to said
members.
3

In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot be
considered as a stock corporation because although it has a capital stock divided into no par value shares as
provided in Section 7
4
of P.D. No. 1084, it is not authorized to distribute dividends, surplus allotments or profits
to stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the subsequent executive
issuances pertaining to PRA, particularly, E.O. No. 525,
5
E.O. No. 654
6
and EO No. 798
7
that authorizes PRA to
distribute dividends, surplus allotments or profits to its stockholders.
PRA cannot be considered a non-stock corporation either because it does not have members. A non-stock
corporation must have members.
8
Moreover, it was not organized for any of the purposes mentioned in Section
88 of the Corporation Code. Specifically, it was created to manage all government reclamation projects.
Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16, Article XII of the
1987 Constitution provides as follows:
Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation
of private corporations. Government-owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of economic viability.
The fundamental provision above authorizes Congress to create GOCCs through special charters on two
conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must meet the test of
economic viability. In this case, PRA may have passed the first condition of common good but failed the second
one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or
commercial activities. Neither was it created to compete in the market place considering that there were no
other competing reclamation companies being operated by the private sector. As mentioned earlier, PRA was
created essentially to perform a public service considering that it was primarily responsible for a coordinated,
economical and efficient reclamation, administration and operation of lands belonging to the government with
the object of maximizing their utilization and hastening their development consistent with the public interest.
Sections 2 and 4 of P.D. No. 1084 reads, as follows:
Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical and
efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or
operated by the government, with the object of maximizing their utilization and hastening their development
consistent with the public interest.
Section 4. Purposes. 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 services as may be necessary for the efficient,
economical and beneficial utilization of the above properties.
The twin requirement of common good and economic viability was lengthily discussed in the case of Manila
International Airport Authority v. Court of Appeals,
9
the pertinent portion of which reads:
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.
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 incometo meet operating expenses solely
from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent
the creation of government-owned or controlled corporations that cannot survive on their own in the market
place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic performance.
We know what happened in the past. If a government corporation loses, then it makes its claim upon the
taxpayers' money through new equity infusions from the government and what is always invoked is the common
good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28
billion of this will go into equity infusions to support a few government financial institutions. And this is all
taxpayers' money which could have been relocated to agrarian reform, to social services like health and
education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the
drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a
restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the
market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration
and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC
VIABILITY OR THE ECONOMIC TEST," together with the common good.1wphi1
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.
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. [Emphases supplied]
This Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory Provisions of the
Administrative Code or under Section 16, Article XII of the 1987 Constitution. The facts, the evidence on record
and jurisprudence on the issue support the position that PRA was not organized either as a stock or a non-stock
corporation. Neither was it created by Congress to operate commercially and compete in the private market.
Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public
service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Being an
incorporated government instrumentality, it is exempt from payment of real property tax.
Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by PRA. On the
other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA from paying realty taxes and
protects it from the taxing powers of local government units.
Sections 234(a) and 133(o) of the LGC provide, as follows:
SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the real property
tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
x x x x
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:
x x x x
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local
government units. [Emphasis supplied]
It is clear from Section 234 that real property owned by the Republic of the Philippines (the Republic) is exempt
from real property tax unless the beneficial use thereof has been granted to a taxable person. In this case, there
is no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity. There is no
showing on record either that PRA leased the subject reclaimed properties to a private taxable entity.
This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local governments
from imposing "taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities
x x x." 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.
Indeed, the Republic grants the beneficial use of its real property to an agency or instrumentality of the national
government. This happens when the 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, unless "the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person."
10

The rationale behind Section 133(o) has also been explained in the case of the Manila International Airport
Authority,
11
to wit:
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."
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.
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" (McCulloch v. Maryland, supra)
cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to
wield it. [Emphases supplied]
The Court agrees with PRA that the subject reclaimed lands are still part of the public domain, owned by the
State and, therefore, exempt from payment of real estate taxes.
Section 2, Article XII of the 1987 Constitution reads in part, as follows:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under the full control and supervision of
the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of
whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as may provided by law. In
cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of
waterpower, beneficial use may be the measure and limit of the grant.
Similarly, Article 420 of the Civil Code enumerates properties belonging to the State:
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. [Emphases supplied]
Here, the subject lands are reclaimed lands, specifically portions of the foreshore and offshore areas of Manila
Bay. As such, these lands remain public lands and form part of the public domain. In the case of Chavez v. Public
Estates Authority and AMARI Coastal Development Corporation,
12
the Court held that foreshore and submerged
areas irrefutably belonged to the public domain and were inalienable unless reclaimed, classified as alienable
lands open to disposition and further declared no longer needed for public service. The fact that alienable lands
of the public domain were transferred to the PEA (now PRA) and issued land patents or certificates of title in
PEAs name did not automatically make such lands private. This Court also held therein that reclaimed lands
retained their inherent potential as areas for public use or public service.
As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed
lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same
manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable
lands of the public domain. Only when qualified private parties acquire these lands will the lands become private
lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands
of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and
all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that
alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or
certificates of title in PEA's name does not automatically make such lands private.
13

Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, thus:
SEC 14. Power to Reserve Lands of the Public and Private Dominion 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.
Reclaimed lands such as the subject lands in issue are reserved lands for public use. They are properties of public
dominion. The ownership of such lands remains with the State unless they are withdrawn by law or presidential
proclamation from public use.
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.
As the Court has repeatedly ruled, properties of public dominion are not subject to execution or foreclosure
sale.
14
Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by respondent, as well as
the issuances of certificates of title in favor of respondent, are without basis.
WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court, Branch 195,
Paraaque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine Reclamation
Authority are hereby declared EXEMPT from real estate taxes. All real estate tax assessments, including the final
notices of real estate tax delinquencies, issued by the City of Paraaque on the subject reclaimed properties; the
assailed auction sale, dated April 7, 2003; and the Certificates of Sale subsequently issued by the Paraaque City
Treasurer in favor of the City of Paraaque, are all declared VOID.
SO ORDERED.
Jean Tan, Et Al. Vs. Republic Of The Philippines G.R. No.193443 Apri 16, 2012

This is a petition for review under Rule 45 of the Decision
[1]
dated July 6, 2009 and Resolution
[2]
dated August 12,
2010 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 88995. The facts leading to its filing are as
follows:

On June 14, 2001, the petitioners filed with the Regional Trial Court (RTC) of Naic, Cavite, an application for
land registration covering a parcel of land identified as Lot 9972, Cad-459-D of Indang Cadastre, situated
in Barangay Bancod, Indang, Cavite and with an area of 6,920 square meters.
[3]
The petitioners alleged that they
acquired the subject property from Gregonio Gatdula pursuant to a Deed of Absolute Sale dated April 25, 1996;
and they and their predecessors-in-interest have been in open, continuous and exclusive possession of the
subject property in the concept of an owner for more than 30 years.
[4]


After trial and hearing, the RTC issued a Decision on July 29, 2006, granting the petitioners application,
thus:

WHEREFORE, in view of the foregoing, this Court confirming its previous Order of
general default, decrees and adjudges Lot No. 9972 consisting of 6,920 square meters, Cad.
459-D, Indang Cadastre and its technical description as herein above-described situated in
Brgy. Bancod, Indang, Cavite, pursuant to the provisions of Act 496 as amended by P.D. 1529,
as it is hereby decreed and adjudged to be confirmed and registered in the names of Jean
Tan, of legal age, Filipino, single, with postal address at Room 54 T. Pinpin St., Binondo,
Manila; Roseller C. Anaci[n]to, of legal age, Filipino, single, with postal address at Moncario
Villag[e], Ampid-1, San Mateo, Rizal; Carlo Loilo Espineda, of legal age, Filipino, with postal
address at Cluster F. Cogeo, Antipolo, Rizal and Daisy Aliado Manaois, of legal age, Filipino
and resident of Panghulo Road, Malabon, Metro Manila.

Once this decision becomes final, let the corresponding decree of registration be
issued by the Administrator, Land Registration Authority.

SO ORDERED.
[5]



The CA gave due course to the appeal filed by the Republic of the Philippines. By way of the assailed
Decision, the CA ruled that the petitioners failed to prove that they and their predecessors-in-interest have been
in possession of the subject property for the requisite period of 30 years. The CA posit:

We now determine if appellees have the right to register their title on such land
despite the fact that their possession commenced only after 12 June 1945. Records show
that the appellees possession over the subject property can be reckoned only from 21 June
1983, the date when according to evidence, the subject property became alienable and
disposable. From said date up to the filing of the application for registration of title over the
subject property on 14 June 2001, only eighteen (18) years had lapsed. Thus, appellees
possession of the subject property fell short of the requirement of open, continuous and
exclusive possession of at least 30 years.

Moreover, there was no adequate evidence which would show that appellees and
their predecessors-in-interest exercised acts of dominion over the subject land as to indicate
possession in the concept of owner. The testimonies of appellees witnesses regarding actual
possession are belied by the absence of evidence on actual use of or improvements on the
subject property. Appellees presented only various tax declarations to prove possession.
However, except for the Certification, showing payment of tax due on tax declaration for the
year 2003, there are no other evidence showing that all the taxes due corresponding to the
rest of the tax declarations were in fact paid by appellees or their predecessors-in-interest.

In sum, appellees were unable to prove that they or their predecessors-in-interest
have been in possession of the subject property for more than 30 years, which possession is
characterized as open, continuous, exclusive, and notorious, in the concept of an
owner. Appellees failed to discharge their duty of substantiating possession and title to the
subject land.

WHEREFORE, the appeal is hereby GRANTED and the Decision dated 29 July 2006 of
the Regional Trial Court (RTC) of Naic, Cavite, Branch 15 is REVERSED and SET ASIDE.

SO ORDERED.
[6]
(citation omitted)


The petitioners moved for reconsideration but this was denied by the CA in its August 12, 2010
Resolution.
[7]


The petitioners question the conclusion arrived at by the CA, alleging that the evidence they presented
prove that they and their predecessors-in-interest have been in possession and occupation of the subject
property for more than 30 years. The petitioners claim that the following sufficed to demonstrate that they
acquired title over the subject property by prescription:

a. the testimony of their attorney-in-fact, Ma. Wilhelmina Tobias, stating that:

i. the petitioners have been in actual, notorious and open possession of the
subject property since the time they purchased the same in 1996;
ii. the petitioners have regularly paid the taxes due on the subject property;
iii. the petitioners predecessors-in-interest, Victorio Garcia, Felipe Gatdula and
Gregonio Gatdula, had been in possession of the subject property for more than 30
years and had religiously paid the taxes due thereon; and
iv. the subject property is agricultural, alienable and disposable;

b. the testimony of the caretaker of the subject property, Margarito Pena, stating that:

i. he resides near the subject property;
ii. he witnessed the execution of the deed of sale that petitioners entered
into with Gregonio Gatdula; and
iii. the petitioners and predecessors-in-interest have been in possession of the
subject property for more than 30 years;

c. the testimony of Ferdinand Encarnacion, a clerk in the Docket Division of the Land
Registration Authority (LRA), stating that:

i. no opposition to the petitioners application was filed before the LRA;
ii. an examiner of the LRA found nothing wrong with the petitioners
application; and
iii. no title covering the subject property was previously issued;

d. Tax Declaration Nos. 2935, 2405 and 1823 for the years 1961, 1967 and 1974 in the name
of Victorio Garcia;
[8]


e. Tax Declaration Nos. 1534 and 3850 for the years 1980 and 1985 in the name of Felipe
Gatdula;
[9]


f. Tax Declaration Nos. 22453-A and 2925 for the years 1991 and 1994 in the name of
Gregonio Gatdula;
[10]


g. Tax Declaration Nos. 21956-A, 22096-A, 22097-A and 97-05078 in the name of the
petitioners;
[11]


h. Resolution No. 69, Series of 1998, of the Sangguniang Bayan of Indang, Cavite, which
approved the reclassification of several lots, including the subject property, from agricultural
to residential/commercial;
[12]


i. DARCO Conversion Order No. 040210005-(340)-99, Series of 2000, issued by the
Department of Agrarian Reform on July 13, 2000, which converted several parcels of land,
including the subject property, from agricultural to residential/commercial;
[13]


j. Certification issued by the Department of Environment and Natural Resources (DENR)
CALABARZON dated October 29, 2002, stating that the subject area falls within the
Alienable and Disposable Land Project No. 13-A of Indang, Cavite per LC Map 3091 certified
on June 21, 1983.
[14]



Issue

This Court is faced with the lone issue of whether the petitioners have proven themselves qualified to
the benefits under the relevant laws on the confirmation of imperfect or incomplete titles.

Our Ruling

Commonwealth Act No. 141, otherwise known as the Public Land Act governs the classification and
disposition of lands forming part of the public domain. Section 11 thereof provides that one of the modes of
disposing public lands suitable for agricultural purposes is by confirmation of imperfect or incomplete titles.
Section 48 thereof enumerates those who are considered to have acquired an imperfect or incomplete title over
an alienable and disposable public land.

Presidential Decree No. 1529 (P.D. No. 1529), otherwise known as the Property Registration Decree,
is a codification of all the laws relative to the registration of property and Section 14 thereof specifies those who
are qualified to register their incomplete title over an alienable and disposable public land under the Torrens
system. Particularly:

Section 14. Who may apply. The following persons may file in the proper Court of
First Instance an application for registration of title to land, whether personally or through
their authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation of alienable
and disposable lands of the public domain under a bona fide claim of ownership since June
12, 1945, or earlier.
(2) Those who have acquired ownership of private lands by prescription under
the provision of existing laws.
(3) Those who have acquired ownership of private lands or abandoned river
beds by right of accession or accretion under the existing laws.
(4) Those who have acquired ownership of land in any other manner provided
for by law.



As this Court clarified in Heirs of Malabanan v. Republic of the Philippines,
[15]
and Republic of the Philippines
v. East Silverlane Realty Development Corporation,
[16]
Section 14(1) covers alienable and disposable lands while
Section 14(2) covers private property. Thus, for ones possession and occupation of an alienable and
disposable public land to give rise to an imperfect title, the same should have commenced on June 12, 1945 or
earlier. On the other, for one to claim that his possession and occupation of private property has ripened to
imperfect title, the same should have been for the prescriptive period provided under the Civil Code. Without
need for an extensive extrapolation, the private property contemplated in Section 14(2) is patrimonial property
as defined in Article 421 in relation to Articles 420 and 422 of the Civil Code.

Going further, it was explained in Heirs of Malabanan and East Silverlane, that possession and occupation
of an alienable and disposable public land for the periods provided under the Civil Code will not convert it to
patrimonial or private property. There must be an express declaration that the property is no longer intended for
public service or the development of national wealth. In the absence thereof, the property remains to be
alienable and disposable and may not be acquired by prescription under Section 14(2) of P.D. No. 1529. Thus:

In Heirs of Malabanan, this Court ruled that possession and occupation of an
alienable and disposable public land for the periods provided under the Civil Code do not
automatically convert said property into private property or release it from the public
domain. There must be an express declaration that the property is no longer intended for
public service or development of national wealth. Without such express declaration, the
property, even if classified as alienable or disposable, remains property of the State, and
thus, may not be acquired by prescription.

Nonetheless, Article 422 of the Civil Code states that
*p+roperty of public dominion, when no longer intended for public use
or for public service, shall form part of the patrimonial property of the
State. It is this provision that controls how public dominion property
may be converted into patrimonial property susceptible to acquisition by
prescription. After all, Article 420 (2) makes clear that those property
which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth are public dominion property. For as long as the property
belongs to the State, although already classified as alienable or
disposable, it remains property of the public dominion if when it is
intended for some public service or for the development of the
national wealth. (emphasis supplied)

Accordingly, there must be an express declaration by the State
that the public dominion property is no longer intended for public
service or the development of the national wealth or that the property
has been converted into patrimonial. Without such express declaration,
the property, even if classified as alienable or disposable, remains
property of the public dominion, pursuant to Article 420(2), and thus
incapable of acquisition by prescription. It is only when such alienable
and disposable lands are expressly declared by the State to be no longer
intended for public service or for the development of the national
wealth that the period of acquisitive prescription can begin to run. Such
declaration shall be in the form of a law duly enacted by Congress or a
Presidential Proclamation in cases where the President is duly
authorized by law.

In other words, for one to invoke the provisions of Section 14(2) and set up acquisitive
prescription against the State, it is primordial that the status of the property as patrimonial
be first established. Furthermore, the period of possession preceding the classification of the
property as patrimonial cannot be considered in determining the completion of the
prescriptive period.
[17]



The petitioners application is obviously anchored on Section 14(2) of P.D. No. 1529 as they do not claim to
have possessed, by themselves or their predecessors-in-interest, the subject property since June 12, 1945 or
earlier. That it was thru prescription that they had acquired an imperfect title over the subject property is the
foundation upon which the petitioners rest their application.

Unfortunately, this Court finds the evidence presented by the petitioners to be wanting. The petitioners
failed to demonstrate that they and their predecessors-in-interest possessed the property in the requisite
manner, which this Court explained as follows:

It is concerned with lapse of time in the manner and under conditions laid down by
law, namely, that the possession should be in the concept of an owner, public, peaceful,
uninterrupted and adverse. Possession is open when it is patent, visible, apparent, notorious
and not clandestine. It is continuous when uninterrupted, unbroken and not intermittent or
occasional; exclusive when the adverse possessor can show exclusive dominion over the land
and an appropriation of it to his own use and benefit; and notorious when it is so
conspicuous that it is generally known and talked of by the public or the people in the
neighborhood. The party who asserts ownership by adverse possession must prove the
presence of the essential elements of acquisitive prescription.
[18]



Tax declarations per se do not qualify as competent evidence of actual possession for purposes of
prescription. More so, if the payment of the taxes due on the property is episodic, irregular and random such as
in this case. Indeed, how can the petitioners claim of possession for the entire prescriptive period be ascribed
any ounce of credibility when taxes were paid only on eleven (11) occasions within the 40-year period from 1961
to 2001? In Wee v. Republic of the Philippines,
[19]
this Court stated that:

It bears stressing that petitioner presented only five tax declarations (for the years 1957,
1961, 1967, 1980 and 1985) for a claimed possession and occupation of more than 45 years
(1945-1993). This type of intermittent and sporadic assertion of alleged ownership does
not prove open, continuous, exclusive and notorious possession and occupation. In any
event, in the absence of other competent evidence, tax declarations do not conclusively
establish either possession or declarants right to registration of title.
[20]
(emphasis supplied
and citation omitted)


In East Silverlane, it was emphasized that adverse, continuous, open, public possession in the concept of an
owner is a conclusion of law and the burden to prove it by clear, positive and convincing evidence is on the
applicant. A claim of ownership will not proper on the basis of tax declarations if unaccompanied by proof of
actual possession.
[21]


While there was an attempt to supplement the tax declaration by testimonial evidence, the same is futile
and frivolous. The testimonies of Margarito Pena and Ma. Wilhelmina Tobias do not merit consideration and do
not make up for the inherent inadequacy of the eleven (11) tax declarations submitted by the petitioners. Such
witnesses did not state what specific acts of ownership or dominion were performed by the petitioners and
predecessors-in-interest and simply made that general assertion that the latter possessed and occupied the
subject property for more than thirty (30) years, which, by all means, is a mere conclusion of law. The RTC should
have tackled evidence of such nature with a disposition to incredulity, if not with an outright rejection.

Furthermore, the petitioners application was filed after only (1) year from the time the subject property
may be considered patrimonial. DARCO Conversion Order No. 040210005-(340)-99, Series of 2000, was issued by
the DAR only on July 13, 2000, which means that the counting of the thirty (30)-year prescriptive period for
purposes of acquiring ownership of a public land under Section 14(2) can only start from such date. Before the
property was declared patrimonial by virtue of such conversion order, it cannot be acquired by prescription. This
is clear from the pronouncements of this Court in Heirs of Malabanan quoted above and in Republic of the
Philippines v. Rizalvo,
[22]
which states:

On this basis, respondent would have been eligible for application for registration because
his claim of ownership and possession over the subject property even exceeds thirty (30)
years. However, it is jurisprudentially clear that the thirty (30)-year period of prescription for
purposes of acquiring ownership and registration of public land under Section 14 (2) of P.D.
No. 1529 only begins from the moment the State expressly declares that the public dominion
property is no longer intended for public service or the development of the national wealth
or that the property has been converted into patrimonial.
[23]



WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The July 6, 2009
Decision and August 12, 2010 Resolution of the Court of Appeals areAFFIRMED.

SO ORDERED.


