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ENVI CASES 1

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. L-12691 February 27, 1959

SIMEON T. DAGDAG, plaintiff-appellee,


vs.
VICENTE NEPOMUCENO, ET AL., defendants-appellants.

Jesus Paredes for appellee.


Mariano Sta. Romana for appellants.

BENGZON, J.:

Forwarded by the Court of Appeals, this lawsuit coming from Nueva Ecija, concern a small parcel of land.
Submitted for decision below upon a stipulation of facts, it raises legal questions only.

A portion of Lot No. 3786, Cabanatuan Cadaster (admittedly alienable or disposable public land way back in
1916) is covered by Sales Patent No. 251 issued to Margarita Juanson, and also by lease No. 49 executed by
the Bureau of Lands in favor of Andres de Vera. The overlapping was recently discovered, and their
successors in interest now litigate for possession and/or ownership.

The Sales Patent was inscribed in the office of the Register of Deeds on July 11, 1927, and Original Certificate
of Title No. 68 was accordingly issued in the same of Margarita Juanson, who later sold the land of Remegio
Juanson Bautista (1928), who in turn sold it to Balarian Incorporated (1929). In May 1950, Simeon T. Dagdag
bought it from Balarin, Inc. After every sale, the corresponding Transfer Certificate of Title was given out.

On the other hand, the lease to De Vera signed in June 1916 covered adjoining land of a bigger area. It was
transferred by him to Regino Nepomuceno. Originally for a 25-years period expiring on June 30, 1941, it was
extended for another like period in 1949. Dagdag's title, and those of his predecessors contained no annotation
of such lease, of which neither he nor they any knowledge.

After purchasing the land, Simeon T. Dagdag had it relocated and the portion in question turned out to be in
possession of the heirs of Regino Nepomuceno, appellants herein allegedly by virtue of the lease. The latter
refused to surrender it, even in the face of Dagdag's patent and title, and despite the Director of Lands'
administrative determination in February 1953, practically holding that their contract of lease did not, could not
and should not extend to the area granted to Dagdag's predecessors.

Hence, this judicial proceeding instituted by Dagdag in the Nueva Ecija court of first instance, wherein he was
declared to be the owner of the whole Lot 3786 and entitled to the products thereof. The Honorable Jose N.
Leutrio, Judge, explained that "the sales patent issued in the name of Margarita Juanson having been
registered with the office of the Register of Deeds, and title having been issued by the Register of Deeds in the
name of Margarita Juanson, Lot 3786 was thereafter brought under the operation of the Land Registration Act.
The title issued in the name of Margarita Juanson, Original Certificate of Title No. 68 was free from all liens and
incumbrances. This land was transferred successively, until it was acquired by the plaintiff herein, and the
certificate of title was issued in his name free from any lien or encumbrances, and free from the claim of
Regino Nepomuceno as losses. The plaintiffs herein cannot, therefore, be bound by the fact that Lot 3786 is
within the lease of Andres de Vera which had been transferred to Regino Nepomuceno, the father and
predecessor of the defendants herein. The said lease not having been annotated on the certificate of title, and
it not having been neither proved or alleged that the plaintiff had purchased the land knowing that Lot 3786 is a
portion of the land leased to Andres de Vera which had been acquired by the defendant's predecessors-in-
interest, it cannot prejudice the plaintiff who is presumed to be an innocent purchaser for value. The fact that
the lease in favor of Andres de Vera had been registered, cannot bind and prejudice the plaintiff for Lot 3786
being a registered land, he need not go farther than the title."

The above observations deserve our approval. They conform with our decisions on indefeasibility of public land
patents when registered in the corresponding Register of Deeds Office.1 We regard these to be veritable
Torrens Title subject to no encumbrances except those stated therein, plus those specified by the status (lease
is not one of them).

In addition to the above reason given by his Honor, it should be remembered that when the lease was renewed
in 1949, the portion in question was no longer public land subject to the disposition of the Director of Lands
because it had already been granted to Margarita Juanson and had become private property; therefore, it
could not have beenincluded in the renewal of such lease of public land.

Defendant's position may be summed up, in their own words, as follows:

When the contract of lease of the predecessor of the defendants was duly issued and registered in the
office of the register of deeds of Nueva Ecija, and when the patent for the certificate of sale in favor of
the predecessor of the plaintiff was issued and registered in the said register of deeds of Nueva Ecija,
both documents have the force and effect of registered properties under the land Registration Act as
provided for in . . . (section 122 of the Land Registration Law). . . .

As the titles of the parties have come under the operation of the Land Registration Act, and in case of
overlapping titles, the older title should prevail. The title of the defendants was issued and registered on
June 14, 1916. The title of the plaintiff was registered on August 5, 1927. The title of the
defendants should, therefore prevail, and they should have been declared the owners of the land in
question. (pp. 8-9 Appellants Brief) [Emphasis Ours].

The flaw in their argument lies in the assumption that their lease contract constituted a "title", or deed or
conveyance within the meaning of section 122, which for convenience is quoted below:

Whenever public lands in the Philippine Islands belonging to the Government of the United States or
the Government of the Philippine Islands 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 and shall
become registered lands. It shall be the duty of the officials issuing the instrument of alienation, grant,
or conveyance in behalf of the Government to cause such instrument, before its delivery to the grantee,
to be filed with the register of deeds for the province where the land lies and to be there registered like
other deeds and conveyance, whereupon a certificate shall be entered as in other cases of registered
land, and an owner's duplicate issue to the grantee. The deed, grant, or instrument of conveyance from
the Government to the grantee shall not take effect as a conveyance or bind the land, . . . After due
registration and issue of the certificate and owner's duplicate such shall be registered land for all
purposes under this Act.

Upon carefully reading the above, we think it clear that the documents mentioned, wherein lands are
"alienated, granted, or conveyed", are documents transferring ownership not documents of lease,
transferring mere possession. Observe especially that the statue directs the issuance to the grantee of "an
owner's duplicate certificate". Appellants may not, therefore, assert a title just as good-so they claim-as
appellee's and older besides. So, the Torrens Title of appellee must prevail.

Judgment affirmed, with costs against appellants.

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.

xxx

(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor
of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land reclaimed
by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold, transferred or
otherwise disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine
Thousand Four Hundred Seventy Three (99,473) square meters in the Financial Center Area covered
by land pledge No. 5 and approximately Three Million Three Hundred Eighty Two Thousand Eight
Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at varying elevations above Mean
Low Water Level located outside the Financial Center Area and the First Neighborhood Unit."3

On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and
transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight hundred ninety
four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality of
Paraaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering the
three reclaimed islands known as the "Freedom Islands" located at the southern portion of the Manila-Cavite
Coastal Road, Paraaque City. The Freedom Islands have a total land area of One Million Five Hundred
Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares.

On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a private
corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250
hectares of submerged areas surrounding these islands to complete the configuration in the Master
Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA
through negotiation without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in its Resolution
No. 1245, confirmed the JVA.5 On June 8, 1995, then President Fidel V. Ramos, through then Executive
Secretary Ruben Torres, approved the JVA.6

On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the Senate
and denounced the JVA as the "grandmother of all scams." As a result, the Senate Committee on Government
Corporations and Public Enterprises, and the Committee on Accountability of Public Officers and
Investigations, conducted a joint investigation. The Senate Committees reported the results of their
investigation in Senate Committee Report No. 560 dated September 16, 1997.7 Among the conclusions of their
report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public
domain which the government has not classified as alienable lands and therefore PEA cannot alienate these
lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.

On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No. 365
creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate Committee Report
No. 560. The members of the Legal Task Force were the Secretary of Justice,8 the Chief Presidential Legal
Counsel,9 and the Government Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA,
contrary to the conclusions reached by the Senate Committees.11

On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-going
renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos. According
to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz
composed the negotiating panel of PEA.

On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application for the
Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No. 132994 seeking
to nullify the JVA. The Court dismissed the petition "for unwarranted disregard of judicial hierarchy, without
prejudice to the refiling of the case before the proper court."12

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the instant Petition for
Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order.
Petitioner contends the government stands to lose billions of pesos in the sale by PEA of the reclaimed lands
to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking
Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the people to information
on matters of public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant
violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands of the public
domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in
properties of the State that are of public dominion.

After several motions for extension of time,13 PEA and AMARI filed their Comments on October 19, 1998 and
June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus Motion: (a) to
require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance of a temporary
restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated June 22, 1999.

In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties to file
their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA," for
brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph E.
Estrada approved the Amended JVA.

Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated contract be declared null and void."14

The Issues

The issues raised by petitioner, PEA15 and AMARI16 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
lands sold to private corporations which acquired the lands from private parties. The transferors of the private
corporations claimed or could claim the right to judicial confirmation of their imperfect titles19 under Title
II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case, AMARI seeks to acquire from
PEA, a public corporation, reclaimed lands and submerged areas for non-agricultural purposes
by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI
under the Amended JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim
judicial confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or still
to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and notorious
occupation of agricultural lands of the public domain for at least thirty years since June 12, 1945 or earlier.
Besides, the deadline for filing applications for judicial confirmation of imperfect title expired on December 31,
1987.20

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

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

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

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

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information
without first asking PEA the needed information. PEA claims petitioner's direct resort to the Court violates the
principle of exhaustion of administrative remedies. It also violates the rule that mandamus may issue only if
there is no other plain, speedy and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v. Tuvera23 where the Court granted the petition for
mandamus even if the petitioners there did not initially demand from the Office of the President the publication
of the presidential decrees. PEA points out that in Taada, the Executive Department had an affirmative
statutory duty under Article 2 of the Civil Code24 and Section 1 of Commonwealth Act No. 63825 to publish the
presidential decrees. There was, therefore, no need for the petitioners in Taada to make an initial demand
from the Office of the President. In the instant case, PEA claims it has no affirmative statutory duty to disclose
publicly information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the
principle of exhaustion of administrative remedies to the instant case in view of the failure of petitioner here to
demand initially from PEA the needed information.

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

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

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

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

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

Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,28 the
Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental importance to the
public, thus -

"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an
issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a right to
initiate and prosecute actions questioning the validity of acts or orders of government agencies or
instrumentalities, if the issues raised are of 'paramount public interest,' and if they 'immediately affect
the social, economic and moral well being of the people.'

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

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

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

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

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

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

Fifth issue: whether the constitutional right to information includes official information on on-going
negotiations before a final agreement.

Section 7, Article III of the Constitution explains the people's right to information on matters of public concern in
this manner:

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

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

"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements
a policy of full public disclosure of all its transactions involving public interest." (Emphasis
supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations
of the government, as well as provide the people sufficient information to exercise effectively other
constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the
government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say,
even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are
also essential to hold public officials "at all times x x x accountable to the people,"29 for unless citizens have the
proper information, they cannot hold public officials accountable for anything. Armed with the right information,
citizens can participate in public discussions leading to the formulation of government policies and their
effective implementation. An informed citizenry is essential to the existence and proper functioning of any
democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30

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

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

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

"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts,
agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the
consummation of the contract, or does he refer to the contract itself?

Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both
steps leading to a contract and already a consummated contract, Mr. Presiding Officer.

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

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

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

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

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

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

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

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood that
the right to information "contemplates inclusion of negotiations leading to the consummation of the
transaction."Certainly, a consummated contract is not a requirement for the exercise of the right to
information. Otherwise, the people can never exercise the right if no contract is consummated, and if one is
consummated, it may be too late for the public to expose its defects.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 proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither
an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all
its transactions involving public interest."

The right covers three categories of information which are "matters of public concern," namely: (1) official
records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3) government
research data used in formulating policies. The first category refers to any document that is part of the public
records in the custody of government agencies or officials. The second category refers to documents and
papers recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts,
transactions or decisions of government agencies or officials. The third category refers to research data,
whether raw, collated or processed, owned by the government and used in formulating government policies.

The information that petitioner may access on the renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes of meetings, terms of reference and other documents
attached to such reports or minutes, all relating to the JVA. However, the right to information does not compel
PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of the JVA.34 The right only
affords access to records, documents and papers, which means the opportunity to inspect and copy them. One
who exercises the right must copy the records, documents and papers at his expense. The exercise of the right
is also subject to reasonable regulations to protect the integrity of the public records and to minimize disruption
to government operations, like rules specifying when and how to conduct the inspection and copying.35

The right to information, however, does not extend to matters recognized as privileged information under the
separation of powers.36 The right does not also apply to information on military and diplomatic secrets,
information affecting national security, and information on investigations of crimes by law enforcement
agencies before the prosecution of the accused, which courts have long recognized as confidential.37 The right
may also be subject to other limitations that Congress may impose by law.

There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the
separation of powers. The information does not cover Presidential conversations, correspondences, or
discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme Court and
other collegiate courts, or executive sessions of either house of Congress,38 are recognized as confidential.
This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of
exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is
essential to protect the independence of decision-making of those tasked to exercise Presidential, Legislative
and Judicial power.39 This is not the situation in the instant case.

We rule, therefore, that the constitutional right to information includes official information on on-going
negotiationsbefore a final contract. The information, however, must constitute definite propositions by the
government and should not cover recognized exceptions like privileged information, military and diplomatic
secrets and similar matters affecting national security and public order. 40 Congress has also prescribed other
limitations on the right to information in several legislations.41

Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or
to be reclaimed, violate the Constitution.

The Regalian Doctrine

The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine
which holds that the State owns all lands and waters of the public domain. Upon the Spanish conquest of the
Philippines, ownership of all "lands, territories and possessions" in the Philippines passed to the Spanish
Crown.42 The King, as the sovereign ruler and representative of the people, acquired and owned all lands and
territories in the Philippines except those he disposed of by grant or sale to private individuals.

The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State, in lieu
of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the foundation
of the time-honored principle of land ownership that "all lands that were not acquired from the Government,
either by purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code of 1889, which is
now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine.

Ownership and Disposition of Reclaimed Lands

The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition of
reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654 which
provided for the lease, but not the sale, of reclaimed lands of the government to corporations and
individuals. Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land
Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations
and individuals. On November 7, 1936, the National Assembly passed Commonwealth Act No. 141, also
known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. CA No. 141 continues to this day as the general law governing
the classification and disposition of lands of the public domain.

The Spanish Law of Waters of 1866 and the Civil Code of 1889

Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the maritime
zone of the Spanish territory belonged to the public domain for public use.44 The Spanish Law of Waters of
1866 allowed the reclamation of the sea under Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the
provinces, pueblos or private persons, with proper permission, shall become the property of the party
constructing such works, unless otherwise provided by the terms of the grant of authority."

Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the
reclamation, provided the government issued the necessary permit and did not reserve ownership of the
reclaimed land to the State.

Article 339 of the Civil Code of 1889 defined property of public dominion as follows:

"Art. 339. Property of public dominion is

1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by
the State, riverbanks, shores, roadsteads, and that of a similar character;

2. That belonging exclusively to the State which, without being of general public use, is employed in
some public service, or in the development of the national wealth, such as walls, fortresses, and other
works for the defense of the territory, and mines, until granted to private individuals."

Property devoted to public use referred to property open for use by the public. In contrast, property devoted to
public service referred to property used for some specific public service and open only to those authorized to
use the property.

Property of public dominion referred not only to property devoted to public use, but also to property not so used
but employed to develop the national wealth. This class of property constituted property of public dominion
although employed for some economic or commercial activity to increase the national wealth.

Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into private
property, to wit:

"Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the
territory, shall become a part of the private property of the State."

This provision, however, was not self-executing. The legislature, or the executive department pursuant to law,
must declare the property no longer needed for public use or territorial defense before the government could
lease or alienate the property to private parties.45

Act No. 1654 of the Philippine Commission

On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed and
foreshore lands. The salient provisions of this law were as follows:

"Section 1. The control and disposition of the foreshore as defined in existing law, and the title to
all Government or public lands made or reclaimed by the Government by dredging or filling or
otherwise throughout the Philippine Islands, shall be retained by the Government without prejudice to
vested rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension.

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

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

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

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

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

Act No. 2874 of the Philippine Legislature

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

"Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and
Natural Resources, shall from time to time classify the lands of the public domain into

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

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

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

xxx

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

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

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

(b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable
lakes or rivers;
(d) Lands not included in any of the foregoing classes.

x x x.

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

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

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

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

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

Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands into
other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only lands for
non-agricultural purposes the government could sell to private parties. Thus, under Act No. 2874, the
government could not sell government reclaimed, foreshore and marshy lands to private parties, unless the
legislature passed a law allowing their sale.49

Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of the
Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government permission
remained private lands.

Dispositions under the 1935 Constitution

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

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

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

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

"Section 2. No private corporation or association may acquire, lease, or hold public agricultural
lands in excess of one thousand and twenty four hectares, nor may any individual acquire such
lands by purchase in excess of one hundred and forty hectares, or by lease in excess of one
thousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands
adapted to grazing, not exceeding two thousand hectares, may be leased to an individual, private
corporation, or association." (Emphasis supplied)

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

Commonwealth Act No. 141 of the Philippine National Assembly

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

Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or
disposable"52 lands of the public domain, which prior to such classification are inalienable and outside the
commerce of man. Section 7 of CA No. 141 authorizes the President to "declare what lands are open to
disposition or concession." Section 8 of CA No. 141 states that the government can declare open for
disposition or concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of CA No.
141 read as follows:

"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and
Commerce, shall from time to time classify the lands of the public domain into

(a) Alienable or disposable,


(b) Timber, and

(c) Mineral lands,

and may at any time and in like manner transfer such lands from one class to another, 53 for the purpose
of their administration and disposition.

Sec. 7. For the purposes of the administration and disposition of alienable or disposable public
lands, the President, upon recommendation by the Secretary of Agriculture and Commerce,
shall from time to time declare what lands are open to disposition or concession under this Act.

Sec. 8. Only those lands shall be declared open to disposition or concession which have been
officially delimited and classified and, when practicable, surveyed, and which have not been
reserved for public or quasi-public uses, nor appropriated by the Government, nor in any manner
become private property, nor those on which a private right authorized and recognized by this Act or
any other valid law may be claimed, or which, having been reserved or appropriated, have ceased to be
so. x x x."

Thus, before the government could alienate or dispose of lands of the public domain, the President must first
officially classify these lands as alienable or disposable, and then declare them open to disposition or
concession. There must be no law reserving these lands for public or quasi-public uses.

The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public
domain, are as follows:

"Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is
intended to be used for residential purposes or for commercial, industrial, or other productive
purposes other than agricultural, and is open to disposition or concession, shall be disposed of
under the provisions of this chapter and not otherwise.

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

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

(b) Foreshore;

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

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

Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any
person, corporation, or association authorized to purchase or lease public lands for agricultural
purposes. x x x.

Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of
to private parties by lease only and not otherwise, as soon as the President, upon
recommendation by the Secretary of Agriculture, shall declare that the same are not necessary for
the public service and are open to disposition under this chapter. The lands included in class (d)
may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874
prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public domain. All
these lands are intended for residential, commercial, industrial or other non-agricultural purposes. As before,
Section 61 allowed only the lease of such lands to private parties. The government could sell to private parties
only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural purposes not
classified as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore
lands, however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to
qualified private parties.

Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for residential,
commercial, industrial or other productive purposes other than agricultural "shall be disposed of under the
provisions of this chapter and not otherwise." Under Section 10 of CA No. 141, the term "disposition"
includes lease of the land. Any disposition of government reclaimed, foreshore and marshy disposable lands
for non-agricultural purposes must comply with Chapter IX, Title III of CA No. 141,54 unless a subsequent law
amended or repealed these provisions.

In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of
Appeals,55Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:

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

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

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

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

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

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

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

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

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

In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141,
Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows:

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

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

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

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

The Civil Code of 1950

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

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

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

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

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

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

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

Dispositions under the 1973 Constitution

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

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

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

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

"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development
requirements of the natural resources, shall determine by law the size of land of the public domain
which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or
association, and the conditions therefor. No private corporation or association may hold alienable
lands of the public domain except by lease not to exceed one thousand hectares in area nor may
any citizen hold such lands by lease in excess of five hundred hectares or acquire by purchase,
homestead or grant, in excess of twenty-four hectares. No private corporation or association may hold
by lease, concession, license or permit, timber or forest lands and other timber or forest resources in
excess of one hundred thousand hectares. However, such area may be increased by the Batasang
Pambansa upon recommendation of the National Economic and Development Authority." (Emphasis
supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain only
through lease. Only individuals could now acquire alienable lands of the public domain, and private
corporations became absolutely barred from acquiring any kind of alienable land of the public domain.
The constitutional ban extended to all kinds of alienable lands of the public domain, while the statutory ban
under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable lands of the public
domain.

PD No. 1084 Creating the Public Estates Authority

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

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

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

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

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

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

(a)To prescribe its by-laws.

xxx

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

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

xxx

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

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

The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public domain
did not apply to PEA since it was then, and until today, a fully owned government corporation. The
constitutional ban applied then, as it still applies now, only to "private corporations and associations." PD No.
1084 expressly empowers PEA "to hold lands of the public domain" even "in excess of the area permitted
to private corporations by statute." Thus, PEA can hold title to private lands, as well as title to lands of the
public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there
must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in view
of Section 60 of CA No.141, which states

"Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch or
subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a
manner affecting its title, except when authorized by Congress; x x x." (Emphasis supplied)

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

Dispositions under the 1987 Constitution

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

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

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

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

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

The Rationale behind the Constitutional Ban

The rationale behind the constitutional ban on corporations from acquiring, except through lease, alienable
lands of the public domain is not well understood. During the deliberations of the 1986 Constitutional
Commission, the commissioners probed the rationale behind this ban, thus:

"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:
`No private corporation or association may hold alienable lands of the public domain except by lease,
not to exceed one thousand hectares in area.'

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

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

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

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

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

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

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

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

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

The Amended Joint Venture Agreement

The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three properties,
namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"

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

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

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

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

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

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

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

To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEA's
statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section
3.2.a of the Amended JVA states that

"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation
and Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture
the full and exclusive right, authority and privilege to undertake the Project in accordance with the
Master Development Plan."

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

The Threshold Issue

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

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

xxx

Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain except by
lease, x x x."(Emphasis supplied)

Classification of Reclaimed Foreshore and Submerged Areas

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

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

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

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

x x x.'" (Emphasis supplied)

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

"D. Conclusion

Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of
ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA,
as owner, may validly convey the same to any qualified person without violating the Constitution or any
statute.

The constitutional provision prohibiting private corporations from holding public land, except by lease
(Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands whose ownership has passed
on to PEA by statutory grant."

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

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

xxx

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

xxx

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

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

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

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR
decides whether reclaimed lands of PEA should be classified as alienable under Sections 681 and 782 of CA
No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the
President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public
domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned
Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No.
141.

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

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

Absent two official acts a classification that these lands are alienable or disposable and open to disposition
and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain
inalienable lands of the public domain. Only such an official classification and formal declaration can convert
reclaimed lands into alienable or disposable lands of the public domain, open to disposition under the
Constitution, Title I and Title III83 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 propertiesin accordance with the PEA charter free from constitutional limitations. The
constitutional ban on private corporations from acquiring alienable lands of the public domain does not apply to
the sale of PEA's patrimonial lands.

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

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

The requirement of public auction in the sale of reclaimed lands


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

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

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

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

At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore and
submerged alienable lands of the public domain. Private corporations are barred from bidding at the auction
sale of any kind of alienable land of the public domain.

PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a
condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize the
shape of the Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in favor of the winning
bidder.92 No one, however, submitted a bid. On December 23, 1994, the Government Corporate Counsel
advised PEA it could sell the Freedom Islands through negotiation, without need of another public bidding,
because of the failure of the public bidding on December 10, 1991.93

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

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

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

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

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

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


Projects by the Private Sector. x x x

xxx

In case of land reclamation or construction of industrial estates, the repayment plan may consist of the
grant of a portion or percentage of the reclaimed land or the industrial estate constructed."

Although Section 302 of the Local Government Code does not contain a proviso similar to that of the BOT Law,
the constitutional restrictions on land ownership automatically apply even though not expressly mentioned in
the Local Government Code.

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

Registration of lands of the public domain

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

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

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

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


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

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

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

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

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

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

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

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly
government owned corporation performing public as well as proprietary functions. No patent or certificate of
title has been issued to any private party. No one is asking the Director of Lands to cancel 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.104Alienable 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
hectares110of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the
1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the
public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of still
submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the
1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the
public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the
reclaimed lands as alienable or disposable, and further declare them no longer needed for public
service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void
in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.

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

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

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

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

SO ORDERED.

SECOND DIVISION

REPUBLIC OF THE PHILIPPINES, G.R. No. 134209


Petitioner,
Present:

PUNO, J., Chairperson,


SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
- versus - GARCIA, JJ.

Promulgated:

CELESTINA NAGUIAT, January 24, 2006


Respondent.

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

DECISION
GARCIA, J.:

Before the Court is this petition for review under Rule 45 of the Rules of Court seeking the reversal of
the Decision[1] dated May 29, 1998 of the Court of Appeals (CA) in CA-G.R. CV No. 37001 which affirmed an
earlier decision[2] of the Regional Trial Court at Iba, Zambales, Branch 69 in Land Registration Case No. N-25-
1.
The decision under review recites the factual backdrop, as follows:

This is an application for registration of title to four (4) parcels of land located in Panan, Botolan,
Zambales, more particularly described in the amended application filed by Celestina Naguiat on 29
December 1989 with the Regional Trial Court of Zambales, Branch 69. Applicant [herein respondent]
alleges, inter alia, that she is the owner of the said parcels of land having acquired them by purchase from
the LID Corporation which likewise acquired the same from Demetria Calderon, Josefina Moraga and
Fausto Monje and their predecessors-in-interest who have been in possession thereof for more than thirty
(30) years; and that to the best of her knowledge, said lots suffer no mortgage or encumbrance of
whatever kind nor is there any person having any interest, legal or equitable, or in possession thereof.

On 29 June 1990, the Republic of the Philippines [herein petitioner]. . . filed an opposition to the
application on the ground that neither the applicant nor her predecessors-in interest have been in open,
continuous, exclusive and notorious possession and occupation of the lands in question since 12 June
1945 or prior thereto; that the muniments of title and tax payment receipts of applicant do not constitute
competent and sufficient evidence of a bona-fide acquisition of the lands applied for or of his open,
continuous, exclusive and notorious possession and occupation thereof in the concept of (an) owner; that
the applicants claim of ownership in fee simple on the basis of Spanish title or grant can no longer be
availed of . . .; and that the parcels of land applied for are part of the public domain belonging to the
Republic of the Philippines not subject to private appropriation.

On 15 October 1990, the lower court issued an order of general default as against the whole
world, with the exception of the Office of the Solicitor General, and proceeded with the hearing of this
registration case.

After she had presented and formally offered her evidence . . . applicant rested her case. The
Solicitor General, thru the Provincial Prosecutor, interposed no objection to the admission of the exhibits.
Later . . . the Provincial Prosecutor manifest (sic) that the Government had no evidence to adduce. [3]

In a decision[4] dated September 30, 1991, the trial court rendered judgment for herein respondent
Celestina Naguiat, adjudicating unto her the parcels of land in question and decreeing the registration thereof
in her name, thus:

WHEREFORE, premises considered, this Court hereby adjudicates the parcels of land situated in
Panan, Botolan, Zambales, appearing on Plan AP-03-003447 containing an area of 3,131 square meters,
appearing on Plan AP-03-003446 containing an area of 15,322 containing an area of 15,387 square meters
to herein applicant Celestina T. Naguiat, of legal age, Filipino citizen, married to Rommel Naguiat and a
resident of Angeles City, Pampanga together with all the improvements existing thereon and orders and
decrees registration in her name in accordance with Act No. 496, Commonwealth Act No. 14, [should be
141] as amended, and Presidential Decree No. 1529. This adjudication, however, is subject to the various
easements/reservations provided for under pertinent laws, presidential decrees and/or presidential letters
of instructions which should be annotated/ projected on the title to be issued. And once this decision
becomes final, let the corresponding decree of registration be immediately issued. (Words in bracket
added)

With its motion for reconsideration having been denied by the trial court, petitioner Republic went on
appeal to the CA in CA-G.R. CV No. 37001.

As stated at the outset hereof, the CA, in the herein assailed decision of May 29, 1998, affirmed that of
the trial court, to wit:

WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED.

SO ORDERED.

Hence, the Republics present recourse on its basic submission that the CAs decision is not in
accordance with law, jurisprudence and the evidence, since respondent has not established with the required
evidence her title in fee simple or imperfect title in respect of the subject lots which would warrant their
registration under (P.D. 1529 or Public Land Act (C.A.) 141. In particular, petitioner Republic faults the
appellate court on its finding respecting the length of respondents occupation of the property subject of her
application for registration and for not considering the fact that she has not established that the lands in
question have been declassified from forest or timber zone to alienable and disposable property.

Public forest lands or forest reserves, unless declassified and released by positive act of the Government so
that they may form part of the disposable agricultural lands of the public domain, are not capable of private
appropriation.[5] As to these assets, the rules on confirmation of imperfect title do not apply.[6] Given this
postulate, the principal issue to be addressed turns on the question of whether or not the areas in question
have ceased to have the status of forest or other inalienable lands of the public domain.

Forests, in the context of both the Public Land Act[7] and the Constitution[8] classifying lands of the public
domain into agricultural, forest or timber, mineral lands and national parks, do not necessarily refer to a large
tract of wooded land or an expanse covered by dense growth of trees and underbrush. As we stated in Heirs
of Amunategui -
[9]

A forested area classified as forest land of the public domain does not lose such classification simply
because loggers or settlers have stripped it of its forest cover. Parcels of land classified as forest land may
actually be covered with grass or planted to crops by kaingin cultivators or other farmers. Forest lands do
not have to be on mountains or in out of the way places. xxx. The classification is merely descriptive of
its legal nature or status and does not have to be descriptive of what the land actually looks like. xxx

Under Section 2, Article XII of the Constitution,[10] which embodies the Regalian doctrine, all lands of the public
domain belong to the State the source of any asserted right to ownership of land.[11] All lands not appearing to
be clearly of private dominion presumptively belong to the State.[12] Accordingly, public lands not shown to
have been reclassified or released as alienable agricultural land or alienated to a private person by the State
remain part of the inalienable public domain.[13] Under Section 6 of the Public Land Act, the prerogative of
classifying or reclassifying lands of the public domain, i.e., from forest or mineral to agricultural and vice versa,
belongs to the Executive Branch of the government and not the court.[14] Needless to stress, the onus to
overturn, by incontrovertible evidence, the presumption that the land subject of an application for registration
is alienable or disposable rests with the applicant.[15]
In the present case, the CA assumed that the lands in question are already alienable and disposable. Wrote
the appellate court:

The theory of [petitioner] that the properties in question are lands of the public domain cannot be sustained as it is
directly against the above doctrine. Said doctrine is a reaffirmation of the principle established in the
earlier cases . . . that open, exclusive and undisputed possession of alienable public land for period
prescribed by law creates the legal fiction whereby the land, upon completion of the requisite period, ipso
jure and without the need of judicial or other sanction, ceases to be public land and becomes private
property . (Word in bracket and underscoring added.)

The principal reason for the appellate courts disposition, finding a registerable title for respondent, is her and
her predecessor-in-interests open, continuous and exclusive occupation of the subject property for more than
30 years. Prescinding from its above assumption and finding, the appellate court went on to conclude,
citing Director of Lands vs. Intermediate Appellate Court (IAC)[16] and Herico vs. DAR,[17] among other cases,
that, upon the completion of the requisite period of possession, the lands in question cease to be public land
and become private property.

Director of Lands, Herico and the other cases cited by the CA are not, however, winning cards for the
respondent, for the simple reason that, in said cases, the disposable and alienable nature of the land sought to
be registered was established, or, at least, not put in issue. And there lies the difference.

Here, respondent never presented the required certification from the proper government agency or official
proclamation reclassifying the land applied for as alienable and disposable. Matters of land classification or
reclassification cannot be assumed. It calls for proof.[18] Aside from tax receipts, respondent submitted in
evidence the survey map and technical descriptions of the lands, which, needless to state, provided no
information respecting the classification of the property. As the Court has held, however, these documents are
not sufficient to overcome the presumption that the land sought to be registered forms part of the public
domain.[19]

It cannot be overemphasized that unwarranted appropriation of public lands has been a notorious practice
resorted to in land registration cases.[20] For this reason, the Court has made it a point to stress, when
appropriate, that declassification of forest and mineral lands, as the case may be, and their conversion into
alienable and disposable lands need an express and positive act from the government.[21]

The foregoing considered, the issue of whether or not respondent and her predecessor-in-interest have been
in open, exclusive and continuous possession of the parcels of land in question is now of little moment. For,
unclassified land, as here, cannot be acquired by adverse occupation or possession; occupation thereof in the
concept of owner, however long, cannot ripen into private ownership and be registered as title.[22]
WHEREFORE, the instant petition is GRANTED and the assailed decision dated May 29, 1998 of the
Court of Appeals in CA-G.R. CV No. 37001 is REVERSED and SET ASIDE. Accordingly, respondents
application for original registration of title in Land Registration Case No. N-25-1 of the Regional Trial Court at
Iba, Zambales, Branch 69, is DENIED.
No costs.

SO ORDERED.

EN BANC

[G.R. No. 127882. January 27, 2004]

LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC., represented by its Chairman FLONG MIGUEL M.


LUMAYONG, WIGBERTO E. TAADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R.
CONSTANTINO, JR., FLONG AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE,
SIMEON H. DOLOJO, IMELDA M. GANDON, LENY B. GUSANAN, MARCELO L. GUSANAN,
QUINTOL A. LABUAYAN, LOMINGGES D. LAWAY, BENITA P. TACUAYAN, minors JOLY L.
BUGOY, represented by his father UNDERO D. BUGOY, ROGER M. DADING, represented by his
father ANTONIO L. DADING, ROMY M. LAGARO, represented by his father TOTING A. LAGARO,
MIKENY JONG B. LUMAYONG, represented by his father MIGUEL M. LUMAYONG, RENE T.
MIGUEL, represented by his mother EDITHA T. MIGUEL, ALDEMAR L. SAL, represented by his
father DANNY M. SAL, DAISY RECARSE, represented by her mother LYDIA S. SANTOS,
EDWARD M. EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL, ALDEN S. TUSAN, AMPARO S.
YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN CARLO CULAR,
VIRGILIO CULAR, JR., represented by their father VIRGILIO CULAR, PAUL ANTONIO P.
VILLAMOR, represented by his parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA
GININA R. TALJA, represented by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN,
represented by her father ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III, represented by
his mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, represented by his father MANUEL E.
NARVADEZ, JR., ROSERIO MARALAG LINGATING, represented by her father RIO OLIMPIO A.
LINGATING, MARIO JOSE B. TALJA, DAVID E. DE VERA, MARIA MILAGROS L. SAN JOSE, SR.,
SUSAN O. BOLANIO, OND, LOLITA G. DEMONTEVERDE, BENJIE L. NEQUINTO, [1] ROSE LILIA S.
ROMANO, ROBERTO S. VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA,
represented by his father ELPIDIO V. PERIA,[2] GREEN FORUM PHILIPPINES, GREEN FORUM
WESTERN VISAYAS, (GF-WV), ENVIRONMETAL LEGAL ASSISTANCE CENTER (ELAC),
PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG
PANSAKAHAN (KAISAHAN),[3] KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT
REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and
RURAL DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PART`NERSHIP FOR THE
DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA), WOMENS
LEGAL BUREAU (WLB), CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI),
UPLAND DEVELOPMENT INSTITUTE (UDI), KINAIYAHAN FOUNDATION, INC., SENTRO NG
ALTERNATIBONG LINGAP PANLIGAL (SALIGAN), LEGAL RIGHTS AND NATURAL RESOURCES
CENTER, INC. (LRC), petitioners, vs. VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES (DENR), HORACIO RAMOS, DIRECTOR, MINES
AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES, EXECUTIVE SECRETARY, and
WMC (PHILIPPINES), INC. [4] respondents.