G.R. No. 157285 February 16, 2007
WOODRIDGE SCHOOL, INC., and MIGUELA JIMENEZ-JAVIER, Petitioners,
vs.
ARB CONSTRUCTION CO., INC., Respondent.
D E C I S I O N
CORONA, J.:
Petitioners Woodridge School, Inc. (Woodridge) and Miguela Jimenez-Javier come to us assailing the
decision
1
dated September 30, 2002 and resolution
2
dated February 14, 2003 of the Court of Appeals in CA-G.R.
CV No. 515333 which, in turn, modified the ruling of the Regional Trial Court (RTC) of Imus, Cavite
awarding P500,000 to respondent ARB Construction Co., Inc. (ARB) as reasonable indemnity for the use of ARB's
road lot.
3

Woodridge is the usufructuary of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-363902 in
the name of spouses Ernesto T. Matugas and Filomena U. Matugas. Its co-petitioner, Miguela Jimenez-Javier, is
the registered owner of the adjacent lot under TCT No. T-330688.
On the other hand, ARB is the owner and developer of Soldiers Hills Subdivision in Bacoor, Cavite, which is
composed of four phases. Phase I of the subdivision was already accessible from the Marcos Alvarez Avenue. To
provide the same accessibility to the residents of Phase II of the subdivision, ARB constructed the disputed road
to link the two phases.
As found by the appellate court, petitioners' properties sit right in the middle of several estates: Phase I of
Soldiers Hills Subdivision in the north, a creek in the east and Green Valley Subdivision the farther east, a road
within Soldiers Hills Subdivision IV which leads to the Marcos Alvarez Avenue in the west and Phase III of Soldiers
Hills Subdivision in the south.
Initially, petitioners offered to pay ARB P50,000 as indemnity for the use of the road. Adamant, ARB refused the
offer and fenced the perimeter of the road fronting the properties of petitioners. By doing so, ARB effectively cut
off petitioners' access to and from the public highway.
After failing to settle the matter amicably, petitioners jointly filed a complaint
4
in the RTC of Imus, Cavite to
enjoin ARB from depriving them of the use of the disputed subdivision road and to seek a compulsory right of
way after payment of proper indemnity. On November 24, 1995, the trial court rendered its decision in favor of
petitioners:
The reasons why this case is not one for a right of way as an easement are not difficult to discern.
The questioned road is part and parcel of the road network of Soldiers Hills IV, Phase II. This road was
constructed pursuant to the approved subdivision plan of Soldiers Hills IV, Phase II. As such, the road has already
been withdrawn from the commerce of men as the ownership of which was automatically vested in the
government without need of any compensation, although it is still registered in the name of the [ARB], the
moment the subdivision plan was approved. While it is not yet donated to the government [,] [it] is of no
moment for donating this road to the government is a mere formality.
Differently stated, the government automatically becomes the owner of the subdivisions' roads the moment the
subdivision plan is approved. From that time on, the roads are withdrawn from the commerce of men even [if]
the titles are still registered in the name of the subdivision owners and the roads are not yet donated to the
government. Thus, the subdivision owner can no longer sell or alienate the roads for they are already owned by
the government; thus, even if [petitioners] want to buy this road, and the [ARB] wants to sell the same, this
transaction cannot materialize for the above-stated reasons. Accordingly, [ARB] cannot prevent/prohibit
plaintiffs from using the road as the same belongs to the government.
xxx xxx xxx
WHEREFORE, *ARB+ is ordered to cease and desist from preventing *petitioners+ in using the subject road or
any other road in the subdivision.
xxx xxx xxx
SO ORDERED.
5
(citations omitted)
ARB elevated the case to the Court of Appeals.
6
Finding merit in the appeal, the appellate court reversed the
decision of the lower court. It explained that the 1991 case of White Plains Subdivision[7] did not apply to the
present case which was decided under a different factual milieu:
In the assailed Decision, the Court below relied on the ruling of the Supreme Court in White Plains Association,
Inc. vs. Legaspi (193 SCRA 765). The ruling is not applicable. In the White Plains case, the disputed area was
specifically set aside by the Quezon City Government, with the concurrence of the owner and developer of the
White Plains Subdivision in Quezon City, for the purpose of constructing a major thoroughfare open to the
general public. The case was filed by the association of homeowners of White Plains in Quezon City when the
owner-developer sought to convert the disputed lot to residential lots. The Supreme Court initially held that the
disputed lot was not longer within the commerce of men, it having been segregated for a particular purpose,
that of being used as "part of a mandatory open space reserved for public use to be improved into the widened
Katipunan Road". It was within this context that the Supreme Court held that "ownership was automatically
vested in the Quezon City government and/or the Republic of the Philippines, without need of paying any
compensation".
8

The appellate court went on to rule that a compulsory right of way exists in favor of petitioners as "[t]here is no
other existing adequate outlet to and from [petitioners'] properties to the Marcos Alvarez Avenue other than the
subject existing road lot designated as Lot No. 5827-F-1 belonging to [ARB]."
9
In addition, it awarded P500,000 to
ARB as reasonable indemnity for the use of the road lot.
Acting on petitioners' motion for reconsideration, the appellate court justified the monetary award in this
manner:
In [o]ur Decision, [w]e awarded the amount of P500,000.00 merely as reasonable indemnity for the use of the
road lot, not the alienation thereof. The amount was based on equitable considerations foremost of which is
that, while there is no alienation to speak of, the easement is of long-standing, that is, until a shorter and
adequate outlet is established. Moreover, [ARB] should be compensated for the wear and tear that [petitioners']
use of the road would contribute to; it is [ARB] which is solely to be credited for the completion of the road lot.
Going by the conservative valuation of the Municipality of Bacoor, Cavite presented by [petitioners], the 4,760
sq. m. road lot would cost P1,904,000 but as stated what is compensated is the use of the road lot not its
alienation.
[Petitioners'] original offer cannot be considered a reasonable indemnity, there being a knotty legal question
involved and it is not [ARB's] fault that the parties had to resort to the courts for a resolution.
10

Unsatisfied with the ruling of the appellate court, petitioners filed this petition for review on certiorari insisting
that ARB is not entitled to be paid any indemnity.
Petitioners argue that the contested road lot is a property of public dominion pursuant to Article 420
11
of the
Civil Code. Specifically, petitioners point out that the disputed road lot falls under the category "others of similar
character" which is the last clause of Article 420 (1).
12
Hence, it is a property of public dominion which can be
used by the general public without need for compensation. Consequently, it is wrong for ARB to exclude
petitioners from using the road lot or to make them pay for the use of the same.
We disagree.
In the case of Abellana, Sr. v. Court of Appeals,
13
the Court held that "the road lots in a private subdivision are
private property, hence, the local government should first acquire them by donation, purchase, or expropriation,
if they are to be utilized as a public road."
14
Otherwise, they remain to be private properties of the owner-
developer.
Contrary to the position of petitioners, the use of the subdivision roads by the general public does not strip it of
its private character. The road is not converted into public property by mere tolerance of the subdivision owner
of the public's passage through it. To repeat, "the local government should first acquire them by donation,
purchase, or expropriation, if they are to be utilized as a public road."
15

Likewise, we hold the trial court in error when it ruled that the subject road is public property pursuant to
Section 2 of Presidential Decree No. 1216.
16
The pertinent portion of the provision reads:
Section 2. xxx xxx xxx
Upon their completion as certified to by the Authority, the roads, alleys, sidewalks and playgrounds shall be
donated by the owner or developer to the city or municipality and it shall be mandatory for the local
governments to accept them provided, however, that the parks and playgrounds may be donated to the
Homeowners Association of the project with the consent of the city or municipality concerned
The law is clear. The transfer of ownership from the subdivision owner-developer to the local government is not
automatic but requires a positive act from the owner-developer before the city or municipality can acquire
dominion over the subdivision roads. Therefore, until and unless the roads are donated,
17
ownership remains
with the owner-developer.
18

Since no donation has been made in favor of any local government and the title to the road lot is still registered
in the name of ARB, the disputed property remains private.
This is not to say that ARB may readily exclude petitioners from passing through the property. As correctly
pointed out by the Court of Appeals, the circumstances clearly make out a case of legal easement of right of way.
It is an easement which has been imposed by law and not by the parties and it has "for (its) object either public
use or the interest of private persons."
19

To be entitled to a legal easement of right of way, the following requisites must concur: (1) the dominant estate
is surrounded by other immovables and has no adequate outlet to a public highway; (2) payment of proper
indemnity; (3) the isolation was not due to acts of the proprietor of the dominant estate and (4) the right of way
claimed is at the point least prejudicial to the servient estate.
20

The appellate and trial courts found that the properties of petitioners are enclosed by other estates without any
adequate access to a public highway except the subject road lot which leads to Marcos Alvarez
Avenue.
21
Although it was shown that the shortest distance from the properties to the highway is toward the east
across a creek, this alternative route does not provide an adequate outlet for the students of the proposed
school. This route becomes marshy as the creek overflows during the rainy season and will endanger the
students attending the school.
All told, the only requisite left unsatisfied is the payment of proper indemnity.
Petitioners assert that their initial offer of P50,000 should be sufficient compensation for the right of way.
Further, they should not be held accountable for the increase in the value of the property since the delay was
attributable to the stubborn refusal of ARB to accept their offer.
22

Again, we are not persuaded.
In the case of a legal easement, Article 649 of the Civil Code prescribes the parameters by which the proper
indemnity may be fixed. Since the intention of petitioners is to establish a permanent passage, the second
paragraph of Article 649 of the Civil Code particularly applies:
Art 649. xxx xxx xxx
Should this easement be established in such a manner that its use may be continuous for all the needs of the
dominant estate, establishing a permanent passage, the indemnity shall consist of the value of the land
occupied and the amount of the damage caused to the servient estate. xxx. (Emphasis supplied)
On that basis, we further hold that the appellate court erred in arbitrarily awarding indemnity for the use of the
road lot.
The Civil Code categorically provides for the measure by which the proper indemnity may be computed: value of
the land occupied plus the amount of the damage caused to the servient estate. Settled is the rule in statutory
construction that "when the law is clear, the function of the courts is simple application."
23
Thus, to award the
indemnity using factors different from that given by the law is a complete disregard of these clear statutory
provisions and is evidently arbitrary. This the Court cannot countenance. The Civil Code has clearly laid down the
parameters and we cannot depart from them. Verba legis non est recedendum.
Having settled the legal issues, we order the remand of this case to the trial court for reception of evidence and
determination of the limits of the property to be covered by the easement, the proper indemnity to be paid and
the respective contributions of petitioners.
For the guidance of the trial court, the fact that the disputed road lot is used by the general public may be taken
in consideration to mitigate the amount of damage that the servient estate is entitled to, in the sense that the
wear and tear of the subject road is not entirely attributable to petitioners.
WHEREFORE, this petition is partially GRANTED. The September 30, 2002 Decision and February 14, 2003
resolution of the Court of Appeals in CA-G.R. CV No. 515333 are ANNULLED and SET ASIDE in so far as
petitioners are ordered to pay an indemnity of P500,000. The case is hereby remanded to the trial court for
reception of evidence and determination of the limits of the property to be covered by the easement, the proper
indemnity to be paid and the respective contributions of petitioners.
SO ORDERED.
G.R. No. 133250 July 9, 2002
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents.
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 PEA's 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.
x x x
(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 Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and academic because of
subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations for a new
agreement." The petition also prays that the Court enjoin PEA from "privately entering into, perfecting and/or
executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on June 21,
1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in the renegotiations.
Thus, PEA has satisfied petitioner's prayer for a public disclosure of the renegotiations. Likewise, petitioner's
prayer to enjoin the signing of the Amended JVA is now moot because PEA and AMARI have already signed the
Amended JVA on March 30, 1999. Moreover, the Office of the President has approved the Amended JVA on May
28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the signing
and approval of the Amended JVA before the Court could act on the issue. Presidential approval does not resolve
the constitutional issue or remove it from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot
operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement the
Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional grounds necessarily
includes preventing its implementation if in the meantime PEA and AMARI have signed one in violation of the
Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its violation of Section 3,
Article XII of the Constitution, which prohibits the government from alienating lands of the public domain to
private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its
implementation, and if already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to
367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single private corporation. It now
becomes more compelling for the Court to resolve the issue to insure the government itself does not violate a
provision of the Constitution intended to safeguard the national patrimony. Supervening events, whether
intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the
Constitution. In the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent
the transfer of title and ownership of alienable lands of the public domain in the name of AMARI. Even in cases
where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling principles to guide the bench, bar, and the public.
17

Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section 3,
Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,
18
covered agricultural
landssold to private corporations which acquired the lands from private parties. The transferors of the private
corporations claimed or could claim the right to judicial confirmation of their imperfect 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 latter's seventy percent proportionate share in the
reclaimed areas as the reclamation progresses. The Amended JVA even allows AMARI to mortgage at any time
the entirereclaimed area to raise financing for the reclamation project.
21

Second issue: whether the petition merits dismissal for failing to observe the principle governing the hierarchy
of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court. The
principle of hierarchy of courts applies generally to cases involving factual questions. As it is not a trier of facts,
the Court cannot entertain cases involving factual issues. The instant case, however, raises constitutional issues
of transcendental importance to the public.
22
The Court can resolve this case without determining any factual
issue related to the case. Also, the instant case is a petition for mandamus which falls under the original
jurisdiction of the Court under Section 5, Article VIII of the Constitution. We resolve to exercise primary
jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information
without first asking PEA the needed information. PEA claims petitioner's direct resort to the Court violates the
principle of exhaustion of administrative remedies. It also violates the rule that mandamus may issue only if
there is no other plain, speedy and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v. 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
the disposition of government lands to private parties requires public
bidding. PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of its
lands. The law obligated PEA to make this public disclosure even without demand from petitioner or from
anyone. PEA failed to make this public disclosure because the original JVA, like the Amended JVA, was the result
of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make
the public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct judicial
intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative remedies
does not apply when the issue involved is a purely legal or constitutional question.
27
The principal issue in the
instant case is the capacity of AMARI to acquire lands held by PEA in view of the constitutional ban prohibiting
the alienation of lands of the public domain to private corporations. We rule that the principle of exhaustion of
administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his constitutional right
to information without a showing that PEA refused to perform an affirmative duty imposed on PEA by the
Constitution. PEA also claims that petitioner has not shown that he will suffer any concrete injury because of the
signing or implementation of the Amended JVA. Thus, there is no actual controversy requiring the exercise of the
power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to comply with
its constitutional duties. There are two constitutional issues involved here. First is the right of citizens to
information on matters of public concern. Second is the application of a constitutional provision intended to
insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The thrust of the
first issue is to compel PEA to disclose publicly information on the sale of government lands worth billions of
pesos, information which the Constitution and statutory law mandate PEA to disclose. The thrust of the second
issue is to prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in violation
of the Constitution, compelling PEA to comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,
28
the Court
upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental importance to the public,
thus -
"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an
issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a right to
initiate and prosecute actions questioning the validity of acts or orders of government agencies or
instrumentalities, if the issues raised are of 'paramount public interest,' and if they 'immediately affect
the social, economic and moral well being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the
proceeding involves the assertion of a public right, such as in this case. He invokes several decisions of
this Court which have set aside the procedural matter of locus standi, when the subject of the case
involved public interest.
x x x
In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in
interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution
of the laws, he need not show that he has any legal or special interest in the result of the action. In the
aforesaid case, the petitioners sought to enforce their right to be informed on matters of public
concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the
rule that laws in order to be valid and enforceable must be published in the Official Gazette or
otherwise effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that
the right they sought to be enforced 'is a public right recognized by no less than the fundamental law
of the land.'
Legaspi v. Civil Service Commission, while reiterating Taada, further declared that 'when a mandamus
proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by
the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the
right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved
under the questioned contract for the development, management and operation of the Manila
International Container Terminal, 'public interest [was] definitely involved considering the important
role [of the subject contract] . . . in the economic development of the country and the magnitude of
the financial consideration involved.' We concluded that, as a consequence, the disclosure provision in
the Constitution would constitute sufficient authority for upholding the petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information and access to
official records, documents and papers a right guaranteed under Section 7, Article III of the 1987
Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of
the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the
enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should
be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rights - to
information and to the equitable diffusion of natural resources - matters of transcendental public importance,
the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official information on on-going
negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on matters of public concern in
this manner:
"Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access
to official records, and to documents, and papers pertaining to official acts, transactions, or
decisions, as well as to government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law." (Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces the people's right to
information on matters of public concern. This State policy is expressed in Section 28, Article II of the
Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy
of full public disclosure of all its transactions involving public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations
of the government, as well as provide the people sufficient information to exercise effectively other
constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the
government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even
if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also
essential to hold public officials "at all times x x x accountable to the people,"
29
for unless citizens have the
proper information, they cannot hold public officials accountable for anything. Armed with the right information,
citizens can participate in public discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper functioning of any democracy. As
explained by the Court inValmonte v. Belmonte, Jr.
30

"An essential element of these freedoms is to keep open a continuing dialogue or process of
communication between the government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that the government may perceive and
be responsive to the people's will. Yet, this open dialogue can be effective only to the extent that the
citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the
discussion are aware of the issues and have access to information relating thereto can such bear fruit."
PEA asserts, citing Chavez v. PCGG,
31
that in cases of on-going negotiations the right to information is limited to
"definite propositions of the government." PEA maintains the right does not include access to "intra-agency or
inter-agency recommendations or communications during the stage when common assertions are still in the
process of being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the closing of
the transaction. To support its contention, AMARI cites the following discussion in the 1986 Constitutional
Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts,
agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the
consummation of the contract, or does he refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both steps
leading to a contract and already a consummated contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the
transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
Mr. Suarez: Thank you."
32
(Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke the right. Requiring
government officials to reveal their deliberations at the pre-decisional stage will degrade the quality of decision-
making in government agencies. Government officials will hesitate to express their real sentiments during
deliberations if there is immediate public dissemination of their discussions, putting them under all kinds of
pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to disclose publicly, and
information the constitutional right to information requires PEA to release to the public. Before the
consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the public
matters relating to the disposition of its property. These include the size, location, technical description and
nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid,
the minimum price and similar information. PEA must prepare all these data and disclose them to the public at
the start of the disposition process, long before the consummation of the contract, because the Government
Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this
information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or
review committee is not immediately accessible under the right to information. While the evaluation or review is
still on-going, there are no "official acts, transactions, or decisions" on the bids or proposals. However, once the
committee makes its official recommendation, there arises a "definite proposition" on the part of the
government. From this moment, the public's right to information attaches, and any citizen can access all the non-
proprietary information leading to such definite proposition. In Chavez v. PCGG,
33
the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the
PCGG and its officers, as well as other government representatives, to disclose sufficient public
information on any proposed settlement they have decided to take up with the ostensible owners and
holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the
government, not necessarily to intra-agency or inter-agency recommendations or communications
during the stage when common assertions are still in the process of being formulated or are in the
"exploratory" stage. There is need, of course, to observe the same restrictions on disclosure of
information in general, as discussed earlier such as on matters involving national security, diplomatic
or foreign relations, intelligence and other classified information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood that the
right to information "contemplates inclusion of negotiations leading to the consummation of the
transaction." Certainly, a consummated contract is not a requirement for the exercise of the right to
information. Otherwise, the people can never exercise the right if no contract is consummated, and if one is
consummated, it may be too late for the public to expose its defects.1wphi1.nt
Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly
disadvantageous to the government or even illegal, becomes a fait accompli. This negates the State policy of full
transparency on matters of public concern, a situation which the framers of the Constitution could not have
intended. Such a requirement will prevent the citizenry from participating in the public discussion of
any proposedcontract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an
emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its
transactions involving public interest."
The right covers three categories of information which are "matters of public concern," namely: (1) official
records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3) government
research data used in formulating policies. The first category refers to any document that is part of the public
records in the custody of government agencies or officials. The second category refers to documents and papers
recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts, transactions or
decisions of government agencies or officials. The third category refers to research data, whether raw, collated
or processed, owned by the government and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes of meetings, terms of reference and other documents
attached to such reports or minutes, all relating to the JVA. However, the right to information does not compel
PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of the JVA.
34
The right only
affords access to records, documents and papers, which means the opportunity to inspect and copy them. One
who exercises the right must copy the records, documents and papers at his expense. The exercise of the right is
also subject to reasonable regulations to protect the integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to conduct the inspection and copying.
35

The right to information, however, does not extend to matters recognized as privileged information under the
separation of powers.
36
The right does not also apply to information on military and diplomatic secrets,
information affecting national security, and information on investigations of crimes by law enforcement agencies
before the prosecution of the accused, which courts have long recognized as confidential.
37
The right may also
be subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the
separation of powers. The information does not cover Presidential conversations, correspondences, or
discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme Court and
other collegiate courts, or executive sessions of either house of Congress,
38
are recognized as confidential. This
kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory
ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to protect
the independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial
power.
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.
x x x
(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.
x x x
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 State's natural
resources, became inalienable by constitutional fiat, available only for lease for 25 years, renewable for another
25 years. The government could alienate foreshore lands only after these lands were reclaimed and classified as
alienable agricultural lands of the public domain. Government reclaimed and marshy lands of the public domain,
being neither timber nor mineral lands, fell under the classification of public agricultural lands.
50
However,
government reclaimed and marshy lands, although subject to classification as disposable public agricultural
lands, could only be leased and not sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of the
public domain was only a statutory prohibition and the legislature could therefore remove such prohibition. The
1935 Constitution did not prohibit individuals and corporations from acquiring government reclaimed and
marshy lands of the public domain that were classified as agricultural lands under existing public land laws.
Section 2, Article XIII of the 1935 Constitution provided as follows:
"Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands
in excess of one thousand and twenty four hectares, nor may any individual acquire such lands by
purchase in excess of one hundred and forty hectares, or by lease in excess of one thousand and
twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing,
not exceeding two thousand hectares, may be leased to an individual, private corporation, or
association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874 to
open for sale to private parties government reclaimed and marshy lands of the public domain. On the contrary,
the legislature continued the long established State policy of retaining for the government title and ownership of
government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the Public
Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as amended, remains
to this day the existing general law governing the classification and disposition of lands of the public domain
other than timber and mineral lands.
51

Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or
disposable"
52
lands of the public domain, which prior to such classification are inalienable and outside the
commerce of man. Section 7 of CA No. 141 authorizes the President to "declare what lands are open to
disposition or concession." Section 8 of CA No. 141 states that the government can declare open for disposition
or concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of CA No. 141 read as
follows:
"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall
from time to time classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to another,
53
for the
purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable public
lands, the President, upon recommendation by the Secretary of Agriculture and Commerce, shall
from time to time declare what lands are open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially
delimited and classified and, when practicable, surveyed, and which have not been reserved for public
or quasi-public uses, nor appropriated by the Government, nor in any manner become private
property, nor those on which a private right authorized and recognized by this Act or any other valid
law may be claimed, or which, having been reserved or appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain, the President must first
officially classify these lands as alienable or disposable, and then declare them open to disposition or concession.
There must be no law reserving these lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public
domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is
intended to be used for residential purposes or for commercial, industrial, or other productive
purposes other than agricultural, and is open to disposition or concession, shall be disposed of under
the provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any
person, corporation, or association authorized to purchase or lease public lands for agricultural
purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to
private parties by lease only and not otherwise, as soon as the President, upon recommendation by
the Secretary of Agriculture, shall declare that the same are not necessary for the public service and
are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale
or lease under the provisions of this Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874
prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public domain. All
these lands are intended for residential, commercial, industrial or other non-agricultural purposes. As before,
Section 61 allowed only the lease of such lands to private parties. The government could sell to private parties
only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural purposes not classified
as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands,
however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to
qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for residential,
commercial, industrial or other productive purposes other than agricultural "shall be disposed of under the
provisions of this chapter and not otherwise." Under Section 10 of CA No. 141, the term "disposition" includes
lease of the land. Any disposition of government reclaimed, foreshore and marshy disposable lands for non-
agricultural purposes must comply with Chapter IX, Title III of CA No. 141,
54
unless a subsequent law amended or
repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of Appeals,
55
Justice
Reynato S. Puno summarized succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by
the government by dredging, filling, or other means. Act 1654 mandated that the control and
disposition of the foreshore and lands under water remained in the national government. Said law
allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919 and 1936 also declared that
the foreshore and lands reclaimed by the government were to be "disposed of to private parties by
lease only and not otherwise." Before leasing, however, the Governor-General, upon recommendation
of the Secretary of Agriculture and Natural Resources, had first to determine that the land reclaimed
was not necessary for the public service. This requisite must have been met before the land could be
disposed of. But even then, the foreshore and lands under water were not to be alienated and sold to
private parties. The disposition of the reclaimed land was only by lease. The land remained property
of the State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained in effect at
present."
The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy alienable
lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935
Constitution took effect. The prohibition on the sale of foreshore lands, however, became a constitutional edict
under the 1935 Constitution. Foreshore lands became inalienable as natural resources of the State, unless
reclaimed by the government and classified as agricultural lands of the public domain, in which case they would
fall under the classification of government reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the public
domain continued to be only leased and not sold to private parties.
56
These lands remained sui generis, as the
only alienable or disposable lands of the public domain the government could not sell to private parties.
Since then and until now, the only way the government can sell to private parties government reclaimed and
marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale. CA No.
141 does not authorize the President to reclassify government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only alienable or disposable
lands for non-agricultural purposes that the government could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under Section 59
that the government previously transferred to government units or entities could be sold to private parties.
Section 60 of CA No. 141 declares that
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of
Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or
lease is requested, and shall not exceed one hundred and forty-four hectares: Provided, however, That
this limitation shall not apply to grants, donations, or transfers made to a province, municipality or
branch or subdivision of the Government for the purposes deemed by said entities conducive to the
public interest;but the land so granted, donated, or transferred to a province, municipality or branch
or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized by Congress: x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority required in
Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units and
entities from the maximum area of public lands that could be acquired from the State. These government units
and entities should not just turn around and sell these lands to private parties in violation of constitutional or
statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes to government units and
entities could be used to circumvent constitutional limitations on ownership of alienable or disposable lands of
the public domain. In the same manner, such transfers could also be used to evade the statutory prohibition in
CA No. 141 on the sale of government reclaimed and marshy lands of the public domain to private parties.
Section 60 of CA No. 141 constitutes by operation of law a lien on these lands.
57

In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141, Sections
63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows:
"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes,
the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the Secretary of
Natural Resources) for authority to dispose of the same. Upon receipt of such authority, the Director of
Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of
agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the
highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or disposable
lands of the public domain.
58

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of Waters
of 1866. Private parties could still reclaim portions of the sea with government permission. However,
the reclaimed land could become private land only if classified as alienable agricultural land of the public
domain open to disposition under CA No. 141. The 1935 Constitution prohibited the alienation of all natural
resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the Civil
Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State."
Again, the government must formally declare that the property of public dominion is no longer needed for public
use or public service, before the same could be classified as patrimonial property of the State.
59
In the case of
government reclaimed and marshy lands of the public domain, the declaration of their being disposable, as well
as the manner of their disposition, is governed by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those properties of
the State which, without being for public use, are intended for public service or the "development of the
national wealth." Thus, government reclaimed and marshy lands of the State, even if not employed for public
use or public service, if developed to enhance the national wealth, are classified as property of public dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine. Section 8,
Article XIV of the 1973 Constitution stated that
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to
the State. With the exception of agricultural, industrial or commercial, residential, and resettlement
lands of the public domain, natural resources shall not be alienated, and no license, concession, or
lease for the exploration, development, exploitation, or utilization of any of the natural resources shall
be granted for a period exceeding twenty-five years, renewable for not more than twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases, beneficial use may be the measure and the limit of the
grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception of "agricultural,
industrial or commercial, residential, and resettlement lands of the public domain." In contrast, the 1935
Constitution barred the alienation of all natural resources except "public agricultural lands." However, the term
"public agricultural lands" in the 1935 Constitution encompassed industrial, commercial, residential and
resettlement lands of the public domain.
60
If the land of public domain were neither timber nor mineral land, it
would fall under the classification of agricultural land of the public domain. Both the 1935 and 1973
Constitutions, therefore, prohibited the alienation of all natural resources except agricultural lands of the
public domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who were
citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were no longer
allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution. Section 11, Article XIV of
the 1973 Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development
requirements of the natural resources, shall determine by law the size of land of the public domain
which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or
association, and the conditions therefor. No private corporation or association may hold alienable
lands of the public domain except by lease not to exceed one thousand hectares in area nor may any
citizen hold such lands by lease in excess of five hundred hectares or acquire by purchase, homestead
or grant, in excess of twenty-four hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest resources in excess of
one hundred thousand hectares. However, such area may be increased by the Batasang Pambansa
upon recommendation of the National Economic and Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain only
through lease. Only individuals could now acquire alienable lands of the public domain, and private corporations
became absolutely barred from acquiring any kind of alienable land of the public domain. The constitutional
ban extended to all kinds of alienable lands of the public domain, while the statutory ban under CA No. 141
applied only to government reclaimed, foreshore and marshy alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating PEA, a
wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of PD No. 1084,
vests PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or
to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all
kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or
operated by the government;
(c) To provide for, operate or administer such service as may be necessary for the efficient, economical
and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for
which it is created, have the following powers and functions:
(a)To prescribe its by-laws.
x x x
(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.
x x x
(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.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian doctrine. The
1987 Constitution declares that all natural resources are "owned by the State," and except for alienable
agricultural lands of the public domain, natural resources cannot be alienated. Sections 2 and 3, Article XII of the
1987 Constitution state that
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands,
and national parks. Agricultural lands of the public domain may be further classified by law according
to the uses which they may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such alienable lands of the
public domain except by lease, for a period not exceeding twenty-five years, renewable for not more
than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines
may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by
purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor." (Emphasis
supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations
fromacquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold alienable lands of the public domain only through lease. As in
the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of reclaimed,
foreshore and marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except through lease, alienable
lands of the public domain is not well understood. During the deliberations of the 1986 Constitutional
Commission, the commissioners probed the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:
`No private corporation or association may hold alienable lands of the public domain except by lease,
not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the
1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public lands. But
it has not been very clear in jurisprudence what the reason for this is. In some of the cases decided in
1982 and 1983, it was indicated that the purpose of this is to prevent large landholdings. Is that the
intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the Iglesia
ni Cristo was not allowed to acquire a mere 313-square meter land where a chapel stood because the
Supreme Court said it would be in violation of this." (Emphasis supplied)
In Ayog v. Cusi,
64
the Court explained the rationale behind this constitutional ban in this way:
"Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands by
private corporations is to equitably diffuse land ownership or to encourage 'owner-cultivatorship and
the economic family-size farm' and to prevent a recurrence of cases like the instant case. Huge
landholdings by corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited
the size of alienable lands of the public domain that corporations could acquire. The Constitution could have
followed the limitations on individuals, who could acquire not more than 24 hectares of alienable lands of the
public domain under the 1973 Constitution, and not more than 12 hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a
corporation would be more effective in preventing the break-up of farmlands. If the farmland is registered in the
name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of
subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and
smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring
more than the allowed area of alienable lands of the public domain. Without the constitutional ban, individuals
who already acquired the maximum area of alienable lands of the public domain could easily set up corporations
to acquire more alienable public lands. An individual could own as many corporations as his means would allow
him. An individual could even hide his ownership of a corporation by putting his nominees as stockholders of the
corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by
individuals of alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area
of alienable land of the public domain to a qualified individual. This constitutional intent is safeguarded by the
provision prohibiting corporations from acquiring alienable lands of the public domain, since the vehicle to
circumvent the constitutional intent is removed. The available alienable public lands are gradually decreasing in
the face of an ever-growing population. The most effective way to insure faithful adherence to this constitutional
intent is to grant or sell alienable lands of the public domain only to individuals. This, it would seem, is the
practical benefit arising from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three properties,
namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to regularize the
configuration of the reclaimed area."
65

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

In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-hectare
reclamation project have been reclaimed, and the rest of the 592.15 hectares are still submerged areas
forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's "actual cost" in
partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the reclamation of the
Freedom Islands. AMARI will further shoulder all the reclamation costs of all the other areas, totaling 592.15
hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined in the Amended JVA as the total reclaimed area less 30
percent earmarked for common areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will
be issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that
"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or conveyance
of the title pertaining to AMARI's Land share based on the Land Allocation Plan. PEA, when requested
in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title
covering AMARI's Land Share in the name of AMARI, x x x; provided, that if more than seventy
percent (70%) of the titled area at any given time pertains to AMARI, PEA shall deliver to AMARI only
seventy percent (70%) of the titles pertaining to AMARI, until such time when a corresponding
proportionate area of additional land pertaining to PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of reclaimed
land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEA's statutory
authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the
Amended JVA states that
"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation
and Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture
the full and exclusive right, authority and privilege to undertake the Project in accordance with the
Master Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its supplemental
agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended JVA
367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and 3, Article XII
of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. x x x.
x x x
Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain except by lease,
x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are alienable or
disposable lands of the public domain. In its Memorandum,
67
PEA admits that
"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and
disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the government by dredging, filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force
68
constituted under Presidential Administrative Order No. 365 admitted in its
Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands are classified as alienable
and disposable lands of the public domain."
69
The Legal Task Force concluded that
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of
ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA,
as owner, may validly convey the same to any qualified person without violating the Constitution or
any statute.
The constitutional provision prohibiting private corporations from holding public land, except by lease
(Sec. 3, Art. XVII,
70
1987 Constitution), does not apply to reclaimed lands whose ownership has passed
on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part
of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the
State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as
"agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or disposable lands of the public domain. There must be
a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open
to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if
the law has reserved them for some public or quasi-public use.
71

Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or concession which
have been officially delimited and classified."
72
The President has the authority to classify inalienable lands of
the public domain into alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141.
In Laurel vs. Garcia,
73
the Executive Department attempted to sell the Roppongi property in Tokyo, Japan, which
was acquired by the Philippine Government for use as the Chancery of the Philippine Embassy. Although the
Chancery had transferred to another location thirteen years earlier, the Court still ruled that, under Article
422
74
of the Civil Code, a property of public dominion retains such character until formally declared otherwise.
The Court ruled that
"The fact that the Roppongi site has not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public domain, not available for private appropriation or
ownership 'until there is a formal declaration on the part of the government to withdraw it from
being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands reclaimed by
PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then President Corazon C.
Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares comprising the partially
reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the Municipality of
Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to Section 103 of PD No. 1529
authorizing the issuance of certificates of title corresponding to land patents. To this day, these certificates of
title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom Islands,
is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the
public domain. PD No. 1085 and President Aquino's issuance of a land patent also constitute a declaration that
the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or
disposable lands of the public domain, open to disposition or concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom
Islands although subsequently there were partial erosions on some areas. The government had also completed
the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of
the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain into
"agricultural, forest or timber, mineral lands, and national parks." Being neither timber, mineral, nor national
park lands, the reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the
public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural
resources that the State may alienate to qualified private parties. All other natural resources, such as the seas or
bays, are "waters x x x owned by the State" forming part of the public domain, and are inalienable pursuant to
Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation, reclaimed
the islands under a contract dated November 20, 1973 with the Commissioner of Public Highways. AMARI, citing
Article 5 of the Spanish Law of Waters of 1866, argues that "if the ownership of reclaimed lands may be given to
the party constructing the works, then it cannot be said that reclaimed lands are lands of the public domain
which the State may not alienate."
75
Article 5 of the Spanish Law of Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the
provinces, pueblos or private persons, with proper permission, shall become the property of the party
constructing such works, unless otherwise provided by the terms of the grant of authority." (Emphasis
supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with
"proper permission" from the State. Private parties could own the reclaimed land only if not "otherwise provided
by the terms of the grant of authority." This clearly meant that no one could reclaim from the sea without
permission from the State because the sea is property of public dominion. It also meant that the State could
grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea from which it
emerged, belonged to the State. Thus, a private person reclaiming from the sea without permission from the
State could not acquire ownership of the reclaimed land which would remain property of public dominion like
the sea it replaced.
76
Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of land
ownership that "all lands that were not acquired from the government, either by purchase or by grant, belong to
the public domain."
77

Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the disposition
of public lands. In particular, CA No. 141 requires that lands of the public domain must first be classified as
alienable or disposable before the government can alienate them. These lands must not be reserved for public or
quasi-public purposes.
78
Moreover, the contract between CDCP and the government was executed after the
effectivity of the 1973 Constitution which barred private corporations from acquiring any kind of alienable land
of the public domain. This contract could not have converted the Freedom Islands into private lands of a private
corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of areas
under water and revested solely in the National Government the power to reclaim lands. Section 1 of PD No. 3-A
declared that
"The provisions of any law to the contrary notwithstanding, the reclamation of areas under water,
whether foreshore or inland, shall be limited to the National Government or any person authorized by
it under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under water
could now be undertaken only by the National Government or by a person contracted by the National
Government. Private parties may reclaim from the sea only under a contract with the National Government, and
no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Government's
implementing arm to undertake "all reclamation projects of the government," which "shall be undertaken by the
PEA or through a proper contract executed by it with any person or entity." Under such contract, a private party
receives compensation for reclamation services rendered to PEA. Payment to the contractor may be in cash, or
in kind consisting of portions of the reclaimed land, subject to the constitutional ban on private corporations
from acquiring alienable lands of the public domain. The reclaimed land can be used as payment in kind only if
the reclaimed land is first classified as alienable or disposable land open to disposition, and then declared no
longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are still
submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying these
submerged areas as alienable or disposable lands of the public domain open to disposition. These submerged
areas are not covered by any patent or certificate of title. There can be no dispute that these submerged areas
form part of the public domain, and in their present state are inalienable and outside the commerce of man.
Until reclaimed from the sea, these submerged areas are, under the Constitution, "waters x x x owned by the
State," forming part of the public domain and consequently inalienable. Only when actually reclaimed from the
sea can these submerged areas be classified as public agricultural lands, which under the Constitution are the
only natural resources that the State may alienate. Once reclaimed and transformed into public agricultural
lands, the government may then officially classify these lands as alienable or disposable lands open to
disposition. Thereafter, the government may declare these lands no longer needed for public service. Only then
can these reclaimed lands be considered alienable or disposable lands of the public domain and within the
commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable lands open to
disposition is necessary because PEA is tasked under its charter to undertake public services that require the use
of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o
own or operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct, maintain and
operate such systems of sanitary sewers as may be necessary; [T]o construct, maintain and operate such storm
drains as may be necessary." PEA is empowered to issue "rules and regulations as may be necessary for the
proper use by private parties of any or all of the highways, roads, utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for their use." Thus, part of the reclaimed foreshore and
submerged lands held by the PEA would actually be needed for public use or service since many of the functions
imposed on PEA by its charter constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National Government." The same
section also states that "[A]ll reclamation projects shall be approved by the President upon recommendation of
the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or
entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA became the primary
implementing agency of the National Government to reclaim foreshore and submerged lands of the public
domain. EO No. 525 recognized PEA as the government entity "to undertake the reclamation of lands and ensure
their maximum utilization in promoting public welfare and interests."
79
Since large portions of these reclaimed
lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed
lands no longer needed for public service from those still needed for public service.1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned by the PEA,"
could not automatically operate to classify inalienable lands into alienable or disposable lands of the public
domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would automatically
become alienable once reclaimed by PEA, whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the
Department of Environment and Natural Resources ("DENR" for brevity) the following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
x x x
(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;
x x x
(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits, concessions,
lease agreements and such other privileges concerning the development, exploration and utilization
of the country's marine, freshwater, and brackish water and over all aquatic resources of the country
and shall continue to oversee, supervise and police our natural resources; cancel or cause to cancel
such privileges upon failure, non-compliance or violations of any regulation, order, and for all other
causes which are in furtherance of the conservation of natural resources and supportive of the national
interest;
(15) Exercise exclusive jurisdiction on the management and disposition of all lands of the public
domain and serve as the sole agency responsible for classification, sub-classification, surveying and
titling of lands in consultation with appropriate agencies."
80
(Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR exercises "supervision and
control over alienable and disposable public lands." DENR also exercises "exclusive jurisdiction on the
management and disposition of all lands of the public domain." Thus, DENR decides whether areas under water,
like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the
country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR
decides whether reclaimed lands of PEA should be classified as alienable under Sections 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

PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the reclaimed
lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No.
141, admits that reclaimed lands transferred to a branch or subdivision of the government "shall not be
alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by
Congress: x x x."
85
(Emphasis by PEA)
In Laurel vs. Garcia,
86
the Court cited Section 48 of the Revised Administrative Code of 1987, which states that
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to the Government. The
Court declared that -
"It is not for the President to convey real property of the government on his or her own sole will. Any
such conveyance must be authorized and approved by a law enacted by the Congress. It requires
executive and legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell its
reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that
"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract for the
reclamation and construction of the Manila-Cavite Coastal Road Project between the Republic of the
Philippines and the Construction and Development Corporation of the Philippines dated November 20,
1973 and/or any other contract or reclamation covering the same area is hereby transferred, conveyed
and assigned to the ownership and administration of the Public Estates Authority established
pursuant to PD No. 1084; Provided, however, That the rights and interests of the Construction and
Development Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and
respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the
Republic of the Philippines (Department of Public Highways) arising from, or incident to, the aforesaid
contract between the Republic of the Philippines and the Construction and Development Corporation
of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in
favor of the Republic of the Philippines the corresponding shares of stock in said entity with an issued
value of said shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public Estates Authority shall
execute such contracts or agreements, including appropriate agreements with the Construction and
Development Corporation of the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of the
Public Estates Authority without prejudice to the subsequent transfer to the contractor or his
assignees of such portion or portions of the land reclaimed or to be reclaimed as provided for in the
above-mentioned contract. On the basis of such patents, the Land Registration Commission shall
issue the corresponding certificate of title." (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible
for its administration, development, utilization or disposition in accordance with the provisions of
Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use
of reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands. PD No.
1085 merely transferred "ownership and administration" of lands reclaimed from Manila Bay to PEA, while EO
No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states
that PEA should dispose of its reclaimed lands "in accordance with the provisions of Presidential Decree No.
1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by the
government."
87
(Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell its lands,
whether patrimonial or alienable lands of the public domain. PEA may sell to private parties its patrimonial
properties in accordance with the PEA charter free from constitutional limitations. The constitutional ban on
private corporations from acquiring alienable lands of the public domain does not apply to the sale of PEA's
patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private individuals since, with the
legislative authority, there is no longer any statutory prohibition against such sales and the constitutional ban
does not apply to individuals. PEA, however, cannot sell any of its alienable or disposable lands of the public
domain to private corporations since Section 3, Article XII of the 1987 Constitution expressly prohibits such sales.
The legislative authority benefits only individuals. Private corporations remain barred from acquiring any kind of
alienable land of the public domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to the
"contractor or his assignees" (Emphasis supplied) would not apply to private corporations but only to individuals
because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate both the 1973 and
1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition, and
further declared no longer needed for public service, PEA would have to conduct a public bidding in selling or
leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141 requiring public
auction, in the absence of a law exempting PEA from holding a public auction.
88
Special Patent No. 3517
expressly states that the patent is issued by authority of the Constitution and PD No. 1084, "supplemented by
Commonwealth Act No. 141, as amended." This is an acknowledgment that the provisions of CA No. 141 apply to
the disposition of reclaimed alienable lands of the public domain unless otherwise provided by law. Executive
Order No. 654,
89
which authorizes PEA "to determine the kind and manner of payment for the transfer" of its
assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654 merely
authorizes PEA to decide the mode of payment, whether in kind and in installment, but does not authorize PEA
to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the
government is required to sell valuable government property through public bidding. Section 79 of PD No. 1445
mandates that
"Section 79. When government property has become unserviceable for any cause, or is no longer
needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the
agency or his duly authorized representative in the presence of the auditor concerned and, if found to
be valueless or unsaleable, it may be destroyed in their presence. If found to be valuable, it may be
sold at public auction to the highest bidder under the supervision of the proper committee on award
or similar body in the presence of the auditor concerned or other authorized representative of the
Commission, after advertising by printed notice in the Official Gazette, or for not less than three
consecutive days in any newspaper of general circulation, or where the value of the property does not
warrant the expense of publication, by notices posted for a like period in at least three public places in
the locality where the property is to be sold. In the event that the public auction fails, the property
may be sold at a private sale at such price as may be fixed by the same committee or body concerned
and approved by the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case the Commission on Audit
must approve the selling price.
90
The Commission on Audit implements Section 79 of the Government Auditing
Code through Circular No. 89-296
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 PEA's reclaimed foreshore and
submerged alienable lands of the public domain. Private corporations are barred from bidding at the auction sale
of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a
condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize the
shape of the Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in favor of the winning
bidder.
92
No one, however, submitted a bid. On December 23, 1994, the Government Corporate Counsel advised
PEA it could sell the Freedom Islands through negotiation, without need of another public bidding, because of
the failure of the public bidding on December 10, 1991.
93

However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional 250
hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares. The original
JVA, a negotiated contract, enlarged the reclamation area to 750 hectares.
94
The failure of public bidding on
December 10, 1991, involving only 407.84 hectares,
95
is not a valid justification for a negotiated sale of 750
hectares, almost double the area publicly auctioned. Besides, the failure of public bidding happened on
December 10, 1991, more than three years before the signing of the original JVA on April 25, 1995. The
economic situation in the country had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear: "Private
corporations or associations may not hold such alienable lands of the public domain except by lease, x x x." Even
Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed
lands to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any
infrastructure projects undertaken through the build-operate-and-transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary payments, such as, but not
limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a government BOT project, cannot
acquire reclaimed alienable lands of the public domain in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local governments in
land reclamation projects to pay the contractor or developer in kind consisting of a percentage of the reclaimed
land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure
Projects by the Private Sector. x x x
x x x
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
titlesissued to private parties. These four cases uniformly hold that the Director of Lands has no jurisdiction over
private lands or that upon issuance of the certificate of title the land automatically comes under the Torrens
System. The fifth case cited involves the registration under the Torrens System of a 12.8-hectare public land
granted by the National Government to Mindanao Medical Center, a government unit under the Department of
Health. The National Government transferred the 12.8-hectare public land to serve as the site for the hospital
buildings and other facilities of Mindanao Medical Center, which performed a public service. The Court affirmed
the registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section 122 of
Act No. 496. This fifth case is an example of a public land being registered under Act No. 496 without the land
losing its character as a property of public dominion.
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly
government owned corporation performing public as well as proprietary functions. No patent or certificate of
title has been issued to any private party. No one is asking the Director of Lands to cancel PEA's patent or
certificates of title. In fact, the thrust of the instant petition is that PEA's certificates of title should remain with
PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to
a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public ownership
of the land. Registration is not a mode of acquiring ownership but is merely evidence of ownership previously
conferred by any of the recognized modes of acquiring ownership. Registration does not give the registrant a
better right than what the registrant had prior to the registration.
102
The registration of lands of the public
domain under the Torrens system, by itself, cannot convert public lands into private lands.
103

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of
the public domain automatically becomes private land cannot apply to government units and entities like PEA.
The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated
in Special Patent No. 3517 issued by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in
conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act
No. 141, as amended, there are hereby granted and conveyed unto the Public Estates Authority the
aforesaid tracts of land containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters; the technical description of which are hereto attached
and made an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084. Section
60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of alienable lands of the public
domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes, under Section
44 of PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated on the certificate
of title.
104
Alienable lands of the public domain held by government entities under Section 60 of CA No. 141
remain public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing
their disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed alienable
lands of the public domain because of the constitutional ban. Only individuals can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not
automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable lands
of the public domain must be transferred to qualified private parties, or to government entities not tasked to
dispose of public lands, before these lands can become private or patrimonial lands. Otherwise, the
constitutional ban will become illusory if Congress can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow private
corporations to acquire directly from government agencies limitless areas of lands which, prior to such law, are
concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim
foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation
Projects
Whereas, there are several reclamation projects which are ongoing or being proposed to be
undertaken in various parts of the country which need to be evaluated for consistency with national
programs;
Whereas, there is a need to give further institutional support to the Government's declared policy to
provide for a coordinated, economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the
National Government or any person authorized by it under proper contract;
Whereas, a central authority is needed to act on behalf of the National Government which shall
ensure a coordinated and integrated approach in the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government
corporation to undertake reclamation of lands and ensure their maximum utilization in promoting
public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing authority to reorganize
the national government including the transfer, abolition, or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers
vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby order and
direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing,
and coordinating all reclamation projects for and on behalf of the National Government. All
reclamation projects shall be approved by the President upon recommendation of the PEA, and shall
be undertaken by the PEA or through a proper contract executed by it with any person or entity;
Provided, that, reclamation projects of any national government agency or entity authorized under its
charter shall be undertaken in consultation with the PEA upon approval of the President.
x x x ."
As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed
lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same
manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable
lands of the public domain. Only when qualified private parties acquire these lands will the lands become private
lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable
lands of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and
all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that
alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or
certificates of title in PEA's name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction
a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of
the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer
several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in
only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987
Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain
among Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can
"acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even individuals
acquiring hundreds of hectares of alienable lands of the public domain under the guise that in the hands of PEA
these lands are private lands. This will result in corporations amassing huge landholdings never before seen in
this country - creating the very evil that the constitutional ban was designed to prevent. This will completely
reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private
corporations to acquire not more than 1,024 hectares of public lands.
105
The 1973 Constitution prohibited
private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally
reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529,
automatically become private lands is contrary to existing laws. Several laws authorize lands of the public
domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their
character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as
follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the
Philippine Islands are alienated, granted, or conveyed to persons or the public or private corporations,
the same shall be brought forthwith under the operation of this Act and shall become registered
lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated, granted
or conveyed to any person, the same shall be brought forthwith under the operation of this Decree."
(Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529 includes
conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or branch or
subdivision of the Government," as provided in Section 60 of CA No. 141, may be registered under the Torrens
System pursuant to Section 103 of PD No. 1529. Such registration, however, is expressly subject to the condition
in Section 60 of CA No. 141 that the land "shall not be alienated, encumbered or otherwise disposed of in a
manner affecting its title, except when authorized by Congress." This provision refers to government reclaimed,
foreshore and marshy lands of the public domain that have been titled but still cannot be alienated or
encumbered unless expressly authorized by Congress. The need for legislative authority prevents the registered
land of the public domain from becoming private land that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be registered
under the Torrens System. Section 48, Chapter 12, Book I of the Code states
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public wharf may be titled in
the name of a government corporation regulating port operations in the country. Private property purchased by
the National Government for expansion of an airport may also be titled in the name of the government agency
tasked to administer the airport. Private property donated to a municipality for use as a town plaza or public
school site may likewise be titled in the name of the municipality.
106
All these properties become properties of
the public domain, and if already registered under Act No. 496 or PD No. 1529, remain registered land. There is
no requirement or provision in any existing law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the Register of
Deeds to issue in the name of the National Government new certificates of title covering such expropriated
lands. Section 85 of PD No. 1529 states
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is
expropriated or taken by eminent domain, the National Government, province, city or municipality, or
any other agency or instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an adequate description, the
particular property or interest expropriated, the number of the certificate of title, and the nature of
the public use. A memorandum of the right or interest taken shall be made on each certificate of title
by the Register of Deeds, and where the fee simple is taken, a new certificate shall be issued in favor
of the National Government, province, city, municipality, or any other agency or instrumentality
exercising such right for the land so taken. The legal expenses incident to the memorandum of
registration or issuance of a new certificate of title shall be for the account of the authority taking the
land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or patrimonial
lands. Lands of the public domain may also be registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of the lands
to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA "is not a sale but
a joint venture with a stipulation for reimbursement of the original cost incurred by PEA for the earlier
reclamation and construction works performed by the CDCP under its 1973 contract with the Republic." Whether
the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA requires PEA to "cause the
issuance and delivery of the certificates of title conveying AMARI's Land Share in the name of AMARI."
107

This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private
corporations "shall not hold such alienable lands of the public domain except by lease." The transfer of title and
ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands other than by lease. The transfer
of title and ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or alienation
under CA No. 141,
108
the Government Auditing Code,
109
and Section 3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of the
public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part of the
public domain and are also inalienable, unless converted pursuant to law into alienable or disposable lands of
the public domain. Historically, lands reclaimed by the government are sui generis, not available for sale to
private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential as areas for
public use or public service. Alienable lands of the public domain, increasingly becoming scarce natural
resources, are to be distributed equitably among our ever-growing population. To insure such equitable
distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any kind of
alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of the State,
or seek to circumvent the constitutional ban on alienation of lands of the public domain to private corporations,
do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates
of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to
private corporations but may not sell or transfer ownership of these lands to private corporations. PEA
may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987
Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the
public domain until classified as alienable or disposable lands open to disposition and declared no
longer needed for public service. The government can make such classification and declaration only
after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands
of the public domain, which are the only natural resources the government can alienate. In their
present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of
man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34
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.
FRANCISCO I. CHAVEZ,
Petitioner, v. NHA G.R. No. 164527

NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY VALIDLY RECLAIM
FORESHORE AND SUBMERGED LAND BECAUSE:

1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED ANY POWER AND
AUTHORITY TO RECLAIM LANDS OF THE PUBLIC DOMAIN AS THIS POWER IS VESTED
EXCLUSIVELY WITH THE PEA.

2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS WERE GIVEN THE
POWER AND AUTHORITY TO RECLAIM FORESHORE AND SUBMERGED LAND, THEY
WERE NEVER GIVEN THE AUTHORITY BY THE DENR TO DO SO.

II

RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED FORESHORE AND
SUBMERGED LAND AREAS BECAUSE:

1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND ARE
INALIENABLE PUBLIC LANDS WHICH ARE BEYOND THE COMMERCE OF MAN.

2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE AND
SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED ALIENABLE LANDS OF
THE PUBLIC DOMAIN, RESPONDENT R-II BUILDERS STILL COULD NOT ACQUIRE THE
SAME BECAUSE THERE WAS NEVER ANY DECLARATION THAT THE SAID LANDS
WERE NO LONGER NEEDED FOR PUBLIC USE.

3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE ALIENABLE AND NO
LONGER NEEDED FOR PUBLIC USE, RESPONDENT R-II BUILDERS STILL CANNOT
ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY LAW AUTHORIZING THE SALE
THEREOF.

4. THERE WAS NEVER ANY PUBLIC BIDDING AWARDING OWNERSHIP OF
THE SUBJECT LAND TO RESPONDENT R-II BUILDERS.

5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER OF ALIENABLE
PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II BUILDERS, BEING PRIVATE
CORPORATION IS NONETHELESS EXPRESSLYPROHIBITED BY THE PHILIPPINE
CONSTITUTION TO ACQUIRE LANDS OF THE PUBLIC DOMAIN.

III

RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE MAJORITY STOCKS ARE
OWNED AND CONTROLLED BY RESPONDENT ROMEROS CORPORATIONS R-II BUILDERS
AND R-II HOLDINGS IS DISQUALIFIED FROM BEING A TRANSFEREE OF PUBLIC LAND.

IV

RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION RELATED TO THE
SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION PROJECT.

The Courts Ruling

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

Whether petitioner has the requisite locus standi to file this case

Respondents argue that petitioner Chavez has no legal standing to file the petition.

Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the
avails of the suit can file a complaint or petition.
[47]
Respondents claim that petitioner is not a proper party-in-
interest as he was unable to show that he has sustained or is in immediate or imminent danger of sustaining
some direct and personal injury as a result of the execution and enforcement of the assailed contracts or
agreements.
[48]
Moreover, they assert that not all government contracts can justify a taxpayers suit especially
when no public funds were utilized in contravention of the Constitution or a law.
We explicated in Chavez v. PCGG
[49]
that in cases where issues of transcendental public importance are
presented, there is no necessity to show that petitioner has experienced or is in actual danger of suffering direct
and personal injury as the requisite injury is assumed. We find our ruling in Chavez v. PEA
[50]
as conclusive
authority on locus standi in the case at bar since the issues raised in this petition are averred to be in breach of
the fair diffusion of the countrys natural resources and the constitutional right of a citizen to information which
have been declared to be matters of transcendental public importance. Moreover, the pleadings especially
those of respondents readily reveal that public funds have been indirectly utilized in the Project by means of
Smokey Mountain Project Participation Certificates (SMPPCs) bought by some government agencies.

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

Whether petitioners direct recourse to this Court was proper

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

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

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

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

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


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

Core factual matters undisputed

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


We find the position of respondents bereft of merit.

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

Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the
facts needed to decide the instant petition are well established from the admissions of the parties in their
pleadings
[55]
and those derived from the documents appended to said submissions. Indeed, the core facts which
are the subject matter of the numerous issues raised in this petition are undisputed.

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

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

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

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

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

(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim submerged areas
without public bidding on April 25, 1995. In the instant NHA case, the NHA and RBI executed a JVA after RBI was
declared the winning bidder on August 31, 1992 as the JVA partner of the NHA in the SMDRP after compliance
with the requisite public bidding.

(3) In PEA, there was no law or presidential proclamation classifying the lands to be reclaimed as
alienable and disposal lands of public domain. In this RBI case, MO 415 of former President Aquino and
Proclamation No. 39 of then President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598, classified
the reclaimed lands as alienable and disposable;

(4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA and AMARI. In
this NHA case, the JVA and subsequent amendments were already substantially implemented. Subsequently,
the Project was terminated through a MOA signed on August 27, 2003. Almost one year later on August 5, 2004,
the Chavez petition was filed;

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

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

(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a government entity
tasked to dispose of public lands under Executive Order No. (EO) 525.
[56]
In the NHA case, the reclaimed lands
were transferred to NHA, a government entity NOT tasked to dispose of public land and therefore said alienable
lands were converted to patrimonial lands upon their transfer to NHA.
[57]


Thus the PEA Decision
[58]
cannot be considered an authority or precedent to the instant case. The
principle of stare decisis
[59]
has no application to the different factual setting of the instant case.

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


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


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

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


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



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

Petitioners contention has no merit.

EO 525 reads:


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


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

(1) approval by the President;
(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:

a. by PEA
b. by any person or entity pursuant to a contract it executed with PEA
c. by the National Government agency or entity authorized under its charter to
reclaim lands subject to consultation with PEA

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


Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily responsible for
integrating, directing and coordinating reclamation projects, such authority is NOT exclusive and such power to
reclaim may be granted or delegated to another government agency or entity or may even be undertaken by the
National Government itself, PEA being only an agency and a part of the National Government.

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

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

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

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

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

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

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

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


The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated as part
of the recommendations of the EXECOM created under MO 415. While there was no specific recommendation
on the SMDRP emanating solely from PEA, we find that the approbation of the Project and the land reclamation
as an essential component by the EXECOM of which PEA is a member, and its submission of the SMDRP and the
agreements on the Project to the President for approval amply met the second requirement of EO 525.

3. The third element was also presentthe reclamation was undertaken either by PEA or any person or
entity under contract with PEA or by the National Government agency or entity authorized under its charter to
reclaim lands subject to consultation with PEA. It cannot be disputed that the reclamation phase was not done
by PEA or any person or entity under contract with PEA. However, the reclamation was implemented by the
NHA, a national government agency whose authority to reclaim lands under consultation with PEA is derived
from its charterPD 727 and other pertinent lawsRA 7279
[62]
and RA 6957 as amended by RA 7718.

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

Basic in administrative law is the doctrine that a government agency or office has express and implied
powers based on its charter and other pertinent statutes. Express powers are those powers granted, allocated,
and delegated to a government agency or office by express provisions of law. On the other hand, implied
powers are those that can be inferred or are implicit in the wordings of the law
[63]
or conferred by necessary or
fair implication in the enabling act.
[64]
In Angara v. Electoral Commission, the Court clarified and stressed that
when a general grant of power is conferred or duty enjoined, every particular power necessary for the exercise
of the one or the performance of the other is also conferred by necessary implication.
[65]
It was also explicated
that when the statute does not specify the particular method to be followed or used by a government agency in
the exercise of the power vested in it by law, said agency has the authority to adopt any reasonable method to
carry out its functions.
[66]


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

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

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

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

x x x x

b) To undertake housing, development, resettlement or other activities as would
enhance the provision of housing to every Filipino;

c) To harness and promote private participation in housing ventures in terms of
capital expenditures, land, expertise, financing and other facilities for the sustained
growth of the housing industry. (Emphasis supplied.)



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

b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore Development
Authority (TFDA), has the power to reclaim, thus:

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

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


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

a) To undertake all manner of activity, business or development projects for the
establishment of harmonious, comprehensive, integrated and healthy living community in
the Tondo Foreshoreland and its resettlement site;

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


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

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

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

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

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

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

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


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

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

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

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

x x x x

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

x x x x

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

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

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

x x x x

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


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

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

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

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


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

x x x x

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



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

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


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

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

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

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



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

4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and EO 525.

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

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

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

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

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

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

The power of the National Government through the President over reclamation of areas, that is,
underwater whether foreshore or inland, was made clear in EO 543
[69]
which took effect on June 24,
2006. Under EO 543, PEA was renamed the Philippine Reclamation Authority (PRA) and was granted the
authority to approve reclamation projects, a power previously reposed in the President under EO 525. EO 543
reads:

Section 1. The power of the President to approve reclamation projects is hereby
delegated to the Philippine Reclamation Authority [formerly PEA], through its governing
board, subject to compliance with existing laws and rules and subject to the condition that
reclamation contracts to be executed with any person or entity go through public bidding.

Section 2. Nothing in the Order shall be construed as diminishing the Presidents
authority to modify, amend or nullify PRAs action.

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


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

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


Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands


Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim,
they were not authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the DENRs authority is necessary in
order for the government to validly reclaim foreshore and submerged lands. In PEA, we expounded in this
manner:


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

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

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



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

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

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

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


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

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

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




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


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


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

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

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

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

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


Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
outside the commerce of man


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

Article 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;

x x x x

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

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


Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and they
cannot be alienated except for alienable agricultural lands of the public domain. One of the States natural
resources are lands of public domain which include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable and disposable and open to disposition or
concession. Absent such law or proclamation, the reclaimed lands cannot be the enabling component or
consideration to be paid to RBI as these are beyond the commerce of man.

We are not convinced of petitioners postulation.

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

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

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


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

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

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

Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on Proclamations Nos.
39 and 465 issued by President Ramos, without doubt, classified the reclaimed areas as alienable and disposable.

Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the
lands to be reclaimed are classified as alienable and disposable. We find however that such conclusion is derived
and implicit from the authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries.

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

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


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


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

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


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

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

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

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

Petitioners contention is not well-taken.

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

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

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


Subsequently, the special patents in the name of the NHA were submitted to the Register of Deeds of the
City of Manila for registration, and corresponding certificates of titles over the reclaimed lots were issued based
on said special patents. The issuance of certificates of titles in NHAs name automatically converts the reclaimed
lands to patrimonial properties of the NHA. Otherwise, the lots would not be of use to the NHAs housing
projects or as payment to the BOT contractor as the enabling component of the BOT contract. The laws of the
land have to be applied and interpreted depending on the changing conditions and times. Tempora mutantur et
legis mutantur in illis (time changes and laws change with it). One such law that should be treated differently is
the BOT Law (RA 6957) which brought about a novel way of implementing government contracts by allowing
reclaimed land as part or full payment to the contractor of a government project to satisfy the huge financial
requirements of the undertaking. The NHA holds the lands covered by Special Patents Nos. 3592 and 3598 solely
for the purpose of the SMDRP undertaken by authority of the BOT Law and for disposition in accordance with
said special law. The lands become alienable and disposable lands of public domain upon issuance of the special
patents and become patrimonial properties of the Government from the time the titles are issued to the NHA.
As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:

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



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

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

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

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



Fourth Issue: Whether respondent RBI can acquire reclaimed
lands when there was no declaration that said lands are no
longer needed for public use

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

We are not moved by petitioners submission.

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

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

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


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

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


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

More decisive and not in so many words is the ruling in PEA which we earlier cited, that PD No. 1085 and
President Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands are no longer
needed for public service. Consequently, we ruled in that case that the reclaimed lands are open to disposition
or concession to qualified parties.
[83]


In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have classified
the reclaimed lands as alienable and disposable and open to disposition or concession as they would be devoted
to units for Smokey Mountain beneficiaries. Hence, said lands are no longer intended for public use or service
and shall form part of the patrimonial properties of the State under Art. 422 of the Civil Code.
[84]
As
discussed a priori, the lands were classified as patrimonial properties of the NHA ready for disposition when the
titles were registered in its name by the Register of Deeds.

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

Fifth Issue: Whether there is a law authorizing sale of
reclaimed lands


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

This position is misplaced.

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


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


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

In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under
the law to other parties, thus:

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

x x x x

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

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



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




Sixth Issue: Whether the transfer of reclaimed lands to RBI
was done by public bidding


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

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

x x x x

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


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

This stand is devoid of merit.

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

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

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

Petitioners theory is incorrect.

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

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

Determining Factors in the Disposal of Unserviceable Property

Property, which can no longer be repaired or reconditioned;

Property whose maintenance costs of repair more than outweigh the benefits and
services that will be derived from its continued use;

Property that has become obsolete or outmoded because of changes in technology;

Serviceable property that has been rendered unnecessary due to change in the agencys
function or mandate;

Unused supplies, materials and spare parts that were procured in excess of
requirements; and

Unused supplies and materials that [have] become dangerous to use because of long
storage or use of which is determined to be hazardous.
[85]



Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in question are
very much needed by the NHA for the Smokey Mountain Project because without it, then the projects will not be
successfully implemented. Since the reclaimed lands are not unserviceable properties and are very much
needed by NHA, then Sec. 79 of PD 1445 does not apply.

More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed lands
transferred to a government agency like the NHA which has entered into a BOT contract with a private firm. The
reason is obvious. If the patrimonial property will be subject to public bidding as the only way of disposing of
said property, then Sec. 6 of RA 6957 on the repayment scheme is almost impossible or extremely difficult to
implement considering the uncertainty of a winning bid during public auction. Moreover, the repayment
scheme of a BOT contract may be in the form of non-monetary payment like the grant of a portion or percentage
of reclaimed land. Even if the BOT partner participates in the public bidding, there is no assurance that he will
win the bid and therefore the payment in kind as agreed to by the parties cannot be performed or the winning
bid prize might be below the estimated valuation of the land. The only way to harmonize Sec. 79 of PD 1445
with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT contracts involving patrimonial
lands. The law does not intend anything impossible (lex non intendit aliquid impossibile).


Seventh Issue: Whether RBI, being a private corporation,
is barred by the Constitution to acquire lands of public domain


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

Petitioners proposition has no legal mooring for the following reasons:

1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a portion as
percentage of the reclaimed land subject to the constitutional requirement that only Filipino citizens or
corporations with at least 60% Filipino equity can acquire the same. It cannot be denied that RBI is a private
corporation, where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is valid and
constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said
proclamations were converted to alienable and disposable lands of public domain. When the titles to the
reclaimed lands were transferred to the NHA, said alienable and disposable lands of public domain were
automatically classified as lands of the private domain or patrimonial properties of the State because the NHA is
an agency NOT tasked to dispose of alienable or disposable lands of public domain. The only way it can transfer
the reclaimed land in conjunction with its projects and to attain its goals is when it is automatically converted to
patrimonial properties of the State. Being patrimonial or private properties of the State, then it has the power to
sell the same to any qualified personunder the Constitution, Filipino citizens as private corporations, 60% of
which is owned by Filipino citizens like RBI.

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


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

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

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


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

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

Eighth Issue: Whether respondents can be compelled to disclose
all information related to the SMDRP



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

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

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

This relief must be granted.

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


ARTICLE II

x x x x

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

ARTICLE III

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




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

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



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

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



Sec. 28, Art. II compels the State and its agencies to fully disclose all of its transactions involving public
interest. Thus, the government agencies, without need of demand from anyone, must bring into public view all
the steps and negotiations leading to the consummation of the transaction and the contents of the perfected
contract.
[89]
Such information must pertain to definite propositions of the government, meaning official
recommendations or final positions reached on the different matters subject of negotiation. The government
agency, however, need not disclose intra-agency or inter-agency recommendations or communications during
the stage when common assertions are still in the process of being formulated or are in the exploratory
stage. The limitation also covers privileged communication like information on military and diplomatic secrets;
information affecting national security; information on investigations of crimes by law enforcement agencies
before the prosecution of the accused; information on foreign relations, intelligence, and other classified
information.

It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution,
there is still no enabling law that provides the mechanics for the compulsory duty of government agencies to
disclose information on government transactions. Hopefully, the desired enabling law will finally see the light of
day if and when Congress decides to approve the proposed Freedom of Access to Information Act. In the
meantime, it would suffice that government agencies post on their bulletin boards the documents incorporating
the information on the steps and negotiations that produced the agreements and the agreements themselves,
and if finances permit, to upload said information on their respective websites for easy access by interested
parties. Without any law or regulation governing the right to disclose information, the NHA or any of the
respondents cannot be faulted if they were not able to disclose information relative to the SMDRP to the public
in general.

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

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

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

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


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

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


The argument of the Solicitor General is meritorious.

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

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

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

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

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

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


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


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

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



In the May 6, 2003 Resolution in Chavez v. PEA,
[93]
we ruled that De Agbayani
[94]
is not applicable to the
case considering that the prevailing law did not authorize private corporations from owning land. The prevailing
law at the time was the 1935 Constitution as no statute dealt with the same issue.

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

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

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



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

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

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

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

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


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

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


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

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

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

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

WHEREFORE, the petition is PARTIALLY GRANTED.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner
to all public documents and official records relative to the SMDRPincluding, but not limited to, the March 19,
1993 JVA between the NHA and RBI and subsequent agreements related to the JVA, the revisions over the
original plan, and the additional works incurred on and the transactions made with respect to the Project.
No costs.
SO ORDERED.

Estate of Yujuico vs. Republic of
The Philippines G.R. No. 168661 October 26, 2007

In 1973, Fermina Castro filed an application for the registration and confirmation of her title over a parcel of
land with an area of 17,343 square meters covered by plan (LRC) Psu-964 located in the Municipality of
Paraaque, Province of Rizal (now Paraaque City), in the Pasig-Rizal Court of First Instance (CFI), Branch 22. The
application was docketed LRC Case No. N-8239. The application was opposed by the Office of the Solicitor
General (OSG) on behalf of the Director of Lands, and by Mercedes Dizon, a private party. Both oppositions were
stricken from the records since the opposition of Dizon was filed after the expiration of the period given by the
court, and the opposition of the Director of Lands was filed after the entry of the order of general default. After
considering the evidence, the trial court rendered its April 26, 1974 Decision. The dispositive portion reads:

____________________________
* As per September 3, 2007 raffle.
WHEREFORE, the Court hereby declares the applicant, Fermina Castro, of legal age,
single, Filipino and a resident of 1515 F. Agoncillo St., Corner J. Escoda St., Ermita, Manila, the
true and absolute owner of the land applied for situated in the Municipality of Paraaque,
Province of Rizal, with an area of 17,343 square meters and covered by plan (LRC) Psu-964
and orders the registration of said parcel of land in her name with her aforementioned
personal circumstances.

Once this decision becomes final and executory, let the corresponding order for the
issuance of the decree be issued.

SO ORDERED.
[1]


The Director of Lands and Mercedes Dizon did not appeal from the adverse decision of the Pasig-Rizal
CFI. Thus, the order for the issuance of a decree of registration became final, and Decree No. N-150912 was
issued by the Land Registration Commission (LRC).
[2]
Original Certificate of Title (OCT) No. 10215 was issued in
the name of Fermina Castro by the Register of Deeds for the Province of Rizal on May 29, 1974.
[3]


The land was then sold to Jesus S. Yujuico, and OCT No. 10215 was cancelled. On May 31,
1974,
[4]
Transfer Certificate of Title (TCT) No. 445863 was issued in Yujuicos name, who subdivided the land
into two lots. TCT No. 446386
[5]
over Lot 1 was issued in his name, while TCT No. S-29361
[6]
over Lot 2 was issued
in the name of petitioner Augusto Y. Carpio.

Annotations at the back of TCT No. 446386 show that Yujuico had, at one time or another, mortgaged the
lot to the Philippine Investments System Organization (PISO) and Citibank, N.A. Annotations in the title of
petitioner Carpio reveal the lot was mortgaged in favor of Private Development Corporation (PDC), Rizal
Commercial Banking Corporation (RCBC) and then Philippine Commercial and Industrial Bank (PCIB) and the
Development Bank of the Philippines (DBP) to secure various loans.
Sometime in 1977, Presidential Decree No. (PD) 1085 entitled Conveying the Land Reclaimed in the
Foreshore and Offshore of the Manila Bay (The Manila-Cavite Coastal Road Project) as Property of the Public
Estates Authority as well as Rights and Interests with Assumptions of Obligations in the Reclamation Contract
Covering Areas of the Manila Bay between the Republic of the Philippines and the Construction and Development
Corporation of the Philippines (1977) was issued. Land reclaimed in the foreshore and offshore areas
ofManila Bay became the properties of the Public Estates Authority (PEA), a government corporation that
undertook the reclamation of lands or the acquisition of reclaimed lands. On January 13, 1989, OCT No. SP 02
was issued in favor of PEA. The PEA also acquired ownership of other parcels of land along the Manila Bay coast,
some of which were subsequently sold to the Manila Bay Development Corporation (MBDC), which in turn
leased portions to Uniwide Holdings, Inc.
[7]


The PEA undertook the construction of the Manila Coastal Road. As this was being planned, Yujuico and
Carpio discovered that a verification survey they commissioned showed that the road directly overlapped their
property, and that they owned a portion of the land sold by the PEA to the MBDC.

On July 24, 1996, Yujuico and Carpio filed before the Paraaque City Regional Trial Court (RTC), a
complaint for the Removal of Cloud and Annulment of Title with Damages docketed as Civil Case No. 96-0317
against the PEA. On May 15, 1998 the parties entered into a compromise agreement approved by the trial court
in a Resolution dated May 18, 1998. OnJune 17, 1998, the parties executed a Deed of Exchange of Real Property,
pursuant to the compromise agreement, where the PEA property with an area of 1.4007 hectares would be
conveyed to Jesus Yujuico and petitioner Carpio in exchange for their property with a combined area of 1.7343
hectares.

On July 31, 1998, the incumbent PEA General Manager, Carlos P. Doble, informed the OSG that the new
PEA board and management had reviewed the compromise agreement and had decided to defer its
implementation and hold it in abeyance following the view of the former PEA General Manager, Atty. Arsenio
Yulo, Jr., that the compromise agreement did not reflect a condition of the previous PEA Board, requiring the
approval of the Office of the President. The new PEA management then filed a petition for relief from the
resolution approving the compromise agreement on the ground of mistake and excusable negligence.

The petition was dismissed by the trial court on the ground that it was filed out of time and that the
allegation of mistake and excusable negligence lacked basis.

The PEA fared no better in the Court of Appeals (CA), as the petition was dismissed for failure to pay
the required docket fees and for lack of merit.

The matter was raised to the Supreme Court in Public Estates Authority v. Yujuico
[8]
but PEAs petition
was denied, upholding the trial courts dismissal of the petition for relief for having been filed out of time. The
allegation of fraud in the titling of the subject property in the name of Fermina Castro was not taken up by the
Court.

On June 8, 2001, in a Complaint for Annulment and Cancellation of Decree No. N-150912 and its Derivative
Titles, entitled Republic of the Philippines v. Fermina Castro, Jesus S. Yujuico, August Y. Carpio and the Registry of
Deeds of Paraaque City docketed as Civil Case No. 01-0222, filed with the Paraaque City RTC, respondent
Republic of the Philippines, through the OSG, alleged that when the land registered to Castro was surveyed by
Engr. H. Obreto on August 3, 1972 and subsequently approved by the LRC on April 23, 1973, the land was still a
portion of Manila Bay as evidenced by Namria Hydrographic Map No. 4243, Surveys to 1980; 1
st
Ed/. January
9/61: Revised 80-11-2; that Roman Mataverde, the then OIC of the Surveys Division, Bureau of Lands, informed
the OIC of the Legal Division that *w+hen projected on Cadastral Maps CM 14 deg. 13 N-120 deg, 59E, Sec.2-A
of Paraaque Cadastre (Cad. 299), (LRC) Psu-964 falls inside Manila Bay, outside Cad. 299; that then Acting
Regional Lands Director Narciso V. Villapando issued a Report dated November 15, 1973 stating that plan (LRC)
Psu-964 is a portion of Manila Bay; that then Officer-in-Charge, Assistant Director of Lands, Ernesto C. Mendiola,
submitted his Comment and Recommendation re: Application for Registration of Title of FERMINA CASTRO, LRC
Case No. N-8239, dated Dec. 1, 1977, praying that the instant registration case be dismissed; and that Fermina
Castro had no registrable rights over the property.

More significantly, respondent Republic argued that, first, since the subject land was still underwater, it
could not be registered in the name of Fermina Castro. Second, the land registration court did not have
jurisdiction to adjudicate inalienable lands, thus the decision adjudicating the subject parcel of land to Fermina
Castro was void. And third, the titles of Yujuico and Carpio, being derived from a void title, were likewise void.
[9]


On September 13, 2001, Yujuico and Carpio filed a Motion to Dismiss (With Cancellation of Notice
of Lis Pendens),
[10]
on the grounds that: (1) the cause of action was barred by prior judgment; (2) the claim had
been waived, abandoned, or otherwise extinguished; (3) a condition precedent for the filing of the complaint
was not complied with; and (4) the complaint was not verified and the certification against forum shopping was
not duly executed by the plaintiff or principal party.

On November 27, 2001, respondent Republic filed an Opposition
[11]
to the motion to dismiss to which
defendants filed a Reply
[12]
on January 14, 2002, reiterating the grounds for the motion to dismiss.

In the August 7, 2002 Order of the RTC,
[13]
Civil Case No. 01-0222 was dismissed. The trial court stated
that the matter had already been decided in LRC Case No. N-8239, and that after 28 years without being
contested, the case had already become final and executory. The trial court also found that the OSG had
participated in the LRC case, and could have questioned the validity of the decision but did not. Civil Case No. 01-
0222 was thus found barred by prior judgment.

On appeal to the CA, in CA-G.R. CV No. 76212, respondent Republic alleged that the trial court erred in
disregarding that appellant had evidence to prove that the subject parcel of land used to be foreshore land of the
Manila Bay and that the trial court erred in dismissing Civil Case No. 01-0222 on the ground of res judicata.
[14]



The CA observed that shores are properties of the public domain intended for public use and, therefore,
not registrable and their inclusion in a certificate of title does not convert the same into properties of private
ownership or confer title upon the registrant.

Further, according to the appellate court res judicata does not apply to lands of public domain, nor
does possession of the land automatically divest the land of its public character.
The appellate court explained that rulings of the Supreme Court have made exceptions in cases where
the findings of the Director of Lands and the Department of Environment and Natural Resources (DENR) were
conflicting as to the true nature of the land in as much as reversion efforts pertaining foreshore lands are
embued with public interest.

The dispositive portion of the CA decision reads,


WHEREFORE, premises considered, the present appeal is hereby GRANTED. The
appealed Order dated August 7, 2002 of the trial court in Civil Case No. 01-0222 is hereby
REVERSED and SET ASIDE. The case is hereby REMANDED to said court for further
proceedings and a full-blown trial on the merits with utmost dispatch.
[15]



Hence, this petition.


The Issues

Petitioners now raise the following issues before this Court:


THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION OF
SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF
THE HONORABLE COURT AND HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS NECESSITATING THE HONORABLE COURTS EXERCISE OF ITS POWER
OF SUPERVISION CONSIDERING THAT:

I. THE REVERSAL BY THE COURT OF APPEALS OF THE TRIAL COURTS
APPLICATION OF THE PRINCIPLE OF RES JUDICATA IN THE INSTANT CASE IS BASED ON
ITS ERRONEOUS ASSUMPTION THAT THE SUBJECT LAND IS OF PUBLIC DOMAIN,
ALLEGEDLY PART OF MANILA BAY.

A. IN THE FIRESTONE CASE, THE HONORABLE COURT APPLIED THE PRINCIPLE
OF RES JUDICATA NOTWITHSTANDING ALLEGATIONS OF LACK OF
JURISDICTION OF A LAND REGISTRATION COURT, FORECLOSING ANY FURTHER
ATTEMPT BY RESPONDENT THEREIN, AS IN THE INSTANT CASE, TO RESURRECT
A LONG-SETTLED JUDICIAL DETERMINATION OF REGISTRABILITY OF A PARCEL
OF LAND BASED ON THE SHEER ALLEGATION THAT THE SAME IS PART OF THE
PUBLIC DOMAIN.

B. THE LAND REGISTRATION COURT HAD JURISDICTION TO DETERMINE
WHETHER THE SUBJECT LAND WAS PART OF THE PUBLIC DOMAIN.

C. RESPONDENTS REVERSION CASE SEEKS TO RETRY THE VERY SAME FACTUAL
ISSUES THAT HAVE ALREADY BEEN JUDICIALLY DETERMINED OVER THIRTY (30)
YEARS AGO.

D. THE JURISPRUDENTIAL BASES APPLIED BY THE COURT OF APPEALS IN ITS
QUESTIONED DECISION ARE MISPLACED, CONSIDERING THAT THEY ARE ALL
PREDICATED ON THE ERRONEOUS PREMISE THAT IT IS UNDISPUTED THAT
THE SUBJECT LAND IS PART OF THE PUBLIC DOMAIN.

II. RESPONDENT IS BARRED BY JURISDICTIONAL ESTOPPEL AND LACHES FROM
QUESTIONING THE JURISDICTION OF THE LAND REGISTRATION COURT.

III. RELIANCE BY THE COURT OF APPEALS ON THE ISOLATED PRONOUNCEMENT OF
THE HONORABLE COURT IN THE PEA CASE IS UNWARRANTED AND MISLEADING
CONSIDERING THAT THE MATTER OF WHETHER RES JUDICATA APPLIES WITH RESPECT
TO THE LAND REGISTRATION COURTS DECISION IN 1974 WAS NOT IN ISSUE IN SAID
CASE.

A. THE INSTANT REVERSION CASE IS NOT THE PROPER RECOURSE.

B. THE VALIDITY OF THE COURT-APPROVED COMPROMISE AGREEMENT 15 MAY
1998 HAS ALREADY BEEN AFFIRMED BY THE HONORABLE COURT IN
THE PEA CASE.

IV. EQUITABLE CONSIDERATIONS MANDATE THE APPLICATION OF THE RULE ON
ORDINARY ESTOPPEL AND LACHES IN THE INSTANT CASE AGAINST RESPONDENT.
V. RESPONDENT CANNOT BE GIVEN SPECIAL CONSIDERATION AND EXCUSED FOR
TRANSGRESSING RULES OF PROCEDURE.
[16]




Essentially, the issues boil down to three: (1) Is a reversion suit proper in this case? (2) Is the present
petition estopped by laches? (3) Did the CA erroneously apply the principle ofres judicata?

An action for reversion seeks to restore public land fraudulently awarded and disposed of to private
individuals or corporations to the mass of public domain.
[17]
This remedy is provided under Commonwealth Act
(CA) No. 141 (Public Land Act) which became effective on December 1, 1936. Said law recognized the power of
the state to recover lands of public domain. Section 124 of CA No. 141 reads:

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 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. (Emphasis supplied.)


Pursuant to Section 124 of the Public Land Act, reversion suits are proper in the following instances, to
wit:

1. Alienations of land acquired under free patent or homestead provisions in violation of Section
118, CA No. 141;

2. Conveyances made by non-Christians in violation of Section 120, CA No. 141; and

3. Alienations of lands acquired under CA No. 141 in favor of persons not qualified under Sections
121, 122, and 123 of CA No. 141.


From the foregoing, an action for reversion to cancel titles derived from homestead patents or free
patents based on transfers and conveyances in violation of CA No. 141 is filed by the OSG pursuant to its
authority under the Administrative Code with the RTC. It is clear therefore that reversion suits were originally
utilized to annul titles or patents administratively issued by the Director of the Land Management Bureau or the
Secretary of the DENR.

While CA No. 141 did not specify whether judicial confirmation of titles by a land registration court can
be subject of a reversion suit, the government availed of such remedy by filing actions with the RTC to cancel
titles and decrees granted in land registration applications.