DECISION
CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of Republic Act No.
7942,[5] otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and
Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR)
Administrative Order 96-40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on
March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a corporation
organized under Philippine laws.
On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 279 [6] authorizing
the DENR Secretary to

accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts or agreements
involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals,
which, upon appropriate recommendation of the Secretary, the President may execute with the foreign proponent. In
entering into such proposals, the President shall consider the real contributions to the economic growth and general
welfare of the country that will be realized, as well as the development and use of local scientific and technical resources
that will be promoted by the proposed contract or agreement. Until Congress shall determine otherwise, large-scale
mining, for purpose of this Section, shall mean those proposals for contracts or agreements for mineral resources
exploration, development, and utilization involving a committed capital investment in a single mining unit project of at
least Fifty Million Dollars in United States Currency (US $50,000,000.00).[7]

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to govern the exploration,
development, utilization and processing of all mineral resources.[8] R.A. No. 7942 defines the modes of mineral
agreements for mining operations,[9] outlines the procedure for their filing and
approval, assignment/transfer and withdrawal,[12] and fixes their terms.[13]Similar provisions govern
[10] [11]

financial or technical assistance agreements.[14]


The law prescribes the qualifications of contractors[15] and grants them certain rights, including
timber,[16] water[17] and easement[18] rights, and the right to possess explosives.[19] Surface owners, occupants,
or concessionaires are forbidden from preventing holders of mining rights from entering private lands and
concession areas.[20] A procedure for the settlement of conflicts is likewise provided for. [21]
The Act restricts the conditions for exploration,[22] quarry[23] and other[24] permits. It regulates the transport,
sale and processing of minerals,[25] and promotes the development of mining communities, science and mining
technology,[26] and safety and environmental protection.[27]
The governments share in the agreements is spelled out and allocated, [28] taxes and fees are
imposed,[29] incentives granted.[30] Aside from penalizing certain acts,[31] the law likewise specifies grounds for
the cancellation, revocation and termination of agreements and permits.[32]
On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and Manila Times, two
newspapers of general circulation, R.A. No. 7942 took effect.[33]
Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the President entered
into an FTAA with WMCP covering 99,387 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur
and North Cotabato.[34]
On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO)
No. 95-23, s. 1995, otherwise known as the Implementing Rules and Regulations of R.A. No. 7942. This was
later repealed by DAO No. 96-40, s. 1996 which was adopted on December 20, 1996.
On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary demanding that the
DENR stop the implementation of R.A. No. 7942 and DAO No. 96-40,[35] giving the DENR fifteen days from
receipt[36] to act thereon. The DENR, however, has yet to respond or act on petitioners letter.[37]
Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary
restraining order. They allege that at the time of the filing of the petition, 100 FTAA applications had already
been filed, covering an area of 8.4 million hectares,[38] 64 of which applications are by fully foreign-owned
corporations covering a total of 5.8 million hectares, and at least one by a fully foreign-owned mining company
over offshore areas.[39]
Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:
I

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter
being unconstitutional in that it allows fully foreign owned corporations to explore, develop, utilize and exploit mineral
resources in a manner contrary to Section 2, paragraph 4, Article XII of the Constitution;

II

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter
being unconstitutional in that it allows the taking of private property without the determination of public use and for just
compensation;

III

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter
being unconstitutional in that it violates Sec. 1, Art. III of the Constitution;

IV

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter
being unconstitutional in that it allows enjoyment by foreign citizens as well as fully foreign owned corporations of the
nations marine wealth contrary to Section 2, paragraph 2 of Article XII of the Constitution;

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter
being unconstitutional in that it allows priority to foreign and fully foreign owned corporations in the exploration,
development and utilization of mineral resources contrary to Article XII of the Constitution;

VI

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter
being unconstitutional in that it allows the inequitable sharing of wealth contrary to Sections [sic] 1, paragraph 1, and
Section 2, paragraph 4[,] [Article XII] of the Constitution;

VII

x x x in recommending approval of and implementing the Financial and Technical Assistance Agreement between the
President of the Republic of the Philippines and Western Mining Corporation Philippines Inc. because the same is illegal
and unconstitutional.[40]

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or Technical Assistance Agreements;
(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null and void;

(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act contained in DENR Administrative
Order No. 96-40 and all other similar administrative issuances as unconstitutional and null and void; and

(d) Cancelling the Financial and Technical Assistance Agreement issued to Western Mining Philippines, Inc. as
unconstitutional, illegal and null and void.[41]

Impleaded as public respondents are Ruben Torres, the then Executive Secretary, Victor O. Ramos, the
then DENR Secretary, and Horacio Ramos, Director of the Mines and Geosciences Bureau of the DENR. Also
impleaded is private respondent WMCP, which entered into the assailed FTAA with the Philippine
Government. WMCP is owned by WMC Resources International Pty., Ltd. (WMC), a wholly owned subsidiary
of Western Mining Corporation Holdings Limited, a publicly listed major Australian mining and exploration
company.[42] By WMCPs information, it is a 100% owned subsidiary of WMC LIMITED.[43]
Respondents, aside from meeting petitioners contentions, argue that the requisites for judicial inquiry have
not been met and that the petition does not comply with the criteria for prohibition and mandamus. Additionally,
respondent WMCP argues that there has been a violation of the rule on hierarchy of courts.
After petitioners filed their reply, this Court granted due course to the petition. The parties have since filed
their respective memoranda.
WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on January 23, 2001,
WMC sold all its shares in WMCP to Sagittarius Mines, Inc. (Sagittarius), a corporation organized under
Philippine laws.[44] WMCP was subsequently renamed Tampakan Mineral Resources Corporation.[45] WMCP
claims that at least 60% of the equity of Sagittarius is owned by Filipinos and/or Filipino-owned corporations
while about 40% is owned by Indophil Resources NL, an Australian company.[46] It further claims that by such
sale and transfer of shares, WMCP has ceased to be connected in any way with WMC.[47]
By virtue of such sale and transfer, the DENR Secretary, by Order of December 18, 2001, [48] approved the
transfer and registration of the subject FTAA from WMCP to Sagittarius. Said Order, however, was appealed
by Lepanto Consolidated Mining Co. (Lepanto) to the Office of the President which upheld it by Decision of
July 23, 2002.[49] Its motion for reconsideration having been denied by the Office of the President by Resolution
of November 12, 2002,[50] Lepanto filed a petition for review[51] before the Court of Appeals. Incidentally, two
other petitions for review related to the approval of the transfer and registration of the FTAA to Sagittarius were
recently resolved by this Court.[52]
It bears stressing that this case has not been rendered moot either by the transfer and registration of the
FTAA to a Filipino-owned corporation or by the non-issuance of a temporary restraining order or a preliminary
injunction to stay the above-said July 23, 2002 decision of the Office of the President.[53] The validity of the
transfer remains in dispute and awaits final judicial determination. This assumes, of course, that such transfer
cures the FTAAs alleged unconstitutionality, on which question judgment is reserved.
WMCP also points out that the original claimowners of the major mineralized areas included in the WMCP
FTAA, namely, Sagittarius, Tampakan Mining Corporation, and Southcot Mining Corporation, are all Filipino-
owned corporations,[54] each of which was a holder of an approved Mineral Production Sharing Agreement
awarded in 1994, albeit their respective mineral claims were subsumed in the WMCP FTAA; [55] and that these
three companies are the same companies that consolidated their interests in Sagittarius to whom WMC sold its
100% equity in WMCP.[56] WMCP concludes that in the event that the FTAA is invalidated, the MPSAs of the
three corporations would be revived and the mineral claims would revert to their original claimants. [57]
These circumstances, while informative, are hardly significant in the resolution of this case, it involving the
validity of the FTAA, not the possible consequences of its invalidation.
Of the above-enumerated seven grounds cited by petitioners, as will be shown later, only the first and the
last need be delved into; in the latter, the discussion shall dwell only insofar as it questions the effectivity of E.
O. No. 279 by virtue of which order the questioned FTAA was forged.
I
Before going into the substantive issues, the procedural questions posed by respondents shall first be
tackled.

REQUISITES FOR JUDICIAL REVIEW

When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the
following requisites are present:
(1) The existence of an actual and appropriate case;
(2) A personal and substantial interest of the party raising the constitutional question;
(3) The exercise of judicial review is pleaded at the earliest opportunity; and
(4) The constitutional question is the lis mota of the case. [58]
Respondents claim that the first three requisites are not present.
Section 1, Article VIII of the Constitution states that (j)udicial power includes the duty of the courts of
justice to settle actual controversies involving rights which are legally demandable and enforceable. The power
of judicial review, therefore, is limited to the determination of actual cases and controversies.[59]
An actual case or controversy means an existing case or controversy that is appropriate or ripe for
determination, not conjectural or anticipatory,[60] lest the decision of the court would amount to an advisory
opinion.[61] The power does not extend to hypothetical questions[62] since any attempt at abstraction could only
lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.[63]
Legal standing or locus standi has been defined as a personal and substantial interest in the case such
that the party has sustained or will sustain direct injury as a result of the governmental act that is being
challenged,[64] alleging more than a generalized grievance.[65] The gist of the question of standing is whether a
party alleges such personal stake in the outcome of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues upon which the court depends for illumination of difficult
constitutional questions.[66] Unless a person is injuriously affected in any of his constitutional rights by the
operation of statute or ordinance, he has no standing.[67]
Petitioners traverse a wide range of sectors. Among them are La Bugal Blaan Tribal Association, Inc., a
farmers and indigenous peoples cooperative organized under Philippine laws representing a community
actually affected by the mining activities of WMCP, members of said cooperative,[68] as well as other residents
of areas also affected by the mining activities of WMCP. [69] These petitioners have standing to raise the
constitutionality of the questioned FTAA as they allege a personal and substantial injury. They claim that they
would suffer irremediable displacement[70] as a result of the implementation of the FTAA allowing WMCP to
conduct mining activities in their area of residence. They thus meet the appropriate case requirement as they
assert an interest adverse to that of respondents who, on the other hand, insist on the FTAAs validity.
In view of the alleged impending injury, petitioners also have standing to assail the validity of E.O. No.
279, by authority of which the FTAA was executed.
Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue either or both
contracting parties to annul it.[71] In other words, they contend that petitioners are not real parties in interest in
an action for the annulment of contract.
Public respondents contention fails. The present action is not merely one for annulment of contract but for
prohibition and mandamus. Petitioners allege that public respondents acted without or in excess of jurisdiction
in implementing the FTAA, which they submit is unconstitutional. As the case involves constitutional questions,
this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal
standing. As held in Kilosbayan v. Morato:[72]

x x x. It is important to note . . . that standing because of its constitutional and public policy underpinnings, is very
different from questions relating to whether a particular plaintiff is the real party in interest or has capacity to
sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an action,
standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper
role of the judiciary in certain areas.[] (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985])

Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been
personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who
actually sue in the public interest. Hence, the question in standing is whether such parties have alleged such a personal
stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of difficult constitutional questions. (Baker v. Carr, 369 U.S.
186, 7 L.Ed.2d 633 [1962].)

As earlier stated, petitioners meet this requirement.


The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40 likewise fulfills the
requisites of justiciability. Although these laws were not in force when the subject FTAA was entered into, the
question as to their validity is ripe for adjudication.
The WMCP FTAA provides:

14.3 Future Legislation

Any term and condition more favourable to Financial &Technical Assistance Agreement contractors
resulting from repeal or amendment of any existing law or regulation or from the enactment of a law,
regulation or administrative order shall be considered a part of this Agreement.

It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more favorable to WMCP,
hence, these laws, to the extent that they are favorable to WMCP, govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing agreements.

SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. x x x That the provisions of Chapter XIV on
government share in mineral production-sharing agreement and of Chapter XVI on incentives of this Act shall
immediately govern and apply to a mining lessee or contractor unless the mining lessee or contractor indicates his
intention to the secretary, in writing, not to avail of said provisions x x xProvided, finally, That such leases, production-
sharing agreements, financial or technical assistance agreements shall comply with the applicable provisions of this Act
and its implementing rules and regulations.

As there is no suggestion that WMCP has indicated its intention not to avail of the provisions of Chapter XVI of
R.A. No. 7942, it can safely be presumed that they apply to the WMCP FTAA.
Misconstruing the application of the third requisite for judicial review that the exercise of the review is
pleaded at the earliest opportunity WMCP points out that the petition was filed only almost two years after the
execution of the FTAA, hence, not raised at the earliest opportunity.
The third requisite should not be taken to mean that the question of constitutionality must be raised
immediately after the execution of the state action complained of. That the question of constitutionality has not
been raised before is not a valid reason for refusing to allow it to be raised later.[73] A contrary rule would mean
that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party
to promptly file a case to challenge the same.

PROPRIETY OF PROHIBITION
AND MANDAMUS

Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule 65 read:
SEC. 2. Petition for prohibition. When the proceedings of any tribunal, corporation, board, or person, whether exercising
functions judicial or ministerial, are without or in excess of its or his jurisdiction, or with grave abuse of discretion, 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 defendant to desist from further proceeding in the action or matter specified therein.

Prohibition is a preventive remedy.[74] It seeks a judgment ordering the defendant to desist from continuing
with the commission of an act perceived to be illegal.[75]
The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself
may be fait accompli, its implementation is not. Public respondents, in behalf of the Government, have
obligations to fulfill under said contract. Petitioners seek to prevent them from fulfilling such obligations on the
theory that the contract is unconstitutional and, therefore, void.
The propriety of a petition for prohibition being upheld, discussion of the propriety of the mandamus aspect
of the petition is rendered unnecessary.

HIERARCHY OF COURTS

The contention that the filing of this petition violated the rule on hierarchy of courts does not likewise
lie. The rule has been explained thus:

Between two courts of concurrent original jurisdiction, it is the lower court that should initially pass upon the issues of a
case. That way, as a particular case goes through the hierarchy of courts, it is shorn of all but the important legal issues or
those of first impression, which are the proper subject of attention of the appellate court. This is a procedural rule borne of
experience and adopted to improve the administration of justice.

This Court has consistently enjoined litigants to respect the hierarchy of courts. Although this Court has concurrent
jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give a party unrestricted
freedom of choice of court forum. The resort to this Courts primary jurisdiction to issue said writs shall be allowed only
where the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify such invocation. We held in People v. Cuaresma that:

A becoming regard for 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 where there are special and important reasons therefor, clearly and specifically set out in the
petition. This is established policy. It is a policy 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 x x x.[76] [Emphasis supplied.]

The repercussions of the issues in this case on the Philippine mining industry, if not the national economy,
as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this
Court in the first instance.
In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the
requirements of an actual case or legal standing when paramount public interest is involved. [77] When the
issues raised are of paramount importance to the public, this Court may brush aside technicalities of
procedure.[78]
II
Petitioners contend that E.O. No. 279 did not take effect because its supposed date of effectivity came
after President Aquino had already lost her legislative powers under the Provisional Constitution.
And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates
Section 2, Article XII of the Constitution because, among other reasons:
(1) It allows foreign-owned companies to extend more than mere financial or technical assistance to the
State in the exploitation, development, and utilization of minerals, petroleum, and other mineral oils, and even
permits foreign owned companies to operate and manage mining activities.
(2) It allows foreign-owned companies to extend both technical and financial assistance, instead
of either technical or financial assistance.
To appreciate the import of these issues, a visit to the history of the pertinent constitutional provision, the
concepts contained therein, and the laws enacted pursuant thereto, is in order.
Section 2, Article XII reads in full:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the
exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision of the State. The State may directly
undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone,
and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative
fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and
technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days
from its execution.

THE SPANISH REGIME


AND THE REGALIAN DOCTRINE

The first sentence of Section 2 embodies the Regalian doctrine or jura regalia. Introduced by Spain into
these Islands, this feudal concept is based on the States power of dominium, which is the capacity of the State
to own or acquire property.[79]

In its broad sense, the term jura regalia refers to royal rights, or those rights which the King has by virtue of his
prerogatives. In Spanish law, it refers to a right which the sovereign has over anything in which a subject has a right of
property or propriedad. These were rights enjoyed during feudal times by the king as the sovereign.

The theory of the feudal system was that title to all lands was originally held by the King, and while the use of lands was
granted out to others who were permitted to hold them under certain conditions, the King theoretically retained the
title. By fiction of law, the King was regarded as the original proprietor of all lands, and the true and only source of title,
and from him all lands were held. The theory of jura regalia was therefore nothing more than a natural fruit of
conquest.[80]

The Philippines having passed to Spain by virtue of discovery and conquest, [81] earlier Spanish decrees
declared that all lands were held from the Crown.[82]
The Regalian doctrine extends not only to land but also to all natural wealth that may be found in the
bowels of the earth.[83] Spain, in particular, recognized the unique value of natural resources, viewing them,
especially minerals, as an abundant source of revenue to finance its wars against other nations. [84] Mining laws
during the Spanish regime reflected this perspective.[85]

THE AMERICAN OCCUPATION AND


THE CONCESSION REGIME

By the Treaty of Paris of December 10, 1898, Spain ceded the archipelago known as the Philippine
Islands to the United States. The Philippines was hence governed by means of organic acts that were in the
nature of charters serving as a Constitution of the occupied territory from 1900 to 1935. [86] Among the principal
organic acts of the Philippines was the Act of Congress of July 1, 1902, more commonly known as
the Philippine Bill of 1902, through which the United States Congress assumed the administration of the
Philippine Islands.[87] Section 20 of said Bill reserved the disposition of mineral lands of the public domain from
sale. Section 21 thereof allowed the free and open exploration, occupation and purchase of mineral deposits
not only to citizens of the Philippine Islands but to those of the United States as well:

Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands, both surveyed and unsurveyed, are
hereby declared to be free and open to exploration, occupation and purchase, and the land in which they are found, to
occupation and purchase, by citizens of the United States or of said Islands: Provided, That when on any lands in said
Islands entered and occupied as agricultural lands under the provisions of this Act, but not patented, mineral deposits have
been found, the working of such mineral deposits is forbidden until the person, association, or corporation who or which
has entered and is occupying such lands shall have paid to the Government of said Islands such additional sum or sums as
will make the total amount paid for the mineral claim or claims in which said deposits are located equal to the amount
charged by the Government for the same as mineral claims.

Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and
saw fit to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant
patents to private mineral lands.[88] A person who acquired ownership over a parcel of private mineral land
pursuant to the laws then prevailing could exclude other persons, even the State, from exploiting minerals
within his property.[89] Thus, earlier jurisprudence[90] held that:

A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of the statutes of the
United States, has the effect of a grant by the United States of the present and exclusive possession of the lands located,
and this exclusive right of possession and enjoyment continues during the entire life of the location. x x x.

x x x.

The discovery of minerals in the ground by one who has a valid mineral location perfects his claim and his location not
only against third persons, but also against the Government. x x x. [Italics in the original.]

The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the
Regalian theory, mineral rights are not included in a grant of land by the state; under the American doctrine,
mineral rights are included in a grant of land by the government.[91]
Section 21 also made possible the concession (frequently styled permit, license or
lease)[92] system.[93] This was the traditional regime imposed by the colonial administrators for the exploitation
of natural resources in the extractive sector (petroleum, hard minerals, timber, etc.).[94]
Under the concession system, the concessionaire makes a direct equity investment for the purpose of
exploiting a particular natural resource within a given area.[95] Thus, the concession amounts to complete
control by the concessionaire over the countrys natural resource, for it is given exclusive and plenary rights to
exploit a particular resource at the point of extraction.[96] In consideration for the right to exploit a natural
resource, the concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds. [97]
Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual
framework of the concession.[98] For instance, Act No. 2932,[99] approved on August 31, 1920, which provided
for the exploration, location, and lease of lands containing petroleum and other mineral oils and gas in the
Philippines, and Act No. 2719,[100] approved on May 14, 1917, which provided for the leasing and development
of coal lands in the Philippines, both utilized the concession system.[101]

THE 1935 CONSTITUTION AND THE


NATIONALIZATION OF NATURAL RESOURCES

By the Act of United States Congress of March 24, 1934, popularly known as the Tydings-McDuffie Law,
the People of the Philippine Islands were authorized to adopt a constitution.[102] On July 30, 1934, the
Constitutional Convention met for the purpose of drafting a constitution, and the Constitution subsequently
drafted was approved by the Convention on February 8, 1935.[103] The Constitution was submitted to the
President of the United States on March 18, 1935.[104] On March 23, 1935, the President of the United States
certified that the Constitution conformed substantially with the provisions of the Act of Congress approved on
March 24, 1934.[105] On May 14, 1935, the Constitution was ratified by the Filipino people.[106]
The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines,
including mineral lands and minerals, to be property belonging to the State.[107]As adopted in a republican
system, the medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested
in the State.[108]
Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935 Constitution
provided:

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, 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.