The situation changed on August 14, 1981 upon effectivity of Batas Pambansa (BP) Blg. 129 which gave
the Intermediate Appellate Court the exclusive original jurisdiction over actions for annulment of judgments of
RTCs.

When the 1997 Rules of Civil Procedure became effective on July 1, 1997, it incorporated Rule 47 on
annulment of judgments or final orders and resolutions of the RTCs. The two grounds for annulment under Sec.
2, Rule 47 are extrinsic fraud and lack of jurisdiction. If based on extrinsic fraud, the action must be filed within
four (4) years from its discovery, and if based on lack of jurisdiction, before it is barred by laches or estoppel as
provided by Section 3, Rule 47. Thus, effective July 1, 1997, any action for reversion of public land instituted by
the Government was already covered by Rule 47.

The instant Civil Case No. 01-0222 for annulment and cancellation of Decree No. N-150912 and its
derivative titles was filed on June 8, 2001 with the Paraaque City RTC. It is clear therefore that the reversion
suit was erroneously instituted in the Paraaque RTC and should have been dismissed for lack of
jurisdiction. The proper court is the CA which is the body mandated by BP Blg. 129 and prescribed by Rule 47 to
handle annulment of judgments of RTCs.
In Collado v. Court of Appeals,
[18]
the government, represented by the Solicitor General pursuant to
Section 9(2) of BP Blg. 129, filed a petition for annulment of judgment with the CA. Similarly in the case
of Republic v. Court of Appeals,
[19]
the Solicitor General correctly filed the annulment of judgment with the said
appellate court.

This was not done in this case. The Republic misfiled the reversion suit with the Paraaque RTC. It
should have been filed with the CA as required by Rule 47. Evidently, the Paraaque RTC had no jurisdiction over
the instant reversion case.

Assuming that the Paraaque RTC has jurisdiction over the reversion case, still the lapse of almost
three decades in filing the instant case, the inexplicable lack of action of the Republic and the injury this would
cause constrain us to rule for petitioners. While it may be true that estoppel does not operate against the state
or its agents,
[20]
deviations have been allowed. In Manila Lodge No. 761 v. Court of Appeals, we said:

Estoppels against the public are little favored. They should not be invoked except
in rare and unusual circumstances, and may not be invoked where they would operate to
defeat the effective operation of a policy adopted to protect the public. They must be
applied with circumspection and should be applied only in those special cases where the
interests of justice clearly require it. Nevertheless, the government must not be allowed to
deal dishonorably or capriciously with its citizens, and must not play an ignoble part or do a
shabby thing; and subject to limitations x x x, the doctrine of equitable estoppel may be
invoked against public authorities as well as against private individuals.
[21]
(Emphasis
supplied.)


Equitable estoppel may be invoked against public authorities when as in this case, the lot was already
alienated to innocent buyers for value and the government did not undertake any act to contest the title for an
unreasonable length of time.

In Republic v. Court of Appeals, where the title of an innocent purchaser for value who relied on the
clean certificates of the title was sought to be cancelled and the excess land to be reverted to the Government,
we ruled that *i+t is only fair and reasonable to apply the equitable principle of estoppel by laches against the
government to avoid an injustice to innocent purchasers for value (emphasis supplied).
[22]
We explained:


Likewise time-settled is the doctrine that where innocent third persons, relying on
the correctness of the certificate of title, acquire rights over the property, courts cannot
disregard such rights and order the cancellation of the certificate. Such cancellation would
impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance whether the
title has been regularly issued or not. This would be contrary to the very purpose of the law,
which is to stabilize land titles. Verily, all persons dealing with registered land may safely rely
on the correctness of the certificate of title issued therefore, and the law or the courts do not
oblige them to go behind the certificate in order to investigate again the true condition of the
property. They are only charged with notice of the liens and encumbrances on the property
that are noted on the certificate.
[23]


x x x x

But in the interest of justice and equity, neither may the titleholder be made to
bear the unfavorable effect of the mistake or negligence of the States agents, in the absence
of proof of his complicity in a fraud or of manifest damage to third persons. First, the real
purpose of the Torrens system is to quiet title to land to put a stop forever to any question as
to the legality of the title, except claims that were noted in the certificate at the time of the
registration or that may arise subsequent thereto. Second, as we discussed earlier, estoppel
by laches now bars petitioner from questioning private respondents titles to the subdivision
lots. Third, it was never proven that Private Respondent St. Jude was a party to the fraud that
led to the increase in the area of the property after its subdivision. Finally, because
petitioner even failed to give sufficient proof of any error that might have been committed
by its agents who had surveyed the property, the presumption of regularity in the
performance of their functions must be respected. Otherwise, the integrity of
the Torrenssystem, which petitioner purportedly aims to protect by filing this case, shall
forever be sullied by the ineptitude and inefficiency of land registration officials, who are
ordinarily presumed to have regularly performed their duties.
[24]



Republic v. Court of Appeals is reinforced by our ruling in Republic v. Umali,
[25]
where, in a reversion
case, we held that even if the original grantee of a patent and title has obtained the same through fraud,
reversion will no longer prosper as the land had become private land and the fraudulent acquisition cannot
affect the titles of innocent purchasers for value.

Considering that innocent purchaser for value Yujuico bought the lot in 1974, and more than 27 years
had elapsed before the action for reversion was filed, then said action is now barred by laches.

While the general rule is that an action to recover lands of public domain is imprescriptible, said right
can be barred by laches or estoppel. Section 32 of PD 1592 recognized the rights of an innocent purchaser for
value over and above the interests of the government. Section 32 provides:

SEC. 32. Review of decree of registration; Innocent purchaser for value.The
decree of registration shall not be reopened or revised by reason of absence, minority, or
other disability of any person adversely affected thereby, nor by any proceeding in any court
for reversing judgments, subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or of any estate or interest therein
by such adjudication or confirmation of title obtained by actual fraud, to file in the proper
Court of First Instance a petition for reopening and review of the decree of registration not
later than one year from and after the date of the entry of such decree of registration, but
in no case shall such petition be entertained by the court where an innocent purchaser for
value has acquired the land or an interest therein, whose rights may be
prejudiced. Whenever the phrase innocent purchaser for value or an equivalent phrase
occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other
encumbrances for value. (Emphasis supplied.)


In this petition, the LRC (now LRA), on May 30, 1974, issued Decree No. N-150912 in favor of Fermina
Castro and OCT No. 10215 was issued by the Rizal Registrar of Deeds onMay 29, 1974. OCT No. 10215 does not
show any annotation, lien, or encumbrance on its face. Relying on the clean title, Yujuico bought the same in
good faith and for value from her. He was issued TCT No. 445863 on May 31, 1974. There is no allegation that
Yujuico was a buyer in bad faith, nor did he acquire the land fraudulently. He thus had the protection of the
Torrens System that every subsequent purchaser of registered land taking a certificate of title for value and in
good faith shall hold the same free from all encumbrances except those noted on the certificate and any of the x
x x encumbrances which may be subsisting.
[26]
The same legal shield redounds to his successors-in-interest, the
Yujuicos and Carpio, more particularly the latter since Carpio bought the lot from Jesus Y. Yujuico for value and in
good faith.

Likewise protected are the rights of innocent mortgagees for value, the PISO, Citibank, N.A., PDC,
RCBC, PCIB, and DBP. Even if the mortgagors title was proved fraudulent and the title declared null and void,
such declaration cannot nullify the mortgage rights of a mortgagee in good faith.
[27]


All told, a reversion suit will no longer be allowed at this stage.

More on the issue of laches. Laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which by exercising due diligence could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting a presumption that the party
entitled thereto has either abandoned or declined to assert it.
[28]


When respondent government filed the reversion case in 2001, 27 years had already elapsed from the
time the late Jesus Yujuico purchased the land from the original owner Castro. After the issuance of OCT No.
10215 to Castro, no further action was taken by the government to question the issuance of the title to Castro
until the case of Public Estates Authority, brought up in the oral argument before this Court on September 6,
2000.
[29]
We then held that allegation of fraud in the issuance of the title was not proper for consideration and
determination at that stage of the case.

From the undisputed facts of the case, it is easily revealed that respondent Republic took its sweet
time to nullify Castros title, notwithstanding the easy access to ample remedies which were readily available
after OCT No. 10215 was registered in the name of Castro. First, it could have appealed to the CA when the
Pasig-Rizal CFI rendered a decision ordering the registration of title in the name of applicant Castro on April 26,
1974. Had it done so, it could have elevated the matter to this Court if the appellate court affirms the decision of
the land registration court. Second, when the entry of Decree No. N-150912 was made on May 29, 1974 by the
Rizal Register of Deeds, the Republic had one (1) year from said date or up to May 28, 1975 to file a petition for
the reopening and review of Decree No. N-150912 with the Rizal CFI (now RTC) on the ground of actual fraud
under section 32 of PD 1592. Again, respondent Republic did not avail of such remedy. Third, when Jesus
Yujuico filed a complaint for Removal of Cloud and Annulment of Title with Damages against PEA before the
Paraaque RTC in Civil Case No. 96-0317, respondent could have persevered to question and nullify Castros
title. Instead, PEA undertook a compromise agreement on which the May 18, 1998 Resolution
[30]
was
issued. PEA in effect admitted that the disputed land was owned by the predecessors-in-interest of petitioners
and their title legal and valid; and impliedly waived its right to contest the validity of said title; respondent
Republic even filed the petition for relief from judgment beyond the time frames allowed by the rules, a fact
even acknowledged by this Court in Public Estates Authority. Lastly, respondent only filed the reversion suit
on June 8, 2001 after the passage of 27 years from the date the decree of registration was issued to Fermina
Castro.

Such a Rip Van Winkle, coupled with the signing of the settlement with PEA, understandably misled
petitioners to believe that the government no longer had any right or interest in the disputed lot to the extent
that the two lots were even mortgaged to several banks including a government financing institution. Any
nullification of title at this stage would unsettle and prejudice the rights and obligations of innocent parties. All
told, we are constrained to conclude that laches had set in.

Even granting arguendo that respondent Republic is not precluded by laches from challenging the title
of petitioners in the case at bar, still we find that the instant action for reversion is already barred by res judicata.

Petitioners relying on Firestone Ceramics, Inc. v. Court of Appeals
[31]
as a precedent to the case at bar
contend that the instant reversion suit is now barred by res judicata.

We agree with petitioners.

The doctrine on precedents is expressed in the latin maximStare decisis et non quieta movere. Follow
past precedents and do not disturb what has been settled.
[32]
In order however that a case can be considered as
a precedent to another case which is pending consideration, the facts of the first case should be similar or
analogous to the second case.

A perusal of the facts of the Firestone case and those of the case at bar reveals that the facts in the two
(2) cases are parallel. First, in Firestone and in this case, the claimants filed land registration applications with
the CFI; both claimants obtained decrees for registration of lots applied for and were issued OCTs. Second,
in Firestone, the Republic filed a reversion case alleging that the land covered by the OCT was still inalienable
forest land at the time of the application and hence the Land Registration Court did not acquire jurisdiction to
adjudicate the property to the claimant. In the instant case, respondent Republic contend that the land applied
for by Yujuico was within Manila Bay at the time of application and therefore the CFI had no jurisdiction over the
subject matter of the complaint. Third, in Firestone, the validity of the title of the claimant was favorably ruled
upon by this Court in G.R. No. 109490 entitledPatrocinio E. Margolles v. CA. In the case at bar, the validity of the
compromise agreement involving the disputed lot was in effect upheld when this Court in Public Estates
Authority v. Yujuico dismissed the petition of PEA seeking to reinstate the petition for relief from the May 18,
1998 Resolution approving said compromise agreement. With the dismissal of the petition, the May 18, 1998
Resolution became final and executory and herein respondent Republic through PEA was deemed to have
recognized Castros title over the disputed land as legal and valid. In Romero v. Tan,
[33]
we ruled that a judicial
compromise has the effect of res judicata. We also made clear that a judgment based on a compromise
agreement is a judgment on the merits, wherein the parties have validly entered into stipulations and the
evidence was duly considered by the trial court that approved the agreement. In the instant case, the May 18,
1998 Resolution approving the compromise agreement confirmed the favorable decision directing the
registration of the lot to Castros name in LRC Case No. N-8239. Similarly, inFirestone, the Margolles case
confirmed the decision rendered in favor of Gana in Land Registration Case No. 672 ordering the issuance of the
decree to said applicant. Fourth, inFirestone, the Supreme Court relied on the letter of then Solicitor General
Francisco Chavez that the evidence of the Bureau of Lands and the LRC was not sufficient to support an action
for cancellation of OCT No. 4216. In the instant case, both the Solicitor General and the Government Corporate
Counsel opined that the Yujuico land was not under water and that there appears to be no sufficient basis for
the Government to institute the action for annulment. Fifth, in Firestone, we ruled that the Margolles case had
long become final, thus the validity of OCT No. 4216 should no longer be disturbed and should be applied in the
instant case (reversion suit) based on the principle of res judicata or, otherwise, the rule on conclusiveness of
judgment.
[34]


Clearly from the above, Firestone is a precedent case. The Public Estates Authority had become final
and thus the validity of OCT No. 10215 issued to Castro could no longer be questioned.

While we said in Public Estates Authority that the court does not foreclose the right of the Republic
from pursuing the proper recourse in a separate proceedings as it may deem warranted, the statement
was obiter dictum since the inquiry on whether or not the disputed land was still under water at the time of its
registration was a non-issue in the said case.

Even granting for the sake of argument that Firestone is not squarely applicable, still we find the
reversion suit already barred by res judicata.

For res judicata to serve as an absolute bar to a subsequent action, the following requisites must
concur: (1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction over the
subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there must be between
the two cases, identity of parties, subject matter and causes of action.
[35]

There is no question as to the first, third and last requisites. The threshold question pertains to the
second requisite, whether or not the then Pasig-Rizal CFI, Branch 22 had jurisdiction over the subject matter in
LRC Case No. N-8239. In Civil Case No. 01-0222, the Paraaque City RTC, Branch 257 held that the CFI had
jurisdiction. The CA reversed the decision of the Paraaque City RTC based on the assertion of respondent
Republic that the Pasig-Rizal CFI had no jurisdiction over the subject matter, and that there was a need to
determine the character of the land in question.

The Paraaque City RTC Order dismissing the case for res judicata must be upheld.

The CA, in rejecting the dismissal of the reversion case by the Paraaque RTC, relied on two cases,
namely: Municipality of Antipolo v. Zapanta
[36]
and Republic v. Vda. De Castillo.
[37]


In Municipality of Antipolo, we held that the land registration court had no jurisdiction to entertain any
land registration application if the land was public property, thus:

Since the Land Registration Court had no jurisdiction to entertain the application for
registration of public property of ANTIPOLO, its Decision adjudicating the DISPUTED
PROPERTY as of private ownership is null and void. It never attained finality, and can be
attacked at any time. It was not a bar to the action brought by ANTIPOLO for its annulment
by reason of res judicata.

*x x x+ the want of jurisdiction by a court over the subject matter renders the
judgment void and a mere nullity, and considering that a void judgment is in legal
effect no judgment, by which no rights are divested, from which no rights can be
obtained, which neither binds nor bars any one, and under which all acts
performed and all claims flowing out of are void, and considering, further, that the
decision, for want of jurisdiction of the court, is not a decision in contemplation of
law, and hence, can never become executory, it follows that such a void judgment
cannot constitute a bar to another case by reason of res judicata.

x x x x

It follows that if a person obtains a title under the Public Land Act which
includes, by oversight, lands which cannot be registered under the Torrens System,
or when the Director of Lands did not have jurisdiction over the same because it is
a public forest, the grantee does not, by virtue of the said certificate of title alone,
become the owner of the land illegally included (Republic vs. Animas, 56 SCRA 499,
503; Ledesma vs. Municipality of Iloilo, 49 Phil. 769).

[x x x x]

Under these circumstances, the certificate of title may be ordered cancelled
(Republic vs. Animas, et al., supra), and the cancellation maybe pursued through an
ordinary action therefore. This action cannot be barred by the prior judgment of
the land registration court, since the said court had no jurisdiction over the subject
matter. And if there was no such jurisdiction, then the principle of res
judicata does not apply. [x x x] Certainly, one of the essential requisites, i.e.,
jurisdiction over the subject matter, is absent in this case. (Italics supplied).
[38]




The plain import of Municipality of Antipolo is that a land registration court, the RTC at present, has no
jurisdiction over the subject matter of the application which respondent Republic claims is public land. This ruling
needs elucidation.

Firmly entrenched is the principle that jurisdiction over the subject matter is conferred by
law.
[39]
Consequently, the proper CFI (now the RTC) under Section 14 of PD 1529
[40]
(Property Registration
Decree) has jurisdiction over applications for registration of title to land.

Section 14 of PD 1592 provides:


SEC. 14. Who may apply.The following persons may file in the proper Court of First
Instance an application for registration of title to land, whether personally or through their
duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been
in open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June 12,
1945, or earlier. (Emphasis supplied.)



Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the subject matter of the land
registration case filed by Fermina Castro, petitioners predecessor-in-interest, since jurisdiction over the subject
matter is determined by the allegations of the initiatory pleadingthe application.
[41]
Settled is the rule that the
authority to decide a case and not the decision rendered therein is what makes up jurisdiction. When there is
jurisdiction, the decision of all questions arising in the case is but an exercise of jurisdiction.
[42]


In our view, it was imprecise to state in Municipality of Antipolo that the Land Registration
Court [has] no jurisdiction to entertain the application for registration of public property x x x for such court
precisely has the jurisdiction to entertain land registration applications since that is conferred by PD 1529. The
applicant in a land registration case usually claims the land subject matter of the application as his/her private
property, as in the case of the application of Castro. Thus, the conclusion of the CA that the Pasig-Rizal CFI has
no jurisdiction over the subject matter of the application of Castro has no legal mooring. The land registration
court initially has jurisdiction over the land applied for at the time of the filing of the application. After trial, the
court, in the exercise of its jurisdiction, can determine whether the title to the land applied for is registrable and
can be confirmed. In the event that the subject matter of the application turns out to be inalienable public land,
then it has no jurisdiction to order the registration of the land and perforce must dismiss the application.
Based on our ruling in Antipolo, the threshold question is whether the land covered by the titles of
petitioners is under water and forms part of Manila Bay at the time of the land registration application in
1974. If the land was within Manila Bay, then res judicata does not apply. Otherwise, the decision of the land
registration court is a bar to the instant reversion suit.

After a scrutiny of the case records and pleadings of the parties in LRC Case No. N-8239 and in the
instant petition, we rule that the land of Fermina Castro is registrable and not part of Manila Bay at the time of
the filing of the land registration application.

The trial courts Decision in 1974 easily reveals the basis for its conclusion that the subject matter was
a dry land, thus:

On February 1, 1974, the applicant presented her evidence before the Deputy Clerk
of this Court and among the evidence presented by her were certain documents which were
marked as Exhibits D to J, inclusive. The applicant testified in her behalf and substantially
declared that: she was 62 years old, single, housekeeper and residing at 1550 J. Escoda,
Ermita, Manila; that she was born on June 3, 1911; that she first came to know of the land
applied for which is situated in the Municipality of Paraaque, province of Rizal, with an area
of 17,343 square meters and covered by plan (LRC) Psu-964 while she was still ten (10) years
old or sometime in 1921; that when she first came to know of the land applied for, the
person who was in possession and owner of said land was her father, Catalino Castro; that
during that time her father used to plant on said land various crops like pechay, mustard,
eggplant, etc.; that during that time, her father built a house on said land which was used by
her father and the other members of the family, including the applicant, as their residential
house; that the land applied for was inherited by her father from her grandfather Sergio
Castro; that Catalino Castro continuously possessed and owned the land in question from
1921 up to the time of his death in 1952; and that during that period of time nobody ever
disturbed the possession and ownership of her father over the said parcel of land; that after
the death of her father in 1952 she left the place and transferred her place of residence but
she had also occasions to visit said land twice or thrice a week and sometimes once a week;
that after she left the land in question in 1952, she still continued possessing said land,
through her caretaker Eliseo Salonga; that her possession over the land in question from the
time she inherited it up to the time of the filing of the application has been continuous,
public, adverse against the whole world and in the concept of an owner; that it was never
encumbered, mortgaged, or disposed of by her father during his lifetime and neither did she
ever encumber or sell the same; that it was declared for taxation purposes by her father
when he was still alive and her father also paid the real estate taxes due to the government
although the receipt evidencing the payment of said real estate taxes for the property
applied for have been lost and could no longer be found inspite of diligent effort exerted to
locate the same.