The nationalization and conservation of the natural resources of the country was one of the fixed and
dominating objectives of the 1935 Constitutional Convention.[109] One delegate relates:

There was an overwhelming sentiment in the Convention in favor of the principle of state ownership of natural resources
and the adoption of the Regalian doctrine. State ownership of natural resources was seen as a necessary starting point to
secure recognition of the states power to control their disposition, exploitation, development, or utilization. The delegates
of the Constitutional Convention very well knew that the concept of State ownership of land and natural resources was
introduced by the Spaniards, however, they were not certain whether it was continued and applied by the Americans. To
remove all doubts, the Convention approved the provision in the Constitution affirming the Regalian doctrine.

The adoption of the principle of state ownership of the natural resources and of the Regalian doctrine was considered to be
a necessary starting point for the plan of nationalizing and conserving the natural resources of the country. For with the
establishment of the principle of state ownership of the natural resources, it would not be hard to secure the recognition of
the power of the State to control their disposition, exploitation, development or utilization.[110]
The nationalization of the natural resources was intended (1) to insure their conservation for Filipino
posterity; (2) to serve as an instrument of national defense, helping prevent the extension to the country of
foreign control through peaceful economic penetration; and (3) to avoid making the Philippines a source of
international conflicts with the consequent danger to its internal security and independence.[111]
The same Section 1, Article XIII also adopted the concession system, expressly permitting the State to
grant licenses, concessions, or leases for the exploitation, development, or utilization of any of the natural
resources. Grants, however, were limited to Filipinos or entities at least 60% of the capital of which is owned by
Filipinos.
The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November
1946, the Parity Amendment, which came in the form of an Ordinance Appended to the Constitution, was
ratified in a plebiscite.[112] The Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and
exploit our natural resources to citizens of the United States and business enterprises owned or controlled,
directly or indirectly, by citizens of the United States:[113]

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing
Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the
President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of
Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen
hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and
mineral lands of the public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of
potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any
person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or
indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens
of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as
the Laurel-Langley Agreement, embodied in Republic Act No. 1355.[114]

THE PETROLEUM ACT OF 1949


AND THE CONCESSION SYSTEM

In the meantime, Republic Act No. 387,[115] also known as the Petroleum Act of 1949, was approved on
June 18, 1949.
The Petroleum Act of 1949 employed the concession system for the exploitation of the nations petroleum
resources. Among the kinds of concessions it sanctioned were exploration and exploitation concessions, which
respectively granted to the concessionaire the exclusive right to explore for[116] or develop[117] petroleum within
specified areas.
Concessions may be granted only to duly qualified persons[118] who have sufficient finances, organization,
resources, technical competence, and skills necessary to conduct the operations to be undertaken.[119]
Nevertheless, the Government reserved the right to undertake such work itself. [120] This proceeded from
the theory that all natural deposits or occurrences of petroleum or natural gas in public and/or private lands in
the Philippines belong to the State.[121] Exploration and exploitation concessions did not confer upon the
concessionaire ownership over the petroleum lands and petroleum deposits.[122] However, they did grant
concessionaires the right to explore, develop, exploit, and utilize them for the period and under the conditions
determined by the law.[123]
Concessions were granted at the complete risk of the concessionaire; the Government did not guarantee
the existence of petroleum or undertake, in any case, title warranty.[124]
Concessionaires were required to submit information as maybe required by the Secretary of Agriculture
and Natural Resources, including reports of geological and geophysical examinations, as well as production
reports.[125] Exploration[126] and exploitation[127] concessionaires were also required to submit work programs.
Exploitation concessionaires, in particular, were obliged to pay an annual exploitation tax,[128] the object of
which is to induce the concessionaire to actually produce petroleum, and not simply to sit on the concession
without developing or exploiting it.[129] These concessionaires were also bound to pay the Government royalty,
which was not less than 12% of the petroleum produced and saved, less that consumed in the operations of
the concessionaire.[130] Under Article 66, R.A. No. 387, the exploitation tax may be credited against the
royalties so that if the concessionaire shall be actually producing enough oil, it would not actually be paying the
exploitation tax.[131]
Failure to pay the annual exploitation tax for two consecutive years,[132] or the royalty due to the
Government within one year from the date it becomes due,[133] constituted grounds for the cancellation of the
concession. In case of delay in the payment of the taxes or royalty imposed by the law or by the concession, a
surcharge of 1% per month is exacted until the same are paid.[134]
As a rule, title rights to all equipment and structures that the concessionaire placed on the land belong to
the exploration or exploitation concessionaire.[135] Upon termination of such concession, the concessionaire
had a right to remove the same.[136]
The Secretary of Agriculture and Natural Resources was tasked with carrying out the provisions of the law,
through the Director of Mines, who acted under the Secretarys immediate supervision and control. [137] The Act
granted the Secretary the authority to inspect any operation of the concessionaire and to examine all the books
and accounts pertaining to operations or conditions related to payment of taxes and royalties.[138]
The same law authorized the Secretary to create an Administration Unit and a Technical Board.[139] The
Administration Unit was charged, inter alia, with the enforcement of the provisions of the law. [140] The Technical
Board had, among other functions, the duty to check on the performance of concessionaires and to determine
whether the obligations imposed by the Act and its implementing regulations were being complied with. [141]
Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development, analyzed the
benefits and drawbacks of the concession system insofar as it applied to the petroleum industry:

Advantages of Concession. Whether it emphasizes income tax or royalty, the most positive aspect of the concession
system is that the States financial involvement is virtually risk free and administration is simple and comparatively low in
cost. Furthermore, if there is a competitive allocation of the resource leading to substantial bonuses and/or greater royalty
coupled with a relatively high level of taxation, revenue accruing to the State under the concession system may compare
favorably with other financial arrangements.

Disadvantages of Concession. There are, however, major negative aspects to this system. Because the Governments role
in the traditional concession is passive, it is at a distinct disadvantage in managing and developing policy for the nations
petroleum resource. This is true for several reasons. First, even though most concession agreements contain covenants
requiring diligence in operations and production, this establishes only an indirect and passive control of the host country
in resource development. Second, and more importantly, the fact that the host country does not directly participate in
resource management decisions inhibits its ability to train and employ its nationals in petroleum development. This factor
could delay or prevent the country from effectively engaging in the development of its resources. Lastly, a direct role in
management is usually necessary in order to obtain a knowledge of the international petroleum industry which is
important to an appreciation of the host countrys resources in relation to those of other countries.[142]

Other liabilities of the system have also been noted:

x x x there are functional implications which give the concessionaire great economic power arising from its exclusive
equity holding. This includes, first, appropriation of the returns of the undertaking, subject to a modest royalty; second,
exclusive management of the project; third, control of production of the natural resource, such as volume of production,
expansion, research and development; and fourth, exclusive responsibility for downstream operations, like processing,
marketing, and distribution. In short, even if nominally, the state is the sovereign and owner of the natural resource being
exploited, it has been shorn of all elements of control over such natural resource because of the exclusive nature of the
contractual regime of the concession. The concession system, investing as it does ownership of natural resources,
constitutes a consistent inconsistency with the principle embodied in our Constitution that natural resources belong to the
state and shall not be alienated, not to mention the fact that the concession was the bedrock of the colonial system in the
exploitation of natural resources.[143]
Eventually, the concession system failed for reasons explained by Dimagiba:

Notwithstanding the good intentions of the Petroleum Act of 1949, the concession system could not have properly spurred
sustained oil exploration activities in the country, since it assumed that such a capital-intensive, high risk venture could be
successfully undertaken by a single individual or a small company. In effect, concessionaires funds were easily
exhausted. Moreover, since the concession system practically closed its doors to interested foreign investors, local capital
was stretched to the limits. The old system also failed to consider the highly sophisticated technology and expertise
required, which would be available only to multinational companies.[144]

A shift to a new regime for the development of natural resources thus seemed imminent.

PRESIDENTIAL DECREE NO. 87, THE 1973


CONSTITUTION AND THE SERVICE CONTRACT SYSTEM

The promulgation on December 31, 1972 of Presidential Decree No. 87,[145] otherwise known as THE OIL
EXPLORATION AND DEVELOPMENT ACT OF 1972 signaled such a transformation. P.D. No. 87 permitted
the government to explore for and produce indigenous petroleum through service contracts.[146]
Service contracts is a term that assumes varying meanings to different people, and it has carried many
names in different countries, like work contracts in Indonesia, concession agreements in Africa, production-
sharing agreements in the Middle East, and participation agreements in Latin America. [147] A functional
definition of service contracts in the Philippines is provided as follows:

A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum, mineral,
energy, land and other natural resources by which a government or its agency, or a private person granted a right or
privilege by the government authorizes the other party (service contractor) to engage or participate in the exercise of such
right or the enjoyment of the privilege, in that the latter provides financial or technical resources, undertakes the
exploitation or production of a given resource, or directly manages the productive enterprise, operations of the exploration
and exploitation of the resources or the disposition of marketing or resources.[148]

In a service contract under P.D. No. 87, service and technology are furnished by the service contractor for
which it shall be entitled to the stipulated service fee.[149] The contractor must be technically competent and
financially capable to undertake the operations required in the contract.[150]
Financing is supposed to be provided by the Government to which all petroleum produced belongs. [151] In
case the Government is unable to finance petroleum exploration operations, the contractor may furnish
services, technology and financing, and the proceeds of sale of the petroleum produced under the contract
shall be the source of funds for payment of the service fee and the operating expenses due the
contractor.[152] The contractor shall undertake, manage and execute petroleum operations, subject to the
government overseeing the management of the operations.[153] The contractor provides all necessary services
and technology and the requisite financing, performs the exploration work obligations, and assumes all
exploration risks such that if no petroleum is produced, it will not be entitled to reimbursement.[154] Once
petroleum in commercial quantity is discovered, the contractor shall operate the field on behalf of the
government.[155]
P.D. No. 87 prescribed minimum terms and conditions for every service contract. [156] It also granted the
contractor certain privileges, including exemption from taxes and payment of tariff duties, [157] and permitted the
repatriation of capital and retention of profits abroad.[158]
Ostensibly, the service contract system had certain advantages over the concession regime. [159] It has
been opined, though, that, in the Philippines, our concept of a service contract, at least in the petroleum
industry, was basically a concession regime with a production-sharing element.[160]
On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new
Constitution.[161] Article XIV on the National Economy and Patrimony contained provisions similar to the 1935
Constitution with regard to Filipino participation in the nations natural resources. Section 8, Article XIV thereof
provides:

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.

While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment of natural
resources, it also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts
with any person or entity for the exploration or utilization of natural resources.

SEC. 9. The disposition, exploration, development, exploitation, or utilization of any of the natural resources of the
Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum of which is owned by
such citizens. The Batasang Pambansa, in the national interest, may allow such citizens, corporations or
associations to enter into service contracts for financial, technical, management, or other forms of assistance with
any person or entity for the exploration, or utilization of any of the natural resources. Existing valid and binding
service contracts for financial, technical, management, or other forms of assistance are hereby recognized as
such. [Emphasis supplied.]

The concept of service contracts, according to one delegate, was borrowed from the methods followed by
India, Pakistan and especially Indonesia in the exploration of petroleum and mineral oils.[162] The provision
allowing such contracts, according to another, was intended to enhance the proper development of our natural
resources since Filipino citizens lack the needed capital and technical know-how which are essential in the
proper exploration, development and exploitation of the natural resources of the country.[163]
The original idea was to authorize the government, not private entities, to enter into service contracts with
foreign entities.[164] As finally approved, however, a citizen or private entity could be allowed by the National
Assembly to enter into such service contract.[165] The prior approval of the National Assembly was deemed
sufficient to protect the national interest.[166]Notably, none of the laws allowing service contracts were passed
by the Batasang Pambansa. Indeed, all of them were enacted by presidential decree.
On March 13, 1973, shortly after the ratification of the new Constitution, the President promulgated
Presidential Decree No. 151.[167] The law allowed Filipino citizens or entities which have acquired lands of the
public domain or which own, hold or control such lands to enter into service contracts for financial, technical,
management or other forms of assistance with any foreign persons or entity for the exploration, development,
exploitation or utilization of said lands.[168]
Presidential Decree No. 463,[169] also known as THE MINERAL RESOURCES DEVELOPMENT DECREE
OF 1974, was enacted on May 17, 1974. Section 44 of the decree, as amended, provided that a lessee of a
mining claim may enter into a service contract with a qualified domestic or foreign contractor for the
exploration, development and exploitation of his claims and the processing and marketing of the product
thereof.
Presidential Decree No. 704[170] (THE FISHERIES DECREE OF 1975), approved on May 16, 1975,
allowed Filipinos engaged in commercial fishing to enter into contracts for financial, technical or other forms of
assistance with any foreign person, corporation or entity for the production, storage, marketing and processing
of fish and fishery/aquatic products.[171]
Presidential Decree No. 705[172] (THE REVISED FORESTRY CODE OF THE PHILIPPINES), approved on
May 19, 1975, allowed forest products licensees, lessees, or permitees to enter into service contracts for
financial, technical, management, or other forms of assistance . . . with any foreign person or entity for the
exploration, development, exploitation or utilization of the forest resources.[173]
Yet another law allowing service contracts, this time for geothermal resources, was Presidential Decree
No. 1442,[174] which was signed into law on June 11, 1978. Section 1 thereof authorized the Government to
enter into service contracts for the exploration, exploitation and development of geothermal resources with a
foreign contractor who must be technically and financially capable of undertaking the operations required in the
service contract.
Thus, virtually the entire range of the countrys natural resources from petroleum and minerals to
geothermal energy, from public lands and forest resources to fishery products was well covered by apparent
legal authority to engage in the direct participation or involvement of foreign persons or corporations (otherwise
disqualified) in the exploration and utilization of natural resources through service contracts. [175]

THE 1987 CONSTITUTION AND TECHNICAL


OR FINANCIAL ASSISTANCE AGREEMENTS

After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power under a
revolutionary government. On March 25, 1986, President Aquino issued Proclamation No. 3,[176] promulgating
the Provisional Constitution, more popularly referred to as the Freedom Constitution. By authority of the same
Proclamation, the President created a Constitutional Commission (CONCOM) to draft a new constitution,
which took effect on the date of its ratification on February 2, 1987.[177]
The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: 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.
Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same
provision, prohibits the alienation of natural resources, except agricultural lands.
The third sentence of the same paragraph is new: The exploration, development and utilization of natural
resources shall be under the full control and supervision of the State. The constitutional policy of the States
full control and supervision over natural resources proceeds from the concept of jura regalia, as well as the
recognition of the importance of the countrys natural resources, not only for national economic development,
but also for its security and national defense.[178] Under this provision, the State assumes a more dynamic role
in the exploration, development and utilization of natural resources.[179]
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the
State to grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of
natural resources. By such omission, the utilization of inalienable lands of public domain through license,
concession or lease is no longer allowed under the 1987 Constitution.[180]
Having omitted the provision on the concession system, Section 2 proceeded to introduce unfamiliar
language:[181]

The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by
such citizens.

Consonant with the States full supervision and control over natural resources, Section 2 offers the State
two options.[182] One, the State may directly undertake these activities itself; or two, it may enter into co-
production, joint venture, or production-sharing agreements with Filipino citizens, or entities at least 60% of
whose capital is owned by such citizens.
A third option is found in the third paragraph of the same section:

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative
fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.
While the second and third options are limited only to Filipino citizens or, in the case of the former, to
corporations or associations at least 60% of the capital of which is owned by Filipinos, a fourth allows the
participation of foreign-owned corporations. The fourth and fifth paragraphs of Section 2 provide:

The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and
technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days
from its execution.

Although Section 2 sanctions the participation of foreign-owned corporations in the exploration,


development, and utilization of natural resources, it imposes certain limitations or conditions to agreements
with such corporations.
First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements,
and only with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or
association may enter into a service contract with a foreign person or entity.
Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The
term large-scale usually refers to very capital-intensive activities.[183]
Third, the natural resources subject of the activities is restricted to minerals, petroleum and other
mineral oils, the intent being to limit service contracts to those areas where Filipino capital may not be
sufficient.[184]
Fourth, consistency with the provisions of statute. The agreements must be in accordance with the
terms and conditions provided by law.
Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must
be based on real contributions to economic growth and general welfare of the country.
Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and
use of local scientific and technical resources.
Seventh, the notification requirement. The President shall notify Congress of every financial or technical
assistance agreement entered into within thirty days from its execution.
Finally, the scope of the agreements. While the 1973 Constitution referred to service contracts for
financial, technical, management, or other forms of assistance the 1987 Constitution provides for agreements. .
. involving either financial or technical assistance. It bears noting that the phrases service contracts and
management or other forms of assistance in the earlier constitution have been omitted.
By virtue of her legislative powers under the Provisional Constitution,[185] President Aquino, on July 10,
1987, signed into law E.O. No. 211 prescribing the interim procedures in the processing and approval of
applications for the exploration, development and utilization of minerals. The omission in the 1987 Constitution
of the term service contracts notwithstanding, the said E.O. still referred to them in Section 2 thereof:

SEC. 2. Applications for the exploration, development and utilization of mineral resources, including renewal applications
and applications for approval of operating agreements and mining service contracts, shall be accepted and processed and
may be approved x x x. [Emphasis supplied.]

The same law provided in its Section 3 that the processing, evaluation and approval of all mining
applications . . . operating agreements and service contracts . . . shall be governed by Presidential Decree
No. 463, as amended, other existing mining laws, and their implementing rules and regulations. . . .
As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by authority of which the
subject WMCP FTAA was executed on March 30, 1995.
On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof declares that the
Act shall govern the exploration, development, utilization, and processing of all mineral resources. Such
declaration notwithstanding, R.A. No. 7942 does not actually cover all the modes through which the State may
undertake the exploration, development, and utilization of natural resources.
The State, being the owner of the natural resources, is accorded the primary power and responsibility in
the exploration, development and utilization thereof. As such, it may undertake these activities through four
modes:
The State may directly undertake such activities.
(2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino
citizens or qualified corporations.
(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens.
(4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral
oils, the President may enter into agreements with foreign-owned corporations involving technical or financial
assistance.[186]
Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and
surveys,[187] and a passing mention of government-owned or controlled corporations,[188] R.A. No. 7942 does
not specify how the State should go about the first mode. The third mode, on the other hand, is governed by
Republic Act No. 7076[189] (the Peoples Small-Scale Mining Act of 1991) and other pertinent laws.[190] R.A. No.
7942 primarily concerns itself with the second and fourth modes.
Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A.
No. 7942 as mineral agreements.[191] The Government participates the least in a mineral production sharing
agreement (MPSA). In an MPSA, the Government grants the contractor[192] the exclusive right to conduct
mining operations within a contract area[193] and shares in the gross output.[194] The MPSA contractor provides
the financing, technology, management and personnel necessary for the agreements implementation.[195] The
total government share in an MPSA is the excise tax on mineral products under Republic Act No.
7729,[196] amending Section 151(a) of the National Internal Revenue Code, as amended.[197]
In a co-production agreement (CA),[198] the Government provides inputs to the mining operations other
than the mineral resource,[199] while in a joint venture agreement (JVA), where the Government enjoys the
greatest participation, the Government and the JVA contractor organize a company with both parties having
equity shares.[200] Aside from earnings in equity, the Government in a JVA is also entitled to a share in the
gross output.[201] The Government may enter into a CA[202] or JVA[203] with one or more contractors. The
Governments share in a CA or JVA is set out in Section 81 of the law:

The share of the Government in co-production and joint venture agreements shall be negotiated by the Government and
the contractor taking into consideration the: (a) capital investment of the project, (b) the risks involved, (c) contribution of
the project to the economy, and (d) other factors that will provide for a fair and equitable sharing between the Government
and the contractor. The Government shall also be entitled to compensations for its other contributions which shall be
agreed upon by the parties, and shall consist, among other things, the contractors income tax, excise tax, special
allowance, withholding tax due from the contractors foreign stockholders arising from dividend or interest payments to
the said foreign stockholders, in case of a foreign national and all such other taxes, duties and fees as provided for under
existing laws.

All mineral agreements grant the respective contractors the exclusive right to conduct mining operations
and to extract all mineral resources found in the contract area. [204] A qualified person may enter into any of the
mineral agreements with the Government.[205] A qualified person is

any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized
or authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources
development and duly registered in accordance with law at least sixty per centum (60%) of the capital of which is owned
by citizens of the Philippines x x x.[206]
The fourth mode involves financial or technical assistance agreements. An FTAA is defined as a contract
involving financial or technical assistance for large-scale exploration, development, and utilization of natural
resources.[207] Any qualified person with technical and financial capability to undertake large-scale exploration,
development, and utilization of natural resources in the Philippines may enter into such agreement directly with
the Government through the DENR.[208] For the purpose of granting an FTAA, a legally organized foreign-
owned corporation (any corporation, partnership, association, or cooperative duly registered in accordance
with law in which less than 50% of the capital is owned by Filipino citizens)[209] is deemed a qualified person.[210]
Other than the difference in contractors qualifications, the principal distinction between mineral
agreements and FTAAs is the maximum contract area to which a qualified person may hold or be
granted.[211] Large-scale under R.A. No. 7942 is determined by the size of the contract area, as opposed to the
amount invested (US $50,000,000.00), which was the standard under E.O. 279.
Like a CA or a JVA, an FTAA is subject to negotiation.[212] The Governments contributions, in the form of
taxes, in an FTAA is identical to its contributions in the two mineral agreements, save that in an FTAA:

The collection of Government share in financial or technical assistance agreement shall commence after the financial or
technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development
expenditures, inclusive.[213]

III
Having examined the history of the constitutional provision and statutes enacted pursuant thereto, a
consideration of the substantive issues presented by the petition is now in order.

THE EFFECTIVITY OF
EXECUTIVE ORDER NO. 279

Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was executed, did not come
into effect.
E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days before the opening
of Congress on July 27, 1987.[214] Section 8 of the E.O. states that the same shall take effect immediately.
This provision, according to petitioners, runs counter to Section 1 of E.O. No. 200,[215] which provides:

SECTION 1. Laws shall take effect after fifteen days following the completion of their publication either in the
Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided. [216] [Emphasis
supplied.]

On that premise, petitioners contend that E.O. No. 279 could have only taken effect fifteen days after its
publication at which time Congress had already convened and the Presidents power to legislate had ceased.
Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in Miners
Association of the Philippines v. Factoran, supra. This is of course incorrect for the issue in Miners
Association was not the validity of E.O. No. 279 but that of DAO Nos. 57 and 82 which were issued pursuant
thereto.
Nevertheless, petitioners contentions have no merit.
It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other
than even before the 15-day period after its publication. Where a law provides for its own date of effectivity,
such date prevails over that prescribed by E.O. No. 200. Indeed, this is the very essence of the phrase unless
it is otherwise provided in Section 1 thereof.Section 1, E.O. No. 200, therefore, applies only when a statute
does not provide for its own date of effectivity.
What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Taada v.
Tuvera,[217] is the publication of the law for
without such notice and publication, there would be no basis for the application of the maxim ignorantia legis n[eminem]
excusat. It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which
he had no notice whatsoever, not even a constructive one.

While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its
invalidation since the Constitution, being the fundamental, paramount and supreme law of the nation, is
deemed written in the law.[218] Hence, the due process clause,[219] which, so Taada held, mandates the
publication of statutes, is read into Section 8 of E.O. No. 279.Additionally, Section 1 of E.O. No. 200 which
provides for publication either in the Official Gazette or in a newspaper of general circulation in the Philippines,
finds suppletory application. It is significant to note that E.O. No. 279 was actually published in the Official
Gazette[220] on August 3, 1987.
From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Taada v. Tuvera, this
Court holds that E.O. No. 279 became effective immediately upon its publication in the Official Gazette on
August 3, 1987.
That such effectivity took place after the convening of the first Congress is irrelevant. At the time President
Aquino issued E.O. No. 279 on July 25, 1987, she was still validly exercising legislative powers under the
Provisional Constitution.[221] Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states:

SEC. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened.

The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it
did not prevent the effectivity of laws she had previously enacted.
There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute.

THE CONSTITUTIONALITY
OF THE WMCP FTAA

Petitioners submit that, in accordance with the text of Section 2, Article XII of the Constitution, FTAAs
should be limited to technical or financial assistance only. They observe, however, that, contrary to the
language of the Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to
extend more than mere financial or technical assistance to the State, for it permits WMCP to manage and
operate every aspect of the mining activity. [222]
Petitioners submission is well-taken. It is a cardinal rule in the interpretation of constitutions that the
instrument must be so construed as to give effect to the intention of the people who adopted it. [223] This
intention is to be sought in the constitution itself, and the apparent meaning of the words is to be taken as
expressing it, except in cases where that assumption would lead to absurdity, ambiguity, or
contradiction.[224] What the Constitution says according to the text of the provision, therefore, compels
acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the
people mean what they say.[225] Accordingly, following the literal text of the Constitution, assistance accorded
by foreign-owned corporations in the large-scale exploration, development, and utilization of petroleum,
minerals and mineral oils should be limited to technical or financial assistance only.
WMCP nevertheless submits that the word technical in the fourth paragraph of Section 2 of E.O. No. 279
encompasses a broad number of possible services, perhaps, scientific and/or technological in basis.[226] It thus
posits that it may also well include the area of management or operations . . . so long as such assistance
requires specialized knowledge or skills, and are related to the exploration, development and utilization of
mineral resources.[227]
This Court is not persuaded. As priorly pointed out, the phrase management or other forms of assistance
in the 1973 Constitution was deleted in the 1987 Constitution, which allows only technical or financial
assistance. Casus omisus pro omisso habendus est. A person, object or thing omitted from an enumeration
must be held to have been omitted intentionally.[228] As will be shown later, the management or operation of
mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil
that the drafters of the 1987 Constitution sought to eradicate.
Respondents insist that agreements involving technical or financial assistance is just another term for
service contracts. They contend that the proceedings of the CONCOM indicate that although the terminology
service contract was avoided [by the Constitution], the concept it represented was not. They add that [t]he
concept is embodied in the phrase agreements involving financial or technical assistance.[229] And point out
how members of the CONCOM referred to these agreements as service contracts. For instance:

SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the past service
contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the
President? That is the only difference, is it not?

MR. VILLEGAS. That is right.

SR. TAN. So those are the safeguards[?]

MR. VILLEGAS. Yes. There was no law at all governing service contracts before.

SR. TAN. Thank you, Madam President.[230] [Emphasis supplied.]

WMCP also cites the following statements of Commissioners Gascon, Garcia, Nolledo and Tadeo who
alluded to service contracts as they explained their respective votes in the approval of the draft Article:

MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons: One, the provision on service
contracts. I felt that if we would constitutionalize any provision on service contracts, this should always be with the
concurrence of Congress and not guided only by a general law to be promulgated by Congress. x x x. [231] [Emphasis
supplied.]

x x x.

MR. GARCIA. Thank you.

I vote no. x x x.

Service contracts are given constitutional legitimization in Section 3, even when they have been proven to be
inimical to the interests of the nation, providing as they do the legal loophole for the exploitation of our natural
resources for the benefit of foreign interests. They constitute a serious negation of Filipino control on the use and
disposition of the nations natural resources, especially with regard to those which are nonrenewable. [232] [Emphasis
supplied.]

xxx

MR. NOLLEDO. While there are objectionable provisions in the Article on National Economy and Patrimony, going over
said provisions meticulously, setting aside prejudice and personalities will reveal that the article contains a balanced set of
provisions. I hope the forthcoming Congress will implement such provisions taking into account that Filipinos should
have real control over our economy and patrimony, and if foreign equity is permitted, the same must be subordinated to
the imperative demands of the national interest.

x x x.

It is also my understanding that service contracts involving foreign corporations or entities are resorted to only
when no Filipino enterprise or Filipino-controlled enterprise could possibly undertake the exploration or
exploitation of our natural resources and that compensation under such contracts cannot and should not equal
what should pertain to ownership of capital. In other words, the service contract should not be an instrument to
circumvent the basic provision, that the exploration and exploitation of natural resources should be truly for the
benefit of Filipinos.

Thank you, and I vote yes.[233] [Emphasis supplied.]

x x x.

MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.

Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang salitang imperyalismo. Ang ibig
sabihin nito ay ang sistema ng lipunang pinaghaharian ng iilang monopolyong kapitalista at ang salitang imperyalismo ay
buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa pamamagitan ng salitang based on, naroroon
na ang free trade sapagkat tayo ay mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring
produkto. Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang 60-40 equity sa natural
resources. Habang naghihirap ang sambayanang Pilipino, ginagalugad naman ng mga dayuhan ang ating likas na
yaman. Kailan man ang Article on National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating
ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng bansa ay dalawa lamang: ang pagpapatupad ng
tunay na reporma sa lupa at ang national industrialization. Ito ang tinatawag naming pagsikat ng araw sa Silangan. Ngunit
ang mga landlords and big businessmen at ang mga komprador ay nagsasabi na ang free trade na ito, ang kahulugan para
sa amin, ay ipinipilit sa ating sambayanan na ang araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang
araw sa Kanluran. I vote no.[234] [Emphasis supplied.]

This Court is likewise not persuaded.


As earlier noted, the phrase service contracts has been deleted in the 1987 Constitutions Article on
National Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under
the 1973 Constitution, it could have simply adopted the old terminology (service contracts) instead of
employing new and unfamiliar terms (agreements . . . involving either technical or financial assistance). Such a
difference between the language of a provision in a revised constitution and that of a similar provision in the
preceding constitution is viewed as indicative of a difference in purpose.[235] If, as respondents suggest, the
concept of technical or financial assistance agreements is identical to that of service contracts, the CONCOM
would not have bothered to fit the same dog with a new collar. To uphold respondents theory would reduce the
first to a mere euphemism for the second and render the change in phraseology meaningless.
An examination of the reason behind the change confirms that technical or financial assistance
agreements are not synonymous to service contracts.

[T]he Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the
evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in light of the history of the
times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason
which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished
thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that
purpose.[236]

As the following question of Commissioner Quesada and Commissioner Villegas answer shows the
drafters intended to do away with service contracts which were used to circumvent the capitalization (60%-
40%) requirement:

MS. QUESADA. The 1973 Constitution used the words service contracts. In this particular Section 3, is there a safeguard
against the possible control of foreign interests if the Filipinos go into coproduction with them?

MR. VILLEGAS. Yes. In fact, the deletion of the phrase service contracts was our first attempt to avoid some of the
abuses in the past regime in the use of service contracts to go around the 60-40 arrangement. The safeguard that has
been introduced and this, of course can be refined is found in Section 3, lines 25 to 30, where Congress will have to
concur with the President on any agreement entered into between a foreign-owned corporation and the government
involving technical or financial assistance for large-scale exploration, development and utilization of natural
resources.[237] [Emphasis supplied.]

In a subsequent discussion, Commissioner Villegas allayed the fears of Commissioner Quesada regarding
the participation of foreign interests in Philippine natural resources, which was supposed to be restricted to
Filipinos.

MS. QUESADA. Another point of clarification is the phrase and utilization of natural resources shall be under the full
control and supervision of the State. In the 1973 Constitution, this was limited to citizens of the Philippines; but it was
removed and substituted by shall be under the full control and supervision of the State. Was the concept changed so that
these particular resources would be limited to citizens of the Philippines? Or would these resources only be under the full
control and supervision of the State; meaning, noncitizens would have access to these natural resources? Is that the
understanding?

MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence, it states:

Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-
sharing agreements with Filipino citizens.

So we are still limiting it only to Filipino citizens.

x x x.

MS. QUESADA. Going back to Section 3, the section suggests that:

The exploration, development, and utilization of natural resources may be directly undertaken by the State, or it may enter
into co-production, joint venture or production-sharing agreement with . . . corporations or associations at least sixty per
cent of whose voting stock or controlling interest is owned by such citizens.

Lines 25 to 30, on the other hand, suggest that in the large-scale exploration, development and utilization of natural
resources, the President with the concurrence of Congress may enter into agreements with foreign-owned corporations
even for technical or financial assistance.

I wonder if this part of Section 3 contradicts the second part. I am raising this point for fear that foreign investors will use
their enormous capital resources to facilitate the actual exploitation or exploration, development and effective disposition
of our natural resources to the detriment of Filipino investors. I am not saying that we should not consider borrowing
money from foreign sources. What I refer to is that foreign interest should be allowed to participate only to the extent that
they lend us money and give us technical assistance with the appropriate government permit. In this way, we can insure
the enjoyment of our natural resources by our own people.

MR. VILLEGAS. Actually, the second provision about the President does not permit foreign investors to
participate. It is only technical or financial assistance they do not own anything but on conditions that have to be
determined by law with the concurrence of Congress. So, it is very restrictive.

If the Commissioner will remember, this removes the possibility for service contracts which we said yesterday were
avenues used in the previous regime to go around the 60-40 requirement.[238][Emphasis supplied.]

The present Chief Justice, then a member of the CONCOM, also referred to this limitation in scope in
proposing an amendment to the 60-40 requirement:

MR. DAVIDE. May I be allowed to explain the proposal?

MR. MAAMBONG. Subject to the three-minute rule, Madam President.

MR. DAVIDE. It will not take three minutes.


The Commission had just approved the Preamble. In the Preamble we clearly stated that the Filipino people are
sovereign and that one of the objectives for the creation or establishment of a government is to conserve and
develop the national patrimony. The implication is that the national patrimony or our natural resources are
exclusively reserved for the Filipino people. No alien must be allowed to enjoy, exploit and develop our natural
resources. As a matter of fact, that principle proceeds from the fact that our natural resources are gifts from God
to the Filipino people and it would be a breach of that special blessing from God if we will allow aliens to exploit
our natural resources.

I voted in favor of the Jamir proposal because it is not really exploitation that we granted to the alien corporations but
only for them to render financial or technical assistance. It is not for them to enjoy our natural resources. Madam
President, our natural resources are depleting; our population is increasing by leaps and bounds. Fifty years from now, if
we will allow these aliens to exploit our natural resources, there will be no more natural resources for the next generations
of Filipinos. It may last long if we will begin now. Since 1935 the aliens have been allowed to enjoy to a certain extent the
exploitation of our natural resources, and we became victims of foreign dominance and control. The aliens are interested
in coming to the Philippines because they would like to enjoy the bounty of nature exclusively intended for Filipinos by
God.

And so I appeal to all, for the sake of the future generations, that if we have to pray in the Preamble to preserve and
develop the national patrimony for the sovereign Filipino people and for the generations to come, we must at this time
decide once and for all that our natural resources must be reserved only to Filipino citizens.

Thank you.[239] [Emphasis supplied.]

The opinion of another member of the CONCOM is persuasive [240] and leaves no doubt as to the intention
of the framers to eliminate service contracts altogether. He writes:

Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological undertakings for which the President
may enter into contracts with foreign-owned corporations, and enunciates strict conditions that should govern such
contracts. x x x.

This provision balances the need for foreign capital and technology with the need to maintain the national sovereignty. It
recognizes the fact that as long as Filipinos can formulate their own terms in their own territory, there is no danger of
relinquishing sovereignty to foreign interests.

Are service contracts allowed under the new Constitution? No. Under the new Constitution, foreign investors (fully
alien-owned) can NOT participate in Filipino enterprises except to provide: (1) Technical Assistance for highly
technical enterprises; and (2) Financial Assistance for large-scale enterprises.

The intent of this provision, as well as other provisions on foreign investments, is to prevent the practice (prevalent
in the Marcos government) of skirting the 60/40 equation using the cover of service contracts. [241] [Emphasis
supplied.]

Furthermore, it appears that Proposed Resolution No. 496,[242] which was the draft Article on National
Economy and Patrimony, adopted the concept of agreements . . . involving either technical or financial
assistance contained in the Draft of the 1986 U.P. Law Constitution Project (U.P. Law draft) which was taken
into consideration during the deliberation of the CONCOM.[243] The former, as well as Article XII, as adopted,
employed the same terminology, as the comparative table below shows:
PROPOSED RESOLUTION ARTICLE XII OF THE 1987
NO. 496 OF THE CONSTITUTION
CONSTITUTIONAL
COMMISSION
DRAFT OF THE UP LAW
CONSTITUTION PROJECT
SEC. 1. All lands of the public SEC. 3. All lands of the public SEC. 2. All lands of the public
domain, waters, minerals, domain, waters, minerals, domain, waters, minerals,
coal, petroleum and other coal, petroleum and other coal, petroleum, and other
mineral oils, all forces of mineral oils, all forces of mineral oils, all forces of
potential energy, fisheries, potential energy, fisheries, potential energy, fisheries,
flora and fauna and other forests, flora and fauna, and forests or timber, wildlife,
natural resources of the other natural resources are flora and fauna, and other
Philippines are owned by the owned by the State. With the natural resources are owned
State. With the exception of exception of agricultural by the State. With the
agricultural lands, all other lands, all other natural exception of agricultural
natural resources shall not be resources shall not be lands, all other natural
alienated. The exploration, alienated. The exploration, resources shall not be
development and utilization of development, and utilization alienated. The exploration,
natural resources shall be of natural resources shall be development, and utilization
under the full control and under the full control and of natural resources shall be
supervision of the State. Such supervision of the State. Such under the full control and
activities may be directly activities may be directly supervision of the State. The
undertaken by the state, or it undertaken by the State, or it State may directly undertake
may enter into co-production, may enter into co-production, such activities or it may enter
joint venture, production joint venture, production- into co-production, joint
sharing agreements with sharing agreements with venture, or production-sharing
Filipino citizens or Filipino citizens or agreements with Filipino
corporations or associations corporations or associations at citizens, or corporations or
sixty per cent of whose voting least sixty per cent of whose associations at least sixty per
stock or controlling interest is voting stock or controlling centum of whose capital is
owned by such citizens for a interest is owned by such owned by such citizens. Such
period of not more than citizens. Such agreements agreements may be for a
twenty-five years, renewable shall be for a period of twenty- period not exceeding twenty-
for not more than twenty-five five years, renewable for not five years, renewable for not
years and under such terms more than twenty-five years, more than twenty-five years,
and conditions as may be and under such term and and under such terms and
provided by law. In case as to conditions as may be provided conditions as may be provided
water rights for irrigation, by law. In cases of water by law. In case of water rights
water supply, fisheries, or rights for irrigation, water for irrigation, water supply,
industrial uses other than the supply, fisheries or industrial fisheries, or industrial uses
development of water power, uses other than the other than the development of
beneficial use may be the development for water power, water power, beneficial use
measure and limit of the grant. beneficial use may be the may be the measure and limit
measure and limit of the grant. of the grant.