The other witness presented by the applicant was Emiliano de Leon, who declared
that he was 70 years old, married, farmer and residing at San Jose, Baliwag, Bulacan; that he
knew Catalino Castro, the father of the applicant because said Catalino Castro was his
neighbor in Tambo, Paraaque, Rizal, he had a house erected on the land of Catalino Castro;
that he was born in 1903 and he first came to know of the land in question when in 1918
when he was about 18 years old; that the area of the land owned and possessed by Catalino
Castro where he constructed a residential house has an area of more than one and one-half
(1 ) hectares; that the possession of Catalino Castro over the land in question was peaceful,
continuous, notorious, adverse against the whole world and in the concept of an owner; that
during the time that Catalino Castro was in possession of the land applied for he planted on
said parcel of land mango, coconut and banana, etc.; that Catalino Castro continuously
possessed and owned said parcel of land up to the year 1952 when he died; that during the
time that Catalino Castro was in possession of said land, nobody ever laid claim over the said
property; that said land is not within any military or naval reservation; that upon the death of
Catalino Castro, the applicant took possession of the land applied for and that up to the
present the applicant is in possession of said land; that he resided in the land in question
from 1918 up to the time he transferred his place of residence in Baliwag, Bulacan in the year
1958.

On February 11, 1974, the Court, pursuant to the provision of Presidential Decree
No. 230 issued by his Excellency, Ferdinand E. Marcos dated July 9, 1973 held in abeyance
the rendition of a decision in this case and directed the applicant to submit a white print copy
of plan (LRC) Psu-964 to the Director of lands who was directed by the Court to submit his
comment and recommendation thereon.

The property in question is declared for taxation purposes under Tax Declaration
No. 51842 (Exhibit G) and real estate taxes due thereon have been paid up to the year 1973
(Exhibit H).

In compliance with the Order of this Court February 11, 1974, the Director of Lands,
thru Special Attorney Saturnino A. Pacubas, submitted a report to this Court dated April 25,
1974, stating among other things, that upon ocular inspection conducted by Land Inspector
Adelino G. Gorospe and the subsequent joint ocular inspection conducted by Geodetic
Engineer Manuel A. Cervantes and Administrative Assistant Lazaro G. Berania, it was
established that the parcel of land covered by plan (LRC) Psu-964 no longer forms part of
the Manila Bay but is definitely solid and dry land.

In this connection, it should be noted that Administrative Assistant Lazaro G.
Berania and Geodetic Engineer Manuel A. Cervantes, in their report dated March 22, 1974
have also stated that the land applied for cannot be reached by water even in the highest
tide and that the said land is occupied by squatter families who have erected makeshift
shanties and a basketball court which only prove that the same is dry and solid land away
from the shores of Manila Bay.

Furthermore, Land Inspector Adelino G. Gorospe in his letter-report dated November
28, 1973 has also stated that there is a house of pre-war vintage owned by the applicant on
the land in question which in effect corroborates the testimony of the applicant and her
witness that they have lived on the land in question even prior to the outbreak of the second
world war and that the applicant has been in possession of the land in question long time
ago.
[43]



To counter the evidence of applicant Castro, and bolster its claim that she has no valid title,
respondent Republic relies on the July 18, 1973 Office Memorandum
[44]
of Roman Mataverde, OIC, Surveys
Division, to the OIC, Legal Division, of the Bureau of Lands, stating that when projected on cadastral maps CM
14 13N - 120 59 E., Sec. 3-D and CM 14 30N - 120 59E., Sec. 2-A of Paranaque [sic] Cadastre (Cad-299),
(LRC) Psu-964 falls inside Manila Bay, outside Cad-299.
[45]


The same conclusion was adopted in a November 15, 1973 letter of Narciso Villapando, Acting Regional
Lands Director to the Chief, Legal Division, Bureau of Lands and in the Comment and Recommendation of
Ernesto C. Mendiola, Assistant Director, also of the Bureau of Lands.

Respondent likewise cites Namria Hydrographic Map No. 4243 Revised 80-11-2 to support its position
that Castros lot is a portion of Manila Bay.

The burden of proving these averments falls to the shoulders of respondent Republic. The difficulty is
locating the witnesses of the government. Roman Mataverde, then OIC of the Surveys Division retired from the
government service in 1982. He should by this time be in his 90s. Moreover, Asst. Regional Director Narciso
Villapando and Asst. Director Ernesto C. Mendiola are no longer connected with the Bureau of Lands since 1986.

Assuming that OIC Roman Mataverde, Asst. Regional Director Narciso Villapando and Assistant Director
Ernesto C. Mendiola are still available as witnesses, the projections made on the cadastral maps of the then
Bureau of Lands cannot prevail over the results of the two ocular inspections by several Bureau of Lands officials
that the disputed lot is definitely dry and solid land and not part of Manila Bay. Special Attorney Saturnino A.
Pacubas, Land Inspector Adelino G. Gorospe, Geodetic Engineer Manuel A. Cervantes and Administrative Asst.
Lazaro A. Berana, all officials of the Bureau of Lands, were positive that the disputed land is solid and dry land
and no longer forms part of Manila Bay. Evidence gathered from the ocular inspection is considered direct and
firsthand information entitled to great weight and credit while the Mataverde and Villapando reports are
evidence weak in probative value, being merely based on theoretical projections in the cadastral map or table
surveys.
[46]
Said projections must be confirmed by the actual inspection and verification survey by the land
inspectors and geodetic engineers of the Bureau of Lands. Unfortunately for respondent Republic, the bureau
land inspectors attested and affirmed that the disputed land is already dry land and not withinManila Bay.

On the other hand, the Namria Hydrographic Map No. 4243 does not reveal what portion
of Manila Bay was Castros lot located in 1974. Moreover, a hydrographic map is not the best evidence to show
the nature and location of the lot subject of a land registration application. It is derived from a hydrographic
survey which is mainly used for navigation purposes, thus:





Surveys whose principal purpose is the determination of data relating to bodies of
water. A hydrographic survey may consist of the determination of one or several of the
following classes of data: depth water; configuration and nature of the bottom; directions
and force of currents; heights and times of tides and water stages; and location of fixed
objects for survey and navigation purposes.
[47]




Juxtaposed with finding of the ocular inspection by Bureau of Lands Special Attorney Pacubas and
others that Castros lot is dry land in 1974, Namria Hydrographic Map No. 4243 is therefore inferior evidence and
lacking in probative force.

Moreover, the reliability and veracity of the July 18, 1973 report of Roman Mataverde based on the
alleged projection on cadastral maps and the Villapando report dated November 15, 1973 are put to serious
doubt in the face of the opinion dated October 13, 1997 of the Government Corporate Counsel, the lawyer of
the PEA, which upheld the validity of the titles of petitioners, thus:



We maintain to agree with the findings of the court that the property of Fermina
Castro was registrable land, as based on the two (2) ocular inspections conducted on March
22, 1974 by Lands Administrative Assistant Lazaro G. Berania and Lands Geodetic Engr.
Manuel Cervantes, finding the same no longer forms part of Manila Bay but is definitely
solid land which cannot be reached by water even in the highest of tides. This Berania-
Cervantes report based on ocular inspections literally overturned the findings and
recommendations of Land Director Narciso V. Villapando dated November 15, 1973, and
that of Director Ernesto C. Mendiola dated December 1, 1977, and the fact that the
Villapando-Mendiola reports were merely based on projections in the cadastral map or
table surveys.

x x x x

A. The Legal prognosis of the case is not promising in favor of PEA.

4.1 LRC Case No. N-8239 has already become final and executory and OCT No.
10215 was already issued in favor of Fermina Castro. Any and all attempts to question its
validity can only be entertained in a quo warranto proceedings (sic), assuming that there are
legal grounds (not factual grounds) to support its nullification. Subjecting it to a collateral
attack is not allowed under the Torrens Title System. In Calalang vs. Register of Deeds of
Quezon City, 208 SCRA 215, the Supreme Court held that the present petition is not the
proper remedy in challenging the validity of certificates of titles since the judicial action
required is a direct and not a collateral attack (refer also to: Toyota Motor Philippine
Corporation vs. CA, 216 SCRA 236).

4.2 OCT No. 10215 in favor of Fermina Castro was issued pursuant to a cadastral
proceeding, hence is a rem proceedings which is translated as a constructive notice to the
whole world, as held in Adez Realty Incorporated vs. CA, 212 SCRA 623.

4.3 From the cursory and intent reading of the decision of Judge Sison in LRC
Case No. N-8239, we cannot find any iota of fraud having been committed by the court and
the parties. In fact, due process was observed when the Office of the Solicitor General
represented ably the Bureau of Lands. In Balangcad vs. Justices of the Court of Appeals, 206
SCRA 169, the Supreme Court held that title to registered property becomes indefeasible
after one-year from date of registration except where there is actual fraud in which case it
may be challenged in a direct proceeding within that period. This is also the ruling in Bishop
vs. CA, 208 SCRA 636, that to sustain an action for annulment of a torrens certificate for
being void ab initio, it must be shown that the registration court had not acquired jurisdiction
over the case and there was actual fraud in securing the title.

4.4 As to priority of torrens title, PEA has no defense, assuming that both PEA
and Yujuico titles are valid, as held in Metropolitan Waterworks and Sewerage System vs. CA,
215 SCRA 783, where two (2) certificates purport to include the same land, the earlier in date
prevails.

4.5 The documents so far submitted by the parties to the court indicate that
the mother title of the Yujuico land when registered in 1974 was not underwater. This was
shown in the two (2) ocular inspections conducted by the officials of the Land Bureau.

4.6 The provision of P.D. 239 that no decree of registration may be issued by the
court unless upon approval and recommendation of the Bureau of Lands was substantially
complied with in the Report of Lands Special Attorney Saturnino Pacubas, submitted to the
court.
[48]

Even the counsel of respondent Republic, the OSG, arrived at the conclusion that there is no sufficient
legal basis for said respondent to institute action to annul the titles of petitioners, thus:

It may be stated at the outset that a petition for annulment of certificate of title or
reconveyance of land may be based on fraud which attended the issuance of the decree of
registration and the corresponding certificate of title.

Based on the decision in the LRC Case No. N-8239 involving the petition for
registration and confirmation of title filed by Fermina Castro, there is no showing that fraud
attended the issuance of OCT No. 10215. it appears that the evidence presented by Fermina
Castro was sufficient for the trial court to grant her petition.

The testimony of Fermina Castro, which was corroborated by Emiliano de Leon,
that she and her predecessors-in-interest had been in possession of the land for more than
thirty (30) years sufficiently established her vested right over the property initially covered by
OCT No. 10215. The report dated April 25, 1974 which was submitted to the trial court by the
Director of Lands through Special Attorney Saturnino Pacubas showed that the parcel of land
was solid and dry land when Fermina Castros application for registration of title was filed. It
was based on the ocular inspection conducted by Land Inspector Adelino Gorospe and the
joint circular inspection conducted by Geodetic Engineer Manuel A. Cervantes and
Administrative Assistant Lazaro Berania on November 28, 1973 and March 22,
1974 respectively.

The aforesaid report must be requested unless there is a concrete proof that there
was an irregularity in the issuance thereof. In the absence of evidence to the contrary, the
ocular inspection of the parcel of land, which was made the basis of said report, is presumed
to be in order.

Based on the available records, there appears to be no sufficient basis for the
Government to institute an action for the annulment of OCT No. 10215 and its derivative
titles. It is opined that a petition for cancellation/annulment of Decree No. N-150912 and
OCT No. 10215 and all its derivative titles will not prosper unless there is convincing
evidence to negate the report of the then Land Management Bureau through Special
Attorney Pacubas. Should the Government pursue the filing of such an action, the
possibility of winning the case is remote.
[49]

More so, respondent Government, through its counsel, admits that the land applied by Fermina Castro
in 1973 was solid and dry land, negating the nebulous allegation that said land is underwater. The only
conclusion that can be derived from the admissions of the Solicitor General and Government Corporate Counsel
is that the land subject of the titles of petitioners is alienable land beyond the reach of the reversion suit of the
state.
Notably, the land in question has been the subject of a compromise agreement upheld by this Court
in Public Estates Authority.
[50]
In that compromise agreement, among other provisions, it was held that the
property covered by TCT Nos. 446386 and S-29361, the land subject of the instant case, would be exchanged for
PEA property. The fact that PEA signed the May 15, 1998 Compromise Agreement is already a clear admission
that it recognized petitioners as true and legal owners of the land subject of this controversy.

Moreover, PEA has waived its right to contest the legality and validity of Castros title. Such waiver is
clearly within the powers of PEA since it was created by PD 1084 as a body corporate which shall have the
attribute of perpetual succession and possessed of the powers of the corporations, to be exercised in conformity
with the provisions of this Charter *PD 1084+.
[51]
It has the power to enter into, make, perform and carry out
contracts of every class and description, including loan agreements, mortgages and other types of security
arrangements, necessary or incidental to the realization of its purposes with any person, firm or corporation,
private or public, and with any foreign government or entity.
[52]
It also has the power to sue and be sued in its
corporate name.
[53]
Thus, the Compromise Agreement and the Deed of Exchange of Real Property signed by PEA
with the petitioners are legal, valid and binding on PEA. In the Compromise Agreement, it is provided that it
settles in full all the claims/counterclaims of the parties against each other.
[54]
The waiver by PEA of its right to
question petitioners title is fortified by the manifestation by PEA in the Joint Motion for Judgment based on
Compromise Agreement that

4. The parties herein hereto waive and abandon any and all other claims and
counterclaims which they may have against each other arising from this case or related
thereto.
[55]


Thus, there was a valid waiver of the right of respondent Republic through PEA to challenge
petitioners titles.
The recognition of petitioners legal ownership of the land is further bolstered by the categorical and
unequivocal acknowledgment made by PEA in its September 30, 2003 letter where it stated that: Your
ownership thereof was acknowledged by PEA when it did not object to your membership in the CBP-IA
Association, in which an owner of a piece of land in CBP-IA automatically becomes a member
thereof.
[56]
Section 26, Rule 130 provides that the act, declaration or omission of a party as to a relevant fact
may be given in evidence against him. The admissions of PEA which is the real party-in-interest in this case on
the nature of the land of Fermina Castro are valid and binding on respondent Republic. Respondents claim that
the disputed land is underwater falls flat in the face of the admissions of PEA against its interests. Hence, res
judicata now effectively precludes the relitigation of the issue of registrability of petitioners lot.
In sum, the Court finds that the reversion case should be dismissed for lack of jurisdiction on the part
of the Paraaque RTC. Even if we treat said case as a petition for annulment of judgment under Rule 47 of the
1997 Rules of Civil Procedure, the dismissal of the case nevertheless has to be upheld because it is already
barred by laches. Even if laches is disregarded, still the suit is already precluded by res judicata in view of the
peculiar facts and circumstances obtaining therein.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals in
CA-G.R. CV No. 76212 is REVERSED and SET ASIDE, and theAugust 7, 2002 Order of the Paraaque City RTC,
Branch 257 in Civil Case No. 01-0222 entitled Republic of the Philippines v. Fermina Castro, et al. dismissing the
complaint isAFFIRMED.

No costs.

SO ORDERED.













THIRD DIVISION
[G.R. NO. 150824 : February 4, 2008]
LAND BANK OF THE PHILIPPINES, Petitioner, v. REPUBLIC OF THE PHILIPPINES,
represented by the Director of Lands, Respondent.
D E C I S I O N
REYES, R.T., J.:
FOREST lands are outside the commerce of man and unsusceptible of private appropriation in
any form.
1

It is well settled that a certificate of title is void when it covers property of public domain
classified as forest, timber or mineral lands. Any title issued covering non-disposable lots even
in the hands of an alleged innocent purchaser for value shall be cancelled.
2
The rule must stand
no matter how harsh it may seem. Dura lex sed lex.
3
Ang batas ay maaaring mahigpit
subalit ito ang mananaig.
Before Us is a Petition for Review on Certiorari under Rule 45 filed by petitioner Land Bank of
the Philippines (LBP) appealing the: (1) Decision
4
of the Court of Appeals (CA), dated August
23, 2001, in CA-G.R. CV No. 64121 entitled "Republic of the Philippines, represented by the
Director of Lands v. Angelito Bugayong, et al."; and (2) Resolution
5
of the same Court, dated
November 12, 2001, denying LBP's motion for reconsideration.
The CA affirmed the Decision
6
of the Regional Trial Court (RTC), dated July 9, 1996, declaring
null and void Original Certificate of Title (OCT) No. P-2823, as well as other titles originating
from it, on the ground that at the time it was issued, the land covered was still within the forest
zone.
7

The Facts
OCT No. P-2823 was issued on September 26, 1969 in favor of one Angelito C. Bugayong. Said
mother title emanated from Sales Patent No. 4576 issued in Bugayong's name on September
22, 1969.
8
It covered a parcel of land located in Bocana, Kabacan, Davao City, with an area of
41,276 square meters. It was originally identified and surveyed as Lot No. 4159 under Plan SI -
(VIII-1), 328-D. Marshy and under water during high tide, it used to be a portion of a dry river
bed near the mouth of Davao River.
9

The land was initially subdivided into four lots, viz.: Lot Nos. 4159-A, 4159-B, 4159-C and
4159-D under Subdivision Plan (LRC) Psd-139511 approved by the Commissioner of Land
Registration on April 23, 1971.
10
Consequently, OCT No. P-2823 was cancelled and new
Transfer Certificates of Title (TCTs) replaced it, all in the name of Bugayong.
Bugayong sold all of the four lots to different persons. Lot No. 4159-A, which was then under
TCT No. T-32769, was sold to spouses Lourdes and Candido Du. Accordingly, said TCT was
cancelled and replaced by TCT No. T-42166 in the name of spouses Du.
11

Afterwards, the spouses Du further caused the subdivision of the land covered by their TCT No.
T-42166 into two (2) lots. They sold one of said lots to spouses Felix and Guadalupe Dayola,
who were issued TCT No. T-45586. The other remaining lot, registered under TCT No. T-45587,
was retained by and registered in the names of spouses Du.
12

Subsequently, Du spouses' TCT No. T-45587 was cancelled and was replaced by TCT No. T-
57348 registered in the name of Lourdes Farms, Inc. subject of this case.
13
Lourdes Farms, Inc.
mortgaged this property to petitioner LBP on April 14, 1980.
14

The validity of OCT No. P-2823, as well as its derivative TCTs, remained undisturbed until some
residents of the land it covered, particularly those along Bolton Diversion Road, filed a formal
petition before the Bureau of Lands on July 15, 1981.
15

Investigation and ocular inspection were conducted by the Bureau of Lands to check the
legitimacy of OCT No. P-2823. They found out that: (1) at the time Sales Patent No. 4576 was
issued to Bugayong, the land it covered was still within the forest zone, classified under Project
No. 1, LC-47 dated August 6, 1923; it was released as alienable and disposable land only on
March 25, 1981, pursuant to BFD Administrative Order No. 4-1585 and to the provisions of
Section 13, Presidential Decree (P.D.) No. 705;
16
(2) the land was marshy and covered by sea
water during high tide; and (3) Bugayong was never in actual possession of the land.
17

In view of the foregoing findings, the Bureau of Lands resolved that the sales patent in favor of
Bugayong was improperly and illegally issued and that the Director of Lands had no jurisdiction
to dispose of the subject land.
18

Upon recommendation of the Bureau of Lands, the Republic of the Philippines represented by
the Director of Lands, through the Office of the Solicitor General (OSG), instituted a
complaint
19
before the RTC in Davao, Branch 15, for the cancellation of title/patent and
reversion of the land covered by OCT No. P-2823 into the mass of public domain. The
complaint, as amended,
20
was filed against Bugayong and other present owners and
mortgagees of the land, such as Lourdes Farms, Inc. and the latter's mortgagee, petitioner LBP.
In its answer with cross-claim,
21
LBP claimed that it is a mortgagee in good faith and for value.
It prayed that should TCT No. T-57348 of Lourdes Farms, Inc. be annulled by the court, Lourdes
Farms, Inc. should be ordered to pay its outstanding obligations to LBP or to provide a new
collateral security.
22

RTC Judgment
Eventually, the RTC rendered its judgment
23
on July 9, 1996 determining that:
x x x The mistakes and the flaws in the granting of the title were made by the Bureau of Lands
personnel more particularly the Director of Lands who is the Officer charged with the following
the provisions of the Public Land Law. x x x.
It is clear that the mother Title, OCT P-2823 in the name of defendant Bugayong was issued at
a time when the area was not yet released by the Bureau of Forestry to the Bureau of Lands.
The area covered by OCT No. P. 2823 was not yet declared by the Bureau of Lands alienable
and disposable when the said OCT was issued. The subdivision of the lot covered by OCT P-
2823 into 4 lots covered by TCT Nos. T-32768, 32769, 32756 and 32771 did not cure the
defect. x x x.
24