The State shall protect the


nations marine wealth in its
archipelagic waters, territorial
sea, and exclusive economic
zone, and reserve its use and
enjoyment exclusively to
Filipino citizens.

The National Assembly may The Congress may by law The Congress may, by law,
by law allow small scale allow small-scale utilization of allow small-scale utilization of
utilization of natural resources natural resources by Filipino natural resources by Filipino
by Filipino citizens. citizens, as well as cooperative citizens, as well as cooperative
fish farming in rivers, lakes, fish farming, with priority to
bays, and lagoons. subsistence fishermen and
fish-workers in rivers, lakes,
bays, and lagoons.

The National Assembly, may, The President with the The President may enter into
by two-thirds vote of all its concurrence of Congress, by agreements with foreign-
members by special law special law, shall provide the owned corporations
provide the terms and terms and conditions under involving either technical or
conditions under which a which a foreign-owned financial assistance for large-
foreign-owned corporation corporation may enter into scale exploration,
may enter into agreements agreements with the development, and utilization
with the government government involving either of minerals, petroleum, and
involving either technical or technical or financial other mineral oils according to
financial assistance for large- assistance for large-scale the general terms and
scale exploration, exploration, development, and conditions provided by law,
development, or utilization of utilization of natural based on real contributions to
natural resources. [Emphasis resources. [Emphasis the economic growth and
supplied.] supplied.] general welfare of the
country. In such agreements,
the State shall promote the
development and use of local
scientific and technical
resources.[Emphasis
supplied.]
The President shall notify the
Congress of every contract
entered into in accordance
with this provision, within
thirty days from its execution.

The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase
technical or financial assistance.
In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor Pacifico A. Agabin,
who was a member of the working group that prepared the U.P. Law draft, criticized service contracts for they
lodge exclusive management and control of the enterprise to the service contractor, which is reminiscent of the
old concession regime. Thus, notwithstanding the provision of the Constitution that natural resources belong to
the State, and that these shall not be alienated, the service contract system renders nugatory the constitutional
provisions cited.[244] He elaborates:

Looking at the Philippine model, we can discern the following vestiges of the concession regime, thus:

1. Bidding of a selected area, or leasing the choice of the area to the interested party and then negotiating the terms and
conditions of the contract; (Sec. 5, P.D. 87)

2. Management of the enterprise vested on the contractor, including operation of the field if petroleum is
discovered; (Sec. 8, P.D. 87)

3. Control of production and other matters such as expansion and development; (Sec. 8)

4. Responsibility for downstream operations marketing, distribution, and processing may be with the
contractor (Sec. 8);

5. Ownership of equipment, machinery, fixed assets, and other properties remain with contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of profits abroad guaranteed to the contractor (Sec. 13, P.D. 87); and

7. While title to the petroleum discovered may nominally be in the name of the government, the contractor has
almost unfettered control over its disposition and sale, and even the domestic requirements of the country is relegated
to a pro rata basis (Sec. 8).

In short, our version of the service contract is just a rehash of the old concession regime x x x. Some people have pulled
an old rabbit out of a magicians hat, and foisted it upon us as a new and different animal.

The service contract as we know it here is antithetical to the principle of sovereignty over our natural resources
restated in the same article of the [1973] Constitution containing the provision for service contracts. If the service
contractor happens to be a foreign corporation, the contract would also run counter to the constitutional provision
on nationalization or Filipinization, of the exploitation of our natural resources.[245] [Emphasis
supplied. Underscoring in the original.]

Professor Merlin M. Magallona, also a member of the working group, was harsher in his reproach of the
system:

x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the [1973] Charter, but the essence of
nationalism was reduced to hollow rhetoric. The 1973 Charter still provided that the exploitation or development of the
countrys natural resources be limited to Filipino citizens or corporations owned or controlled by them. However, the
martial-law Constitution allowed them, once these resources are in their name, to enter into service contracts with foreign
investors for financial, technical, management, or other forms of assistance. Since foreign investors have the capital
resources, the actual exploitation and development, as well as the effective disposition, of the countrys natural resources,
would be under their direction, and control, relegating the Filipino investors to the role of second-rate partners in joint
ventures.

Through the instrumentality of the service contract, the 1973 Constitution had legitimized at the highest level of
state policy that which was prohibited under the 1973 Constitution, namely: the exploitation of the countrys
natural resources by foreign nationals. The drastic impact of [this] constitutional change becomes more
pronounced when it is considered that the active party to any service contract may be a corporation wholly owned
by foreign interests. In such a case, the citizenship requirement is completely set aside, permitting foreign
corporations to obtain actual possession, control, and [enjoyment] of the countrys natural resources.[246] [Emphasis
supplied.]

Accordingly, Professor Agabin recommends that:

Recognizing the service contract for what it is, we have to expunge it from the Constitution and reaffirm ownership
over our natural resources. That is the only way we can exercise effective control over our natural resources.

This should not mean complete isolation of the countrys natural resources from foreign investment. Other contract
forms which are less derogatory to our sovereignty and control over natural resources like technical assistance
agreements, financial assistance [agreements], co-production agreements, joint ventures, production-sharing could
still be utilized and adopted without violating constitutional provisions. In other words, we can adopt contract
forms which recognize and assert our sovereignty and ownership over natural resources, and where the foreign
entity is just a pure contractor instead of the beneficial owner of our economic resources.[247] [Emphasis supplied.]

Still another member of the working group, Professor Eduardo Labitag, proposed that:

2. Service contracts as practiced under the 1973 Constitution should be discouraged, instead the government may
be allowed, subject to authorization by special law passed by an extraordinary majority to enter into either
technical or financial assistance. This is justified by the fact that as presently worded in the 1973 Constitution, a service
contract gives full control over the contract area to the service contractor, for him to work, manage and dispose of the
proceeds or production. It was a subterfuge to get around the nationality requirement of the constitution.[248] [Emphasis
supplied.]
In the annotations on the proposed Article on National Economy and Patrimony, the U.P. Law draft
summarized the rationale therefor, thus:

5. The last paragraph is a modification of the service contract provision found in Section 9, Article XIV of the 1973
Constitution as amended. This 1973 provision shattered the framework of nationalism in our fundamental law (see
Magallona, Nationalism and its Subversion in the Constitution). Through the service contract, the 1973 Constitution had
legitimized that which was prohibited under the 1935 constitutionthe exploitation of the countrys natural resources by
foreign nationals. Through the service contract, acts prohibited by the Anti-Dummy Law were recognized as legitimate
arrangements. Service contracts lodge exclusive management and control of the enterprise to the service contractor,
not unlike the old concession regime where the concessionaire had complete control over the countrys natural
resources, having been given exclusive and plenary rights to exploit a particular resource and, in effect, having
been assured of ownership of that resource at the point of extraction (see Agabin, Service Contracts: Old Wine in
New Bottles). Service contracts, hence, are antithetical to the principle of sovereignty over our natural resources, as well
as the constitutional provision on nationalization or Filipinization of the exploitation of our natural resources.

Under the proposed provision, only technical assistance or financial assistance agreements may be entered into,
and only for large-scale activities. These are contract forms which recognize and assert our sovereignty and
ownership over natural resources since the foreign entity is just a pure contractor and not a beneficial owner of
our economic resources. The proposal recognizes the need for capital and technology to develop our natural
resources without sacrificing our sovereignty and control over such resources by the safeguard of a special law
which requires two-thirds vote of all the members of the Legislature. This will ensure that such agreements will be
debated upon exhaustively and thoroughly in the National Assembly to avert prejudice to the nation.[249] [Emphasis
supplied.]

The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of
beneficial ownership of the countrys natural resources to foreign owned corporations.While, in theory, the State
owns these natural resources and Filipino citizens, their beneficiaries service contracts actually vested
foreigners with the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos,
became the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the
constitutional ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader
perspective, with Philippine sovereignty.
The proponents nevertheless acknowledged the need for capital and technical know-how in the large-
scale exploitation, development and utilization of natural resources the second paragraph of the proposed draft
itself being an admission of such scarcity. Hence, they recommended a compromise to reconcile the
nationalistic provisions dating back to the 1935 Constitution, which reserved all natural resources exclusively to
Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate in these resources
through service contracts. Such a compromise called for the adoption of a new system in the exploration,
development, and utilization of natural resources in the form of technical agreements or financial agreements
which, necessarily, are distinct concepts from service contracts.
The replacement of service contracts with agreements involving either technical or financial assistance, as
well as the deletion of the phrase management or other forms of assistance, assumes greater significance
when note is taken that the U.P. Law draft proposed other equally crucial changes that were obviously heeded
by the CONCOM. These include the abrogation of the concession system and the adoption of new options for
the State in the exploration, development, and utilization of natural resources. The proponents deemed these
changes to be more consistent with the States ownership of, and its full control and supervision (a phrase also
employed by the framers) over, such resources. The Project explained:

3. In line with the State ownership of natural resources, the State should take a more active role in the exploration,
development, and utilization of natural resources, than the present practice of granting licenses, concessions, or leases
hence the provision that said activities shall be under the full control and supervision of the State. There are three major
schemes by which the State could undertake these activities: first, directly by itself; second, by virtue of co-production,
joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty per cent (60%) of
the voting stock or controlling interests of which are owned by such citizens; or third, with a foreign-owned corporation,
in cases of large-scale exploration, development, or utilization of natural resources through agreements involving either
technical or financial assistance only. x x x.
At present, under the licensing concession or lease schemes, the government benefits from such benefits only through
fees, charges, ad valorem taxes and income taxes of the exploiters of our natural resources. Such benefits are very
minimal compared with the enormous profits reaped by theses licensees, grantees, concessionaires. Moreover, some of
them disregard the conservation of natural resources and do not protect the environment from degradation. The proposed
role of the State will enable it to a greater share in the profits it can also actively husband its natural resources and engage
in developmental programs that will be beneficial to them.

4. Aside from the three major schemes for the exploration, development, and utilization of our natural resources, the State
may, by law, allow Filipino citizens to explore, develop, utilize natural resources in small-scale. This is in recognition of
the plight of marginal fishermen, forest dwellers, gold panners, and others similarly situated who exploit our natural
resources for their daily sustenance and survival.[250]

Professor Agabin, in particular, after taking pains to illustrate the similarities between the two systems,
concluded that the service contract regime was but a rehash of the concession system. Old wine in new
bottles, as he put it. The rejection of the service contract regime, therefore, is in consonance with the
abolition of the concession system.
In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other
proposed changes, there is no doubt that the framers considered and shared the intent of the U.P. Law
proponents in employing the phrase agreements . . . involving either technical or financial assistance.
While certain commissioners may have mentioned the term service contracts during the CONCOM
deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973
Constitution. As noted earlier, service contracts is a term that assumes different meanings to different
people.[251] The commissioners may have been using the term loosely, and not in its technical and legal sense,
to refer, in general, to agreements concerning natural resources entered into by the Government with foreign
corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution
provision allowing service contracts.
It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in response to Sr.
Tans question, Commissioner Villegas commented that, other than congressional notification, the only
difference between future and past service contracts is the requirement of a general law as there were no laws
previously authorizing the same.[252]However, such remark is far outweighed by his more categorical statement
in his exchange with Commissioner Quesada that the draft article does not permit foreign investors to
participate in the nations natural resources which was exactly what service contracts did except to provide
technical or financial assistance.[253]
In the case of the other commissioners, Commissioner Nolledo himself clarified in his work that the
present charter prohibits service contracts.[254] Commissioner Gascon was not totally averse to foreign
participation, but favored stricter restrictions in the form of majority congressional concurrence. [255] On the other
hand, Commissioners Garcia and Tadeo may have veered to the extreme side of the spectrum and their
objections may be interpreted as votes against any foreign participation in our natural resources whatsoever.
WMCP cites Opinion No. 75, s. 1987,[256] and Opinion No. 175, s. 1990[257] of the Secretary of Justice,
expressing the view that a financial or technical assistance agreement is no different in concept from the
service contract allowed under the 1973 Constitution. This Court is not, however, bound by this
interpretation. When an administrative or executive agency renders an opinion or issues a statement of policy,
it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is
the courts that finally determine what the law means.[258]
In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned
corporations is an exception to the rule that participation in the nations natural resources is reserved
exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-
Filipinos. As Commissioner Villegas emphasized, the provision is very restrictive.[259] Commissioner Nolledo
also remarked that entering into service contracts is an exception to the rule on protection of natural resources
for the interest of the nation and, therefore, being an exception, it should be subject, whenever possible, to
stringent rules.[260] Indeed, exceptions should be strictly but reasonably construed; they extend only so far as
their language fairly warrants and all doubts should be resolved in favor of the general provision rather than the
exception.[261]
With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act
authorizes service contracts. Although the statute employs the phrase financial and technical agreements in
accordance with the 1987 Constitution, it actually treats these agreements as service contracts that grant
beneficial ownership to foreign contractors contrary to the fundamental law.

Section 33, which is found under Chapter VI (Financial or Technical Assistance Agreement) of R.A. No. 7942 states:

SEC. 33. Eligibility.Any qualified person with technical and financial capability to undertake large-scale exploration,
development, and utilization of mineral resources in the Philippines may enter into a financial or technical assistance
agreement directly with the Government through the Department. [Emphasis supplied.]

Exploration, as defined by R.A. No. 7942,

means the searching or prospecting for mineral resources by geological, geochemical or geophysical surveys, remote
sensing, test pitting, trending, drilling, shaft sinking, tunneling or any other means for the purpose of determining the
existence, extent, quantity and quality thereof and the feasibility of mining them for profit.[262]

A legally organized foreign-owned corporation may be granted an exploration permit,[263] which vests it with the
right to conduct exploration for all minerals in specified areas, [264] i.e., to enter, occupy and explore the
same.[265] Eventually, the foreign-owned corporation, as such permittee, may apply for a financial and technical
assistance agreement.[266]
Development is

the work undertaken to explore and prepare an ore body or a mineral deposit for mining, including the construction of
necessary infrastructure and related facilities.[267]

Utilization means the extraction or disposition of minerals.[268] A stipulation that the proponent shall
dispose of the minerals and byproducts produced at the highest price and more advantageous terms and
conditions as provided for under the implementing rules and regulations is required to be incorporated in every
FTAA.[269]
A foreign-owned/-controlled corporation may likewise be granted a mineral processing permit. [270] Mineral
processing is the milling, beneficiation or upgrading of ores or minerals and rocks or by similar means to
convert the same into marketable products.[271]
An FTAA contractor makes a warranty that the mining operations shall be conducted in accordance with
the provisions of R.A. No. 7942 and its implementing rules[272] and for work programs and minimum
expenditures and commitments.[273] And it obliges itself to furnish the Government records of geologic,
accounting, and other relevant data for its mining operation.[274]
Mining operation, as the law defines it, means mining activities involving exploration, feasibility,
development, utilization, and processing.[275]
The underlying assumption in all these provisions is that the foreign contractor manages the mineral
resources, just like the foreign contractor in a service contract.
Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights
that it grants contractors in mineral agreements (MPSA, CA and JV).[276]Parenthetically, Sections 72 to 75 use
the term contractor, without distinguishing between FTAA and mineral agreement contractors. And so does
holders of mining rights in Section 76. A foreign contractor may even convert its FTAA into a mineral
agreement if the economic viability of the contract area is found to be inadequate to justify large-scale mining
operations,[277]provided that it reduces its equity in the corporation, partnership, association or cooperative to
forty percent (40%).[278]
Finally, under the Act, an FTAA contractor warrants that it has or has access to all the
financing, managerial, and technical expertise. . . .[279] This suggests that an FTAA contractor is bound to
provide some management assistance a form of assistance that has been eliminated and, therefore,
proscribed by the present Charter.
By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-
cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nations mineral
resources to these contractors, leaving the State with nothing but bare title thereto.
Moreover, the same provisions, whether by design or inadvertence, permit a circumvention of the
constitutionally ordained 60%-40% capitalization requirement for corporations or associations engaged in the
exploitation, development and utilization of Philippine natural resources.
In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of
the Constitution:
(1) The proviso in Section 3 (aq), which defines qualified person, to wit:

Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes of granting
an exploration permit, financial or technical assistance agreement or mineral processing permit.

(2) Section 23,[280] which specifies the rights and obligations of an exploration permittee, insofar as said
section applies to a financial or technical assistance agreement,
(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance
agreement;
(4) Section 35,[281] which enumerates the terms and conditions for every financial or technical assistance
agreement;
(5) Section 39,[282] which allows the contractor in a financial and technical assistance agreement to convert
the same into a mineral production-sharing agreement;
(6) Section 56,[283] which authorizes the issuance of a mineral processing permit to a contractor in a
financial and technical assistance agreement;
The following provisions of the same Act are likewise void as they are dependent on the foregoing
provisions and cannot stand on their own:
(1) Section 3 (g),[284] which defines the term contractor, insofar as it applies to a financial or technical
assistance agreement.
Section 34,[285] which prescribes the maximum contract area in a financial or technical assistance
agreements;
Section 36,[286] which allows negotiations for financial or technical assistance agreements;
Section 37,[287] which prescribes the procedure for filing and evaluation of financial or technical assistance
agreement proposals;
Section 38,[288] which limits the term of financial or technical assistance agreements;
Section 40,[289] which allows the assignment or transfer of financial or technical assistance agreements;
Section 41,[290] which allows the withdrawal of the contractor in an FTAA;
The second and third paragraphs of Section 81,[291] which provide for the Governments share in a financial
and technical assistance agreement; and
Section 90,[292] which provides for incentives to contractors in FTAAs insofar as it applies to said
contractors;
When the parts of the statute are so mutually dependent and connected as conditions, considerations,
inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a
whole, and that if all could not be carried into effect, the legislature would not pass the residue independently,
then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected,
must fall with them.[293]
There can be little doubt that the WMCP FTAA itself is a service contract.
Section 1.3 of the WMCP FTAA grants WMCP the exclusive right to explore, exploit, utilise[,] process and
dispose of all Minerals products and by-products thereof that may be produced from the Contract Area.[294] The
FTAA also imbues WMCP with the following rights:

(b) to extract and carry away any Mineral samples from the Contract area for the purpose of conducting tests and studies
in respect thereof;

(c) to determine the mining and treatment processes to be utilised during the Development/Operating Period and the
project facilities to be constructed during the Development and Construction Period;

(d) have the right of possession of the Contract Area, with full right of ingress and egress and the right to occupy the
same, subject to the provisions of Presidential Decree No. 512 (if applicable) and not be prevented from entry into private
ands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therein;

xxx

(f) to construct roadways, mining, drainage, power generation and transmission facilities and all other types of works on
the Contract Area;

(g) to erect, install or place any type of improvements, supplies, machinery and other equipment relating to the Mining
Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all parts thereof;

(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third Parties, easement rights and the use of
timber, sand, clay, stone, water and other natural resources in the Contract Area without cost for the purposes of the
Mining Operations;

xxx

(l) have the right to mortgage, charge or encumber all or part of its interest and obligations under this Agreement, the
plant, equipment and infrastructure and the Minerals produced from the Mining Operations;

x x x. [295]

All materials, equipment, plant and other installations erected or placed on the Contract Area remain the
property of WMCP, which has the right to deal with and remove such items within twelve months from the
termination of the FTAA.[296]
Pursuant to Section 1.2 of the FTAA, WMCP shall provide [all] financing, technology, management and
personnel necessary for the Mining Operations. The mining company binds itself to perform all Mining
Operations . . . providing all necessary services, technology and financing in connection therewith, [297] and to
furnish all materials, labour, equipment and other installations that may be required for carrying on all Mining
Operations.[298] WMCP may make expansions, improvements and replacements of the mining facilities and
may add such new facilities as it considers necessary for the mining operations.[299]
These contractual stipulations, taken together, grant WMCP beneficial ownership over natural resources
that properly belong to the State and are intended for the benefit of its citizens.These stipulations are abhorrent
to the 1987 Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils that it
aims to suppress. Consequently, the contract from which they spring must be struck down.
In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the Promotion and
Protection of Investments between the Philippine and Australian Governments, which was signed in Manila on
January 25, 1995 and which entered into force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies to investments whenever made and thus the fact that [WMCPs]
FTAA was entered into prior to the entry into force of the treaty does not preclude the Philippine Government from
protecting [WMCPs] investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides that Each Party shall
encourage and promote investments in its area by investors of the other Party and shall [admit] such investments in
accordance with its Constitution, Laws, regulations and investment policies and in Article 3 (2), it states that Each
Party shall ensure that investments are accorded fair and equitable treatment. The latter stipulation indicates that it was
intended to impose an obligation upon a Party to afford fair and equitable treatment to the investments of the other Party
and that a failure to provide such treatment by or under the laws of the Party may constitute a breach of the treaty. Simply
stated, the Philippines could not, under said treaty, rely upon the inadequacies of its own laws to deprive an Australian
investor (like [WMCP]) of fair and equitable treatment by invalidating [WMCPs] FTAA without likewise nullifying the
service contracts entered into before the enactment of RA 7942 such as those mentioned in PD 87 or EO 279.

This becomes more significant in the light of the fact that [WMCPs] FTAA was executed not by a mere Filipino citizen,
but by the Philippine Government itself, through its President no less, which, in entering into said treaty is assumed to be
aware of the existing Philippine laws on service contracts over the exploration, development and utilization of natural
resources. The execution of the FTAA by the Philippine Government assures the Australian Government that the FTAA is
in accordance with existing Philippine laws.[300] [Emphasis and italics by private respondents.]

The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn,
would amount to a violation of Section 3, Article II of the Constitution adopting the generally accepted
principles of international law as part of the law of the land. One of these generally accepted principles is pacta
sunt servanda, which requires the performance in good faith of treaty obligations.
Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that the
Philippines could not . . . deprive an Australian investor (like [WMCP]) of fair and equitable treatment by
invalidating [WMCPs] FTAA without likewise nullifying the service contracts entered into before the enactment
of RA 7942 . . ., the annulment of the FTAA would not constitute a breach of the treaty invoked. For this
decision herein invalidating the subject FTAA forms part of the legal system of the Philippines. [301] The equal
protection clause[302]guarantees that such decision shall apply to all contracts belonging to the same class,
hence, upholding rather than violating, the fair and equitable treatment stipulation in said treaty.
One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section
2, Article XII of the Constitution, the President may enter into agreements involving either technical or financial
assistance only. The agreement in question, however, is a technical and financial assistance agreement.
Petitioners contention does not lie. To adhere to the literal language of the Constitution would lead to
absurd consequences.[303] As WMCP correctly put it:

x x x such a theory of petitioners would compel the government (through the President) to enter into contract with two (2)
foreign-owned corporations, one for financial assistance agreement and with the other, for technical assistance over one
and the same mining area or land; or to execute two (2) contracts with only one foreign-owned corporation which has the
capability to provide both financial and technical assistance, one for financial assistance and another for technical
assistance, over the same mining area. Such an absurd result is definitely not sanctioned under the canons of constitutional
construction.[304] [Underscoring in the original.]

Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of
either/or. A constitution is not to be interpreted as demanding the impossible or the impracticable; and
unreasonable or absurd consequences, if possible, should be avoided.[305] Courts are not to give words a
meaning that would lead to absurd or unreasonable consequences and a literal interpretation is to be rejected
if it would be unjust or lead to absurd results.[306] That is a strong argument against its
adoption.[307] Accordingly, petitioners interpretation must be rejected.
The foregoing discussion has rendered unnecessary the resolution of the other issues raised by the
petition.
WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void:
(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),


(b) Section 23,

(c) Section 33 to 41,

(d) Section 56,

(e) The second and third paragraphs of Section 81, and

(f) Section 90.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s.
1996 which are not in conformity with this Decision, and
(3) The Financial and Technical Assistance Agreement between the Government of the Republic of the
Philippines and WMC Philippines, Inc.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-43938 April 15, 1988

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF FOREST DEVELOPMENT), petitioner,


vs.
HON. COURT OF APPEALS (THIRD DIVISION) and JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44081 April 15, 1988

BENGUET CONSOLIDATED, INC., petitioner,


vs.
HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORIA, BENJAMIN and EDUARDO, all
surnamed DE LA ROSA, represented by their father JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44092 April 15, 1988

ATOK-BIG WEDGE MINING COMPANY, petitioner,


vs.
HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORlA, BENJAMIN and EDUARDO, all
surnamed DE LA ROSA, represented by their father, JOSE Y. DE LA ROSA, respondents.

CRUZ, J.:

The Regalian doctrine reserves to the State all natural wealth that may be found in the bowels of the earth
even if the land where the discovery is made be private. 1 In the cases at bar, which have been consolidated
because they pose a common issue, this doctrine was not correctly applied.

These cases arose from the application for registration of a parcel of land filed on February 11, 1965, by Jose
de la Rosa on his own behalf and on behalf of his three children, Victoria, Benjamin and Eduardo. The land,
situated in Tuding, Itogon, Benguet Province, was divided into 9 lots and covered by plan Psu-225009.
According to the application, Lots 1-5 were sold to Jose de la Rosa and Lots 6-9 to his children by Mamaya
Balbalio and Jaime Alberto, respectively, in 1964. 2

The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok Big Wedge
Corporation, as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the Philippines, through the
Bureau of Forestry Development, as to lots 1-9. 3

In support of the application, both Balbalio and Alberto testified that they had acquired the subject land by
virtue of prescription Balbalio claimed to have received Lots 1-5 from her father shortly after the Liberation. She
testified she was born in the land, which was possessed by her parents under claim of ownership. 4 Alberto
said he received Lots 6-9 in 1961 from his mother, Bella Alberto, who declared that the land was planted by
Jaime and his predecessors-in-interest to bananas, avocado, nangka and camote, and was enclosed with a
barbed-wire fence. She was corroborated by Felix Marcos, 67 years old at the time, who recalled the earlier
possession of the land by Alberto's father. 5 Balbalio presented her tax declaration in 1956 and the realty tax
receipts from that year to 1964, 6 Alberto his tax declaration in 1961 and the realty tax receipts from that year
to 1964. 7

Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it on
September 22, 1934, by the successors-in-interest of James Kelly, who located the claim in September 1909
and recorded it on October 14, 1909. From the date of its purchase, Benguet had been in actual, continuous
and exclusive possession of the land in concept of owner, as evidenced by its construction of adits, its
affidavits of annual assessment, its geological mappings, geological samplings and trench side cuts, and its
payment of taxes on the land. 8

For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the Emma and Fredia
mineral claims located by Harrison and Reynolds on December 25, 1930, and recorded on January 2, 1931, in
the office of the mining recorder of Baguio. These claims were purchased from these locators on November 2,
1931, by Atok, which has since then been in open, continuous and exclusive possession of the said lots as
evidenced by its annual assessment work on the claims, such as the boring of tunnels, and its payment of
annual taxes thereon. 9

The location of the mineral claims was made in accordance with Section 21 of the Philippine Bill of 1902 which
provided that:

SEC. 21. All valuable mineral deposits in public lands in the philippine Islands both surveyed
and unsurveyed are hereby declared to be free and open to exploration, occupation and
purchase and the land in which they are found to occupation and purchase by the citizens of the
United States, or of said islands.

The Bureau of Forestry Development also interposed its objection, arguing that the land sought to be
registered was covered by the Central Cordillera Forest Reserve under Proclamation No. 217 dated February
16, 1929. Moreover, by reason of its nature, it was not subject to alienation under the Constitutions of 1935
and 1973. 10

The trial court * denied the application, holding that the applicants had failed to prove their claim of possession
and ownership of the land sought to be registered. 11 The applicants appealed to the respondent court, * which
reversed the trial court and recognized the claims of the applicant, but subject to the rights of Benguet and
Atok respecting their mining claims. 12 In other words, the Court of Appeals affirmed the surface rights of the de
la Rosas over the land while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of
their mining claims.

Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership. The Republic
has filed its own petition for review and reiterates its argument that neither the private respondents nor the two
mining companies have any valid claim to the land because it is not alienable and registerable.
It is true that the subject property was considered forest land and included in the Central Cordillera Forest
Reserve, but this did not impair the rights already vested in Benguet and Atok at that time. The Court of
Appeals correctly declared that:

There is no question that the 9 lots applied for are within the June Bug mineral claims of
Benguet and the "Fredia and Emma" mineral claims of Atok. The June Bug mineral claim of
plaintiff Benguet was one of the 16 mining claims of James E. Kelly, American and mining
locator. He filed his declaration of the location of the June Bug mineral and the same was
recorded in the Mining Recorder's Office on October 14, 1909. All of the Kelly claims ha
subsequently been acquired by Benguet Consolidated, Inc. Benguet's evidence is that it had
made improvements on the June Bug mineral claim consisting of mine tunnels prior to 1935. It
had submitted the required affidavit of annual assessment. After World War II, Benguet
introduced improvements on mineral claim June Bug, and also conducted geological mappings,
geological sampling and trench side cuts. In 1948, Benguet redeclared the "June Bug" for
taxation and had religiously paid the taxes.

The Emma and Fredia claims were two of the several claims of Harrison registered in 1931, and
which Atok representatives acquired. Portions of Lots 1 to 5 and all of Lots 6 to 9 are within the
Emma and Fredia mineral claims of Atok Big Wedge Mining Company.

The June Bug mineral claim of Benguet and the Fredia and Emma mineral claims of Atok
having been perfected prior to the approval of the Constitution of the Philippines of 1935, they
were removed from the public domain and had become private properties of Benguet and Atok.

It is not disputed that the location of the mining claim under consideration was
perfected prior to November 15, 1935, when the Government of the
Commonwealth was inaugurated; and according to the laws existing at that time,
as construed and applied by this court in McDaniel v. Apacible and Cuisia (42
Phil. 749), a valid location of a mining claim segregated the area from the public
domain. Said the court in that case: The moment the locator discovered a
valuable mineral deposit on the lands located, and perfected his location in
accordance with law, the power of the United States Government to deprive him
of the exclusive right to the possession and enjoyment of the located claim was
gone, the lands had become mineral lands and they were exempted from lands
that could be granted to any other person. The reservations of public lands
cannot be made so as to include prior mineral perfected locations; and, of
course, if a valid mining location is made upon public lands afterwards included
in a reservation, such inclusion or reservation does not affect the validity of the
former location. By such location and perfection, the land located is segregated
from the public domain even as against the Government. (Union Oil Co. v. Smith,
249 U.S. 337; Van Mess v. Roonet, 160 Cal. 131; 27 Cyc. 546).

"The legal effect of a valid location of a mining claim is not only to segregate the
area from the public domain, but to grant to the locator the beneficial ownership
of the claim and the right to a patent therefor upon compliance with the terms and
conditions prescribed by law. Where there is a valid location of a mining claim,
the area becomes segregated from the public domain and the property of the
locator." (St. Louis Mining & Milling Co. v. Montana Mining Co., 171 U.S. 650;
655; 43 Law ed., 320, 322.) "When a location of a mining claim is perfected it has
the effect of a grant by the United States of the right of present and exclusive
possession, with the right to the exclusive enjoyment of all the surface ground as
well as of all the minerals within the lines of the claim, except as limited by the
extralateral right of adjoining locators; and this is the locator's right before as well
as after the issuance of the patent. While a lode locator acquires a vested
property right by virtue of his location made in compliance with the mining laws,
the fee remains in the government until patent issues."(18 R.C.L. 1152) (Gold
Creek Mining Corporation v. Hon. Eulogio Rodriguez, Sec. of Agriculture and
Commerce, and Quirico Abadilla, Director of the Bureau of Mines, 66 Phil. 259,
265-266)

It is of no importance whether Benguet and Atok had secured a patent for as held in the Gold
Creek Mining Corp. Case, for all physical purposes of ownership, the owner is not required to
secure a patent as long as he complies with the provisions of the mining laws; his possessory
right, for all practical purposes of ownership, is as good as though secured by patent.

We agree likewise with the oppositors that having complied with all the requirements of the
mining laws, the claims were removed from the public domain, and not even the government of
the Philippines can take away this right from them. The reason is obvious. Having become the
private properties of the oppositors, they cannot be deprived thereof without due process of
law. 13

Such rights were not affected either by the stricture in the Commonwealth Constitution against the alienation of
all lands of the public domain except those agricultural in nature for this was made subject to existing rights.
Thus, in its Article XIII, Section 1, it was categorically provided that:

SEC. 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 Philipppines 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
60% 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 lands, 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 25 years, except as to
water rights for irrigation, water supply, fisheries, or industrial uses other than the development
of water power, in which case beneficial use may be the measure and the limit of the grant.

Implementing this provision, Act No. 4268, approved on November 8, 1935, declared:

Any provision of existing laws, executive order, proclamation to the contrary notwithstanding, all
locations of mining claim made prior to February 8, 1935 within lands set apart as forest reserve
under Sec. 1826 of the Revised Administrative Code which would be valid and subsisting
location except to the existence of said reserve are hereby declared to be valid and subsisting
locations as of the date of their respective locations.

The perfection of the mining claim converted the property to mineral land and under the laws then in force
removed it from the public domain. 14 By such act, the locators acquired exclusive rights over the land, against
even the government, without need of any further act such as the purchase of the land or the obtention of a
patent over it. 15As the land had become the private property of the locators, they had the right to transfer the
same, as they did, to Benguet and Atok.

It is true, as the Court of Appeals observed, that such private property was subject to the "vicissitudes of
ownership," or even to forfeiture by non-user or abandonment or, as the private respondents aver, by
acquisitive prescription. However, the method invoked by the de la Rosas is not available in the case at bar, for
two reasons.

First, the trial court found that the evidence of open, continuous, adverse and exclusive possession submitted
by the applicants was insufficient to support their claim of ownership. They themselves had acquired the land
only in 1964 and applied for its registration in 1965, relying on the earlier alleged possession of their
predecessors-in-interest. 16The trial judge, who had the opportunity to consider the evidence first-hand and
observe the demeanor of the witnesses and test their credibility was not convinced. We defer to his judgment
in the absence of a showing that it was reached with grave abuse of discretion or without sufficient basis. 17

Second, even if it be assumed that the predecessors-in-interest of the de la Rosas had really been in
possession of the subject property, their possession was not in the concept of owner of the mining claim but of
the property as agricultural land, which it was not. The property was mineral land, and they were claiming it as
agricultural land. They were not disputing the lights of the mining locators nor were they seeking to oust them
as such and to replace them in the mining of the land. In fact, Balbalio testified that she was aware of the
diggings being undertaken "down below" 18 but she did not mind, much less protest, the same although she
claimed to be the owner of the said land.

The Court of Appeals justified this by saying there is "no conflict of interest" between the owners of the surface
rights and the owners of the sub-surface rights. This is rather doctrine, for it is a well-known principle that the
owner of piece of land has rights not only to its surface but also to everything underneath and the airspace
above it up to a reasonable height. 19 Under the aforesaid ruling, the land is classified as mineral underneath
and agricultural on the surface, subject to separate claims of title. This is also difficult to understand, especially
in its practical application.

Under the theory of the respondent court, the surface owner will be planting on the land while the mining
locator will be boring tunnels underneath. The farmer cannot dig a well because he may interfere with the
operations below and the miner cannot blast a tunnel lest he destroy the crops above. How deep can the
farmer, and how high can the miner, go without encroaching on each other's rights? Where is the dividing line
between the surface and the sub-surface rights?

The Court feels that the rights over the land are indivisible and that the land itself cannot be half agricultural
and half mineral. The classification must be categorical; the land must be either completely mineral or
completely agricultural. In the instant case, as already observed, the land which was originally classified as
forest land ceased to be so and became mineral and completely mineral once the mining claims were
perfected. 20 As long as mining operations were being undertaken thereon, or underneath, it did not cease to
be so and become agricultural, even if only partly so, because it was enclosed with a fence and was cultivated
by those who were unlawfully occupying the surface.

What must have misled the respondent court is Commonwealth Act No. 137, providing as follows:

Sec. 3. All mineral lands of the public domain and minerals 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 60% 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 government established under the Constitution.

SEC. 4. The ownership of, and the right to the use of land for agricultural, industrial,
commercial, residential, or for any purpose other than mining does not include the ownership of,
nor the right to extract or utilize, the minerals which may be found on or under the surface.

SEC. 5. The ownership of, and the right to extract and utilize, the minerals included within all
areas for which public agricultural land patents are granted are excluded and excepted from all
such patents.

SEC. 6. The ownership of, and the right to extract and utilize, the minerals included within all
areas for which Torrens titles are granted are excluded and excepted from all such titles.