The RTC explained that titles issued to private parties by the Bureau of Lands are void ab
initio if the land covered by it is a forest land.
25
It went further by stating that if the mother title
is void, all titles arising from the mother title are also void.
26
It thus ruled in favor of the
Republic with a fallo reading:
IN VIEW WHEREOF, judgment is hereby rendered declaring Original Certificate of Title No. P-
2823 issued in the name of defendant Angelito Bugayong null and void. The following Transfer
Certificate of Titles which were originally part of the lot covered by O.C.T. No. P-2823 are
likewise declared void:
1.A. TCT No. 57348 in the name of defendant Lourdes Farms mortgaged to defendant Land
Bank.
B. TCT No. 84749 in the name of defendants Johnny and Catherine Du mortgaged to defendant
Development Bank of the Philippines.
C. TCT No. 37386 in the name of defendants spouses Pahamotang mortgaged to defendant
Lourdes Du mortgaged with defendant Allied Bank.
E. TCT Nos. 68154 and 32768 in the names of defendants/spouses Maglana Santamaria.
2. All private defendants shall give to the Davao City Register of Deeds their titles, who shall
cancel the Transfer Certificate of Titles mentioned in paragraph number one.
3. Lot No. 4159, Plan SI (VIII-1) 328-D covered by O.C.T. P-2823 is hereby REVERTED to the
mass of public domain.
SO ORDERED.
27
(Underscoring supplied)cralawl ibrary
Disagreeing with the RTC judgment, LBP appealed to the CA on October 31, 1996. It asserted in
its appellant's brief
28
that it validly acquired mortgage interest or lien over the subject property
because it was an innocent mortgagee for value and in good faith.
29
It also emphasized that it is
a government financial institution.
CA Disposition
In a Decision
30
dated August 23, 2001, the CA ruled against the appellants,
31
disposing thus:
WHEREFORE, premises considered, the present appeals are hereby DISMISSED and the
Decision of the trial court in Civil Case No. 17516 is hereby AFFIRMED.
32

The CA confirmed that the "evidence for the plaintiff clearly established that the land covered
by OCT No. P-2823 issued pursuant to a sales patent granted to defendant Angelito C.
Bugayong was still within the forestal zone at the time of the grant of the said patent."
33
It
explained:
Forest lands or forest reserves, are incapable of private appropriation and possession thereof,
however long, cannot convert them into private properties. This is premised on the Regalian
Doctrine enshrined not only in the 1935 and 1973 Constitutions but also in
the 1987 Constitution. Our Supreme Court has upheld this rule consistently even in earlier
cases. It has also been held that whatever possession of the land prior to the date of release of
forested land as alienable and disposable cannot be credited to the 30-year requirement (now,
since June 12, 1945) under Section 48(b) of the Public Land Act. It is only from that date that
the period of occupancy for purposes of confirmation of imperfect or incomplete title may be
counted. Since the subject land was declared as alienable and disposable only on March 25,
1981, appellants and their predecessors-in-interest could not claim any vested right thereon
prior to its release from public forest zone.
The inclusion of forest land in a title, "whether title be issued during the Spanish regime or
under the Torrens system, nullifies the title." It is, of course, a well-recognized principle that
the Director of Lands (now Land Management Bureau) is bereft of any jurisdiction over public
forest or any lands not capable of registration. It is the Bureau of Forestry that has jurisdiction
and authority over the demarcation, protection, management, reproduction, occupancy and use
of all public forests and forest reservations and over the granting of licenses for the taking of
products therefrom. And where the land applied for is part of the public forest, the land
registration court acquires no jurisdiction over the land, which is not yet alienable and
disposable.
Thus, notwithstanding the issuance of a sales patent over the subject parcel of land, the State
may still take action to have the same land reverted to the mass of public domain and the
certificate of title covering said forest land declared null and void for having been improperly
and illegally issued. Titles issued over non-alienable public lands have been held as void ab
initio. The defense of indefeasibility of title issued pursuant to such patent does not lie against
the State. Public land fraudulently included in patents or certificates of title may be recovered or
reverted to the State in accordance with Section 101 of the Public Land Act. In such cases,
prescription does not lie against the State. Likewise, the government is not estopped by such
fraudulent or wrongful issuance of a patent over public forest land inasmuch as the principle of
estoppel does not operate against the Government for the acts of its agents. x x x.
34
(Citations
omitted) chanroblesvi rtuallawlibrary
With respect to LBP's contention
35
that it was a mortgagee in good faith and for value, the CA
declared, citing Republic v. Reyes
36
that: "mortgagees of non-disposable lands where titles
thereto were erroneously issued acquire no protection under the land registration law.
Appellants-mortgagees' proper recourse therefore is to pursue their claims against their
respective mortgagors and debtors."
37

When LBP's motion for reconsideration was denied, it resorted to the petition at bar.
Issues
LBP seeks the reversal of the CA disposition on the following grounds '
A.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE PETITIONER LAND BANK OF THE
PHILIPPINES' MORTGAGE RIGHT AND INTEREST AS AN INNOCENT PURCHASER(MORTGAGEE)
FOR VALUE AND IN GOOD FAITH OVER THE SUBJECT LAND COVERED BY TCT NO. T-57348 IS
VALID AND SUBSISTING IN ACCORDANCE WITH THE LAW AND EXISTING JURISPRUDENCE IN
OUR COUNTRY.
B.
THE COURT OF APPEALS ERRED IN NOT FINDING PETITIONER LAND BANK OF THE
PHILIPPINES' MORTGAGE RIGHT AND INTEREST OVER THE SUBJECT LAND AS VALID AND
SUBSISTING UNDER THE CONSTITUTIONAL GUARANTEE OF NON-IMPAIRMENT OF OBLIGATION
OF CONTRACTS.
C.
THE COURT OF APPEALS ERRED IN NOT AWARDING TO PETITIONER LAND BANK OF THE
PHILIPPINES THE RELIEF PRAYED FOR UNDER ITS CROSS-CLAIM AGAINST CO-DEFENDANT
LOURDES FARMS, INC., THAT IS, ORDERING SAID CO-DEFENDANT LOURDES FARMS, INC. TO
PAY ITS OUTSTANDING OBLIGATION TO THE LAND BANK COVERED BY THE SUPPOSED NULL
AND VOID TCT NO. T-57348, OR TO PROVIDE A SUBSTITUTE COLLATERAL IN LIEU OF SAID
TCT NO. T-57348.
38
(Underscoring supplied)cralawli brary
Our Ruling
LBP has no valid and subsisting mortgagee's
interest over the land covered by TCT No. T-57348.
It has been established and admitted by LBP that: (1) the subject land mortgaged to it by
Lourdes Farms, Inc. is covered by TCT No. T-57348; and (2) the said TCT is derived from OCT
No. P-2823 issued to Bugayong.
39

It was further ascertained by the courts below that at the time OCT No. P-2823 was issued to
Bugayong on September 26, 1969, the land it covered was still within the forest zone. It was
declared as alienable and disposable only on March 25, 1981.
40

Despite these established facts, LBP argues that its alleged interest as mortgagee of the subject
land covered by TCT No. T-57348 must be respected. It avers that TCT No. T-57348 is a
Torrens title which has no written indications of defect or vice affecting the ownership of
Lourdes Farms, Inc. Hence, it posits that it was not and could not have been required to explore
or go beyond what the title indicates or to search for defects not indicated in it.
LBP cites cases where the Court ruled that a party is not required to explore further than what
the Torrens title upon its face indicates in quest of any hidden defect of an inchoate right that
may subsequently defeat his right to it; and that a bank is not required before accepting a
mortgage to make an investigation of the title of the property being given as security. LBP
submits that its right as a mortgagee is binding against the whole world and may not be
disregarded.
41

It further argues that review or reopening of registration is proscribed, as the title has become
incontrovertible pursuant to Section 32 of P.D. No. 1529; and that its mortgage rights and
interest over the subject land is protected by the constitutional guarantee of non-impairment of
contracts.
42

The contention that LBP has an interest over the subject land as a mortgagee has no merit. The
mortgagor, Lourdes Farms, Inc. from which LBP supposedly obtained its alleged interest has
never been the owner of the mortgaged land. Acquisition of the subject land by Lourdes Farms,
Inc. is legally impossible as the land was released as alienable and disposable only on March 25,
1981. Even at present, no one could have possessed the same under a claim of ownership for
the period of thirty (30) years required under Section 48(b) of Commonwealth Act No. 141, as
amended.
43
Hence, LBP acquired no rights over the land.
Under Article 2085 of the Civil Code, it is essential that the mortgagor be the absolute owner of
the thing mortgaged, to wit:
ARTICLE 2085. The following requisites are essential to the contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal obligation;
(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose. (Emphasis
ours)
Since Lourdes Farms, Inc. is not the owner of the land, it does not have the capacity to
mortgage it to LBP. In De la Cruz v. Court of Appeals,
44
the Court declared:
While it is true that the mortgagees, having entered into a contract with petitioner as
mortgagor, are estopped from questioning the latter's ownership of the mortgaged property and
his concomitant capacity to alienate or encumber the same, it must be considered that, in the
first place, petitioner did not possess such capacity to encumber the land at the time for the
stark reason that it had been classified as a forest land and remained a part of the patrimonial
property of the State. Assuming, without admitting, that the mortgagees cannot subsequently
question the fact of ownership of petitioner after having dealt with him in that capacity, still,
petitioner was never vested with the proprietary power to encumber the property. In fact, even
if the mortgagees continued to acknowledge petitioner as the owner of the disputed land, in the
eyes of the law, the latter can never be presumed to be owner.
As correctly pointed out by the OSG, mortgagees of non-disposable lands, titles to which were
erroneously issued, acquire no protection under the Land Registration Law.
45

Even assuming that LBP was able to obtain its own TCT over the property by means of its
mortgage contract with Lourdes Farms, Inc., the title must also be cancelled as it was derived
from OCT No. P-2823 which was not validly issued to Bugayong. Forest lands cannot be owned
by private persons. It is not registerable whether the title is a Spanish title or a Torrens
title.
46
It is well settled that a certificate of title is void when it covers property of public domain
classified as forest or timber or mineral land. Any title issued covering non-disposable lots even
in the hands of an alleged innocent purchaser for value shall be cancelled.
47

Moreover, the Court has already addressed the same issue in its Resolution of November 14,
2001 on the petition filed by the Philippine National Bank (PNB) in G. R. No. 149568 entitled
"Philippine National Bank v. Republic of the Philippines represented by the Director of Lands,"
which also appealed the subject CA decision. PNB, like LBP, is also a mortgagee of another
derivative TCT of the same OCT No. 2823. Said resolution reads:
On September 22, 1969, Angelito C. Bugayong was issued a sales patent covering a 41,276
square meter parcel of land in Bocana, Barrio Kabacan, Davao City by the Bureau of Lands. On
the basis of the sales patent, the Register of Deeds of Davao City issued OCT No. P-2823 to
Bugayong. Bugayong later subdivided the land into four lots, one of which (Lot No. 4159-B
covered by TCT No. T-32770) was sold by him to the spouses Reynaldo Rogacion and Corazon
Pahamotang. After obtaining TCT No. T-37786 in their names, the spouses mortgaged the lot to
the Philippine National Bank (PNB). As they defaulted in the payment of their loan, the PNB
foreclosed the property and purchased it at the foreclosure sale as the highest bidder.
Eventually, the PNB consolidated its title.
Sometime in 1981, upon the petition of the residents of the land, the Bureau of Lands
conducted an investigation into the sales patent issued in favor of Angelito C. Bugayong and
found the sales patent to have been illegally issued because (1) the land was released as
alienable and disposable only on March 25, 1981; previous to that, the land was within the
forest zone; (2) the land is covered by sea water during high tide; and (3) the patentee,
Angelito C. Bugayong, had never been in actual possession of the land.
Based on this investigation, the government instituted the present suit in 1987 for cancellation
of title/patent and reversion of the parcel of land against Angelito C. Bugayong, the Rogacion
spouses, and the PNB, among others.
On July 6, 1996, the trial court rendered a decision declaring OCT No. P-2823 and all titles
derived therefrom null and void and ordering reversion of the subject property to the mass of
the public domain. On appeal, the Court of Appeals affirmed the trial court's decision. Hence,
this petition.
First. Petitioner contends that it had a right to rely on TCT No. T-37786 showing the mortgagors
Reynaldo Rogacion and Corazon Pahamotang's ownership of the property.
The contention is without merit. It is well settled that a certificate of title is void when it covers
property of public domain classified as forest or timber or mineral lands. Any title issued
covering non-disposable lots even in the hands of an alleged innocent purchaser for value shall
be cancelled (Republic v. Reyes, 155 SCRA 313 (1987)).
(Republic v. Court of Appeals, 148 SCRA 480 (1987)). In this case, petitioner does not dispute
that its predecessor-in-interest, Angelito C. Bugayong, had the subject property registered in
his name when it was forest land. Indeed, even if the subject property had been eventually
segregated from the forest zone, neither petitioner nor its predecessors-in-interest could have
possessed the same under claim of ownership for the requisite period of thirty (30) years
because it was released as alienable and disposable only on March 25, 1981.
Second. Petitioner's contention that respondent's action for reversion is barred by prescription
for having been filed nearly two decades after the issuance of Bugayong's sales patent is
likewise without merit. Prescription does not lie against the State for reversion of property
which is part of the public forest or of a forest reservation registered in favor of any party.
Public land registered under the Land Registration Act may be recovered by the State at any
time (Republic v. Court of Appeals, 258 SCRA 223 (1996)).
48

Contrary to the argument of LBP, since the title is void, it could not have become
incontrovertible. Even prescription may not be used as a defense against the Republic. On this
aspect, the Court inReyes v. Court of Appeals,
49
citing Republic v. Court of Appeals,
50
held:
Petitioners' contention that the government is now estopped from questioning the validity of
OCT No. 727 issued to them, considering that it took the government 45 years to assail the
same, is erroneous. We have ruled in a host of cases that prescription does not run against the
government. In point is the case of Republic v. Court of Appeals, wherein we declared:
And in so far as the timeliness of the action of the Government is concerned, it is basic that
prescription does not run against the State x x x. The case law has also been:
When the government is the real party in interest, and is proceeding mainly to assert its own
rights and recover its own property, there can be no defense on the ground of laches or
limitation x x x.
Public land fraudulently included in patents or certificates of title may be recovered or reverted
to the State in accordance with Section 101 of the Public Land Act.Prescription does not lie
against the State in such cases for the Statute of Limitations does not run against the State.
The right of reversion or reconveyance to the State is not barred by prescription. (Emphasis
ours)
There is no impairment of contract but a valid
exercise of police power of the State.
The constitutional guarantee of non-impairment of contracts may not likewise be used by LBP to
validate its interest over the land as mortgagee. The State's restraint upon the right to have an
interest or ownership over forest lands does not violate the constitutional guarantee of non-
impairment of contracts. Said restraint is a valid exercise of the police power of the State. As
explained by the Court in Director of Forestry v. Muoz:
51

The view this Court takes of the cases at bar is but in adherence to public policy that should be
followed with respect to forest lands. Many have written much, and many more have spoken,
and quite often, about the pressing need for forest preservation, conservation, protection,
development and reforestation. Not without justification. For, forests constitute a vital segment
of any country's natural resources. It is of common knowledge by now that absence of the
necessary green cover on our lands produces a number of adverse or ill effects of serious
proportions. Without the trees, watersheds dry up; rivers and lakes which they supply are
emptied of their contents. The fish disappear. Denuded areas become dust bowls. As waterfalls
cease to function, so will hydroelectric plants. With the rains, the fertile topsoil is washed away;
geological erosion results. With erosion come the dreaded floods that wreak havoc and
destruction to property - crops, livestock, houses and highways - not to mention precious
human lives. Indeed, the foregoing observations should be written down in a lumberman's
decalogue.
Because of the importance of forests to the nation, the State's police power has been wielded to
regulate the use and occupancy of forest and forest reserves.
To be sure, the validity of the exercise of police power in the name of the general welfare
cannot be seriously attacked. Our government had definite instructions from the Constitution's
preamble to "promote the general welfare." Jurisprudence has time and again upheld the police
power over individual rights, because of the general welfare. Five decades ago, Mr. Justice
Malcolm made it clear that the "right of the individual is necessarily subject to reasonable
restraint by general law for the common good" and that the "liberty of the citizen may be
restrained in the interest of public health, or of the public order and safety, or otherwise within
the proper scope of the police power." Mr. Justice Laurel, about twenty years later, affirmed the
precept when he declared that "the state in order to promote the general welfare may interfere
with personal liberty, with property, and with business and occupations" and that "[p]ersons
and property may be subjected to all kinds of restraints and burdens, in order to secure the
general comfort, health, and prosperity of the state." Recently, we quoted from leading
American case, which pronounced that "neither property rights nor contract rights are absolute;
for government cannot exist if the citizen may at will use his property to the detriment of his
fellows, or exercise his freedom of contract to work them harm," and that, therefore, "[e]qually
fundamental with the private right is that of the public to regulate it in the common interest."
(Emphasis ours and citations omitted)
In Edu v. Ericta,
52
the Court defined police power as the authority of the state to enact
legislation that may interfere with personal liberty or property in order to promote the general
welfare. It is the power to prescribe regulations to promote the health, morals, peace,
education, good order or safety, and general welfare of the people. It is that inherent and
plenary power of the State which enables it to prohibit all things hurtful to the comfort, safety
and welfare of society.
53
It extends to all the great public needs and is described as the most
pervasive, the least limitable and the most demanding of the three inherent powers of the
State, far outpacing taxation and eminent domain.
54
It is a ubiquitous and often unwelcome
intrusion. Even so, as long as the activity or the property has some relevance to the public
welfare, its regulation under the police power is not only proper but necessary.
55

Preservation of our forest lands could entail intrusion upon contractual rights as in this case but
it is justified by the Latin maxims Salus populi est suprema lex and Sic utere tuo ut alienum non
laedas, which call for the subordination of individual interests to the benefit of the greater
number.
56

While We sympathize with petitioner, We nonetheless cannot, in this instance, yield to
compassion and equity. The rule must stand no matter how harsh it may seem.
57

We cannot resolve the cross-claim for lack of
factual basis. The cross-claim must be remanded
to the RTC for further proceedings.
LBP filed a cross-claim against Lourdes Farms, Inc. before the RTC.
58
The cross-claim is for the
payment of cross-defendant Lourdes Farms, Inc.'s alleged obligation to LBP or its submission of
a substitute collateral security in lieu of the property covered by TCT No. T-57348.
However, the records do not show that Lourdes Farms, Inc. was required by the RTC to file an
answer to the cross-claim. Likewise, Lourdes Farms, Inc. was not notified of the proceedings
before the CA. It was not also made a party to this petition.
LPB now contends that the CA erred in not granting its cross-claim against Lourdes Farms, Inc.
We are thus confronted with the question: Should We now order Lourdes Farms, Inc. to comply
with the demand of LBP?cralawred
We rule in the negative. It may be true that Lourdes Farms, Inc. still has an obligation to LBP
but We cannot make a ruling regarding the same for lack of factual basis. There is no evidence-
taking on the cross-claim. No evidence was adduced before the RTC or the CA regarding it. No
factual finding or ruling was made by the RTC or the CA about it.
It bears stressing that in a Petition for Review on Certiorari, the scope of this Court's judicial
review of decisions of the CA is generally confined only to errors of law. Questions of fact are
not entertained.
59

Moreover, the failure to make a ruling on the cross-claim by the RTC was not assigned as an
error in LBP's appellant's brief
60
before the CA. Hence, the CA cannot be faulted for not making
a ruling on it.
As held in De Liano v. Court of Appeals,
61
appellant has to specify in what aspect of the law or
the facts the trial court erred. The conclusion, therefore, is that appellant must carefully
formulate his assignment of errors. Its importance cannot be underestimated, as Section 8,
Rule 51 of the Rules of Court will attest:
Questions that may be decided. - No error which does not affect the jurisdiction over the
subject matter or the validity of the judgment appealed from or the proceedings therein will be
considered unless stated in the assignment of errors, or closely related to or dependent on an
assigned error and properly argued in the brief, save as the court may pass upon plain errors
and clerical errors.
Apparently, the cross-claim was taken for granted not only by the RTC but also by LBP. The
cross-claim was not included as a subject or issue in the pre-trial order and instead of asking
that the same be heard, LBP filed a motion
62
to submit the main case for resolution. The main
case was thus resolved by the RTC without touching on the merits of the cross-claim.
On the other hand, while the CA did not make a categorical ruling on LBP's cross-claim, it
pointed out that: (1) as found by the RTC, there is a mortgage contract between LBP and
Lourdes Farms, Inc., with LBP as mortgagee and Lourdes Farms, Inc. as mortgagor; and (2)
LBP's proper recourse is to pursue its claim against Lourdes Farms, Inc.
63

The CA thus impliedly ruled that LBP's cross-claim should not be included in this case. Instead
of making a ruling on the same, it recommended that LBP pursue its claim against Lourdes
Farms, Inc.
All told, although the relationship between LBP and Lourdes Farms, Inc. as mortgagee and
mortgagor was established, the cross-claim of LBP against Lourdes Farms, Inc. was left
unresolved.
The Court is not in a position to resolve the cross-claim based on the records. In order for the
cross-claim to be equitably decided, the Court, not being a trier of facts, is constrained to
remand the case to the RTC for further proceedings. Remand of the case for further proceedings
is proper due to absence of a definitive factual determination regarding the cross-claim.
64

WHEREFORE, the appealed Decision of the Court of Appeals is hereby AFFIRMED with
theMODIFICATION that the cross-claim of petitioner Land Bank of the Philippines against
Lourdes Farms, Inc. is REMANDED to the Regional Trial Court, Branch 15, Davao City, for
further proceedings.
SO ORDERED.
Ynares-Santiago, J., Chairperson, Austria-Martinez, Corona, Nachura, JJ., concur.