This is an application of the Regalian doctrine which, as its name implies, is intended for the benefit of the
State, not of private persons. The rule simply reserves to the State all minerals that may be found in public and
even private land devoted to "agricultural, industrial, commercial, residential or (for) any purpose other than
mining." Thus, if a person is the owner of agricultural land in which minerals are discovered, his ownership of
such land does not give him the right to extract or utilize the said minerals without the permission of the State
to which such minerals belong.

The flaw in the reasoning of the respondent court is in supposing that the rights over the land could be used for
both mining and non-mining purposes simultaneously. The correct interpretation is that once minerals are
discovered in the land, whatever the use to which it is being devoted at the time, such use may be
discontinued by the State to enable it to extract the minerals therein in the exercise of its sovereign
prerogative. The land is thus converted to mineral land and may not be used by any private party, including the
registered owner thereof, for any other purpose that will impede the mining operations to be undertaken
therein, For the loss sustained by such owner, he is of course entitled to just compensation under the Mining
Laws or in appropriate expropriation proceedings. 21

Our holding is that Benguet and Atok have exclusive rights to the property in question by virtue of their
respective mining claims which they validly acquired before the Constitution of 1935 prohibited the alienation of
all lands of the public domain except agricultural lands, subject to vested rights existing at the time of its
adoption. The land was not and could not have been transferred to the private respondents by virtue of
acquisitive prescription, nor could its use be shared simultaneously by them and the mining companies for
agricultural and mineral purposes.

WHEREFORE, the decision of the respondent court dated April 30, 1976, is SET ASIDE and that of the trial
court dated March 11, 1969, is REINSTATED, without any pronouncement as to costs.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-43938 April 15, 1988

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF FOREST DEVELOPMENT), petitioner,


vs.
HON. COURT OF APPEALS (THIRD DIVISION) and JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44081 April 15, 1988

BENGUET CONSOLIDATED, INC., petitioner,


vs.
HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORIA, BENJAMIN and EDUARDO, all
surnamed DE LA ROSA, represented by their father JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44092 April 15, 1988

ATOK-BIG WEDGE MINING COMPANY, petitioner,


vs.
HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORlA, BENJAMIN and EDUARDO, all
surnamed DE LA ROSA, represented by their father, JOSE Y. DE LA ROSA, respondents.

CRUZ, J.:
The Regalian doctrine reserves to the State all natural wealth that may be found in the bowels of the earth
even if the land where the discovery is made be private. 1 In the cases at bar, which have been consolidated
because they pose a common issue, this doctrine was not correctly applied.

These cases arose from the application for registration of a parcel of land filed on February 11, 1965, by Jose
de la Rosa on his own behalf and on behalf of his three children, Victoria, Benjamin and Eduardo. The land,
situated in Tuding, Itogon, Benguet Province, was divided into 9 lots and covered by plan Psu-225009.
According to the application, Lots 1-5 were sold to Jose de la Rosa and Lots 6-9 to his children by Mamaya
Balbalio and Jaime Alberto, respectively, in 1964. 2

The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok Big Wedge
Corporation, as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the Philippines, through the
Bureau of Forestry Development, as to lots 1-9. 3

In support of the application, both Balbalio and Alberto testified that they had acquired the subject land by
virtue of prescription Balbalio claimed to have received Lots 1-5 from her father shortly after the Liberation. She
testified she was born in the land, which was possessed by her parents under claim of ownership. 4 Alberto
said he received Lots 6-9 in 1961 from his mother, Bella Alberto, who declared that the land was planted by
Jaime and his predecessors-in-interest to bananas, avocado, nangka and camote, and was enclosed with a
barbed-wire fence. She was corroborated by Felix Marcos, 67 years old at the time, who recalled the earlier
possession of the land by Alberto's father. 5 Balbalio presented her tax declaration in 1956 and the realty tax
receipts from that year to 1964, 6 Alberto his tax declaration in 1961 and the realty tax receipts from that year
to 1964. 7

Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it on
September 22, 1934, by the successors-in-interest of James Kelly, who located the claim in September 1909
and recorded it on October 14, 1909. From the date of its purchase, Benguet had been in actual, continuous
and exclusive possession of the land in concept of owner, as evidenced by its construction of adits, its
affidavits of annual assessment, its geological mappings, geological samplings and trench side cuts, and its
payment of taxes on the land. 8

For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the Emma and Fredia
mineral claims located by Harrison and Reynolds on December 25, 1930, and recorded on January 2, 1931, in
the office of the mining recorder of Baguio. These claims were purchased from these locators on November 2,
1931, by Atok, which has since then been in open, continuous and exclusive possession of the said lots as
evidenced by its annual assessment work on the claims, such as the boring of tunnels, and its payment of
annual taxes thereon. 9

The location of the mineral claims was made in accordance with Section 21 of the Philippine Bill of 1902 which
provided that:

SEC. 21. All valuable mineral deposits in public lands in the philippine Islands both surveyed
and unsurveyed are hereby declared to be free and open to exploration, occupation and
purchase and the land in which they are found to occupation and purchase by the citizens of the
United States, or of said islands.

The Bureau of Forestry Development also interposed its objection, arguing that the land sought to be
registered was covered by the Central Cordillera Forest Reserve under Proclamation No. 217 dated February
16, 1929. Moreover, by reason of its nature, it was not subject to alienation under the Constitutions of 1935
and 1973. 10

The trial court * denied the application, holding that the applicants had failed to prove their claim of possession
and ownership of the land sought to be registered. 11 The applicants appealed to the respondent court, * which
reversed the trial court and recognized the claims of the applicant, but subject to the rights of Benguet and
Atok respecting their mining claims. 12 In other words, the Court of Appeals affirmed the surface rights of the de
la Rosas over the land while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of
their mining claims.

Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership. The Republic
has filed its own petition for review and reiterates its argument that neither the private respondents nor the two
mining companies have any valid claim to the land because it is not alienable and registerable.

It is true that the subject property was considered forest land and included in the Central Cordillera Forest
Reserve, but this did not impair the rights already vested in Benguet and Atok at that time. The Court of
Appeals correctly declared that:

There is no question that the 9 lots applied for are within the June Bug mineral claims of
Benguet and the "Fredia and Emma" mineral claims of Atok. The June Bug mineral claim of
plaintiff Benguet was one of the 16 mining claims of James E. Kelly, American and mining
locator. He filed his declaration of the location of the June Bug mineral and the same was
recorded in the Mining Recorder's Office on October 14, 1909. All of the Kelly claims ha
subsequently been acquired by Benguet Consolidated, Inc. Benguet's evidence is that it had
made improvements on the June Bug mineral claim consisting of mine tunnels prior to 1935. It
had submitted the required affidavit of annual assessment. After World War II, Benguet
introduced improvements on mineral claim June Bug, and also conducted geological mappings,
geological sampling and trench side cuts. In 1948, Benguet redeclared the "June Bug" for
taxation and had religiously paid the taxes.

The Emma and Fredia claims were two of the several claims of Harrison registered in 1931, and
which Atok representatives acquired. Portions of Lots 1 to 5 and all of Lots 6 to 9 are within the
Emma and Fredia mineral claims of Atok Big Wedge Mining Company.

The June Bug mineral claim of Benguet and the Fredia and Emma mineral claims of Atok
having been perfected prior to the approval of the Constitution of the Philippines of 1935, they
were removed from the public domain and had become private properties of Benguet and Atok.

It is not disputed that the location of the mining claim under consideration was
perfected prior to November 15, 1935, when the Government of the
Commonwealth was inaugurated; and according to the laws existing at that time,
as construed and applied by this court in McDaniel v. Apacible and Cuisia (42
Phil. 749), a valid location of a mining claim segregated the area from the public
domain. Said the court in that case: The moment the locator discovered a
valuable mineral deposit on the lands located, and perfected his location in
accordance with law, the power of the United States Government to deprive him
of the exclusive right to the possession and enjoyment of the located claim was
gone, the lands had become mineral lands and they were exempted from lands
that could be granted to any other person. The reservations of public lands
cannot be made so as to include prior mineral perfected locations; and, of
course, if a valid mining location is made upon public lands afterwards included
in a reservation, such inclusion or reservation does not affect the validity of the
former location. By such location and perfection, the land located is segregated
from the public domain even as against the Government. (Union Oil Co. v. Smith,
249 U.S. 337; Van Mess v. Roonet, 160 Cal. 131; 27 Cyc. 546).

"The legal effect of a valid location of a mining claim is not only to segregate the
area from the public domain, but to grant to the locator the beneficial ownership
of the claim and the right to a patent therefor upon compliance with the terms and
conditions prescribed by law. Where there is a valid location of a mining claim,
the area becomes segregated from the public domain and the property of the
locator." (St. Louis Mining & Milling Co. v. Montana Mining Co., 171 U.S. 650;
655; 43 Law ed., 320, 322.) "When a location of a mining claim is perfected it has
the effect of a grant by the United States of the right of present and exclusive
possession, with the right to the exclusive enjoyment of all the surface ground as
well as of all the minerals within the lines of the claim, except as limited by the
extralateral right of adjoining locators; and this is the locator's right before as well
as after the issuance of the patent. While a lode locator acquires a vested
property right by virtue of his location made in compliance with the mining laws,
the fee remains in the government until patent issues."(18 R.C.L. 1152) (Gold
Creek Mining Corporation v. Hon. Eulogio Rodriguez, Sec. of Agriculture and
Commerce, and Quirico Abadilla, Director of the Bureau of Mines, 66 Phil. 259,
265-266)

It is of no importance whether Benguet and Atok had secured a patent for as held in the Gold
Creek Mining Corp. Case, for all physical purposes of ownership, the owner is not required to
secure a patent as long as he complies with the provisions of the mining laws; his possessory
right, for all practical purposes of ownership, is as good as though secured by patent.

We agree likewise with the oppositors that having complied with all the requirements of the
mining laws, the claims were removed from the public domain, and not even the government of
the Philippines can take away this right from them. The reason is obvious. Having become the
private properties of the oppositors, they cannot be deprived thereof without due process of
law. 13

Such rights were not affected either by the stricture in the Commonwealth Constitution against the alienation of
all lands of the public domain except those agricultural in nature for this was made subject to existing rights.
Thus, in its Article XIII, Section 1, it was categorically provided that:

SEC. 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 Philipppines 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
60% 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 lands, 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 25 years, except as to
water rights for irrigation, water supply, fisheries, or industrial uses other than the development
of water power, in which case beneficial use may be the measure and the limit of the grant.

Implementing this provision, Act No. 4268, approved on November 8, 1935, declared:

Any provision of existing laws, executive order, proclamation to the contrary notwithstanding, all
locations of mining claim made prior to February 8, 1935 within lands set apart as forest reserve
under Sec. 1826 of the Revised Administrative Code which would be valid and subsisting
location except to the existence of said reserve are hereby declared to be valid and subsisting
locations as of the date of their respective locations.

The perfection of the mining claim converted the property to mineral land and under the laws then in force
removed it from the public domain. 14 By such act, the locators acquired exclusive rights over the land, against
even the government, without need of any further act such as the purchase of the land or the obtention of a
patent over it. 15As the land had become the private property of the locators, they had the right to transfer the
same, as they did, to Benguet and Atok.

It is true, as the Court of Appeals observed, that such private property was subject to the "vicissitudes of
ownership," or even to forfeiture by non-user or abandonment or, as the private respondents aver, by
acquisitive prescription. However, the method invoked by the de la Rosas is not available in the case at bar, for
two reasons.
First, the trial court found that the evidence of open, continuous, adverse and exclusive possession submitted
by the applicants was insufficient to support their claim of ownership. They themselves had acquired the land
only in 1964 and applied for its registration in 1965, relying on the earlier alleged possession of their
predecessors-in-interest. 16The trial judge, who had the opportunity to consider the evidence first-hand and
observe the demeanor of the witnesses and test their credibility was not convinced. We defer to his judgment
in the absence of a showing that it was reached with grave abuse of discretion or without sufficient basis. 17

Second, even if it be assumed that the predecessors-in-interest of the de la Rosas had really been in
possession of the subject property, their possession was not in the concept of owner of the mining claim but of
the property as agricultural land, which it was not. The property was mineral land, and they were claiming it as
agricultural land. They were not disputing the lights of the mining locators nor were they seeking to oust them
as such and to replace them in the mining of the land. In fact, Balbalio testified that she was aware of the
diggings being undertaken "down below" 18 but she did not mind, much less protest, the same although she
claimed to be the owner of the said land.

The Court of Appeals justified this by saying there is "no conflict of interest" between the owners of the surface
rights and the owners of the sub-surface rights. This is rather doctrine, for it is a well-known principle that the
owner of piece of land has rights not only to its surface but also to everything underneath and the airspace
above it up to a reasonable height. 19 Under the aforesaid ruling, the land is classified as mineral underneath
and agricultural on the surface, subject to separate claims of title. This is also difficult to understand, especially
in its practical application.

Under the theory of the respondent court, the surface owner will be planting on the land while the mining
locator will be boring tunnels underneath. The farmer cannot dig a well because he may interfere with the
operations below and the miner cannot blast a tunnel lest he destroy the crops above. How deep can the
farmer, and how high can the miner, go without encroaching on each other's rights? Where is the dividing line
between the surface and the sub-surface rights?

The Court feels that the rights over the land are indivisible and that the land itself cannot be half agricultural
and half mineral. The classification must be categorical; the land must be either completely mineral or
completely agricultural. In the instant case, as already observed, the land which was originally classified as
forest land ceased to be so and became mineral and completely mineral once the mining claims were
perfected. 20 As long as mining operations were being undertaken thereon, or underneath, it did not cease to
be so and become agricultural, even if only partly so, because it was enclosed with a fence and was cultivated
by those who were unlawfully occupying the surface.

What must have misled the respondent court is Commonwealth Act No. 137, providing as follows:

Sec. 3. All mineral lands of the public domain and minerals 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 60% 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 government established under the Constitution.

SEC. 4. The ownership of, and the right to the use of land for agricultural, industrial,
commercial, residential, or for any purpose other than mining does not include the ownership of,
nor the right to extract or utilize, the minerals which may be found on or under the surface.

SEC. 5. The ownership of, and the right to extract and utilize, the minerals included within all
areas for which public agricultural land patents are granted are excluded and excepted from all
such patents.

SEC. 6. The ownership of, and the right to extract and utilize, the minerals included within all
areas for which Torrens titles are granted are excluded and excepted from all such titles.
This is an application of the Regalian doctrine which, as its name implies, is intended for the benefit of the
State, not of private persons. The rule simply reserves to the State all minerals that may be found in public and
even private land devoted to "agricultural, industrial, commercial, residential or (for) any purpose other than
mining." Thus, if a person is the owner of agricultural land in which minerals are discovered, his ownership of
such land does not give him the right to extract or utilize the said minerals without the permission of the State
to which such minerals belong.

The flaw in the reasoning of the respondent court is in supposing that the rights over the land could be used for
both mining and non-mining purposes simultaneously. The correct interpretation is that once minerals are
discovered in the land, whatever the use to which it is being devoted at the time, such use may be
discontinued by the State to enable it to extract the minerals therein in the exercise of its sovereign
prerogative. The land is thus converted to mineral land and may not be used by any private party, including the
registered owner thereof, for any other purpose that will impede the mining operations to be undertaken
therein, For the loss sustained by such owner, he is of course entitled to just compensation under the Mining
Laws or in appropriate expropriation proceedings. 21

Our holding is that Benguet and Atok have exclusive rights to the property in question by virtue of their
respective mining claims which they validly acquired before the Constitution of 1935 prohibited the alienation of
all lands of the public domain except agricultural lands, subject to vested rights existing at the time of its
adoption. The land was not and could not have been transferred to the private respondents by virtue of
acquisitive prescription, nor could its use be shared simultaneously by them and the mining companies for
agricultural and mineral purposes.

WHEREFORE, the decision of the respondent court dated April 30, 1976, is SET ASIDE and that of the trial
court dated March 11, 1969, is REINSTATED, without any pronouncement as to costs.

SO ORDERED.

EN BANC

[G.R. No. 37435. November 28, 1934.]

NUMERIANO PADILLA, applicant-appellee, v. PABLO REYES and THE DIRECTOR OF


LANDS, Oppositors-Appellants.

Attorney-General Jaranilla and Jose Nava for Appellants.

Sison & Siguion for Appellee.

SYLLABUS

1. TORRENS REGISTRATION; REGISTRABLE TITLE. In order that land may be registered


under the Torrens system, the applicant must show, even though there is no opposition to his
application, that he is the absolute owner, in fee simple, of such land. In other words, the
burden is upon him to show that he is the real and absolute owner, in fee simple, of such land.
(Roman Catholic Bishop of Lipa v. Municipality of Taal, 38 Phil., 367, 375, 376.)

2. ID.; ID. It is well-settled that no public land can be acquired by private persons without
any grant, express or implied, from the government. A grant is conclusively presumed by law
when the claimant, by himself or through his predecessors in interest, has occupied the land
openly, continuously, exclusively, and under a claim of title since July 26, 1894, or prior thereto.
(Ongsiaco v. Magsilang, 50 Phil., 380.)
DECISION

ABAD SANTOS, J.:

Appellee applied for the registration in his name of a parcel of land containing a little over 161
hectares located in Bogabong, Nueva Ecija. The application was opposed by the Director of
Lands and by nine homesteaders, on the ground that the property sought to be registered was
public land. One Pablo Reyes, who claimed to be the exclusive owner of the land, also filed an
opposition. After due hearing, the court below dismissed all the oppositions and decreed the
registration of the land in the name of the appellee. From this judgment all the parties who
opposed the application appealed, although Pablo Reyes appeal was dismissed for failure to file
his brief on time.

In support of this appeal the following errors have been assigned: (1) That the lower court erred
in holding that the appellee has established his title to the property sought to be registered, and
(2) that the lower court erred in decreeing the registration of the property in the name of the
appellee.

Appellee presented no valid and sufficient title deed showing his ownership of the land in
question. He, however, tried to prove that he inherited the same from his ancestors, who had
been in possession of the land for many years dating back to the Spanish regime; that he as well
as his predecessors in interest had partly cultivated the land and partly used it as a pasture; that
various improvements had been made on the land ever since the Spanish regime; and that upon
the death of their father, Pablo Padilla, he and his sister Alejandra took possession of the land.
On the other hand, the appellants introduced evidence tending to show that the land in question
was never occupied by Pablo Padilla during the Spanish regime; that when the several
homesteaders settled upon the land during 1912 to 1918, the same was unoccupied, unclaimed,
and without any sign of previous cultivation or occupation; that the homesteaders were not
molested in their possession of portions of the land in question until 1927, after they had cleared
their holdings and put the same in cultivation.

In Roman Catholic Bishop of Lipa v. Municipality of Taal (38 Phil., 367, 375, 376), this court
said:jgc:chanrobles.com.ph

". . . In order, however, that the petitioner for registration of his land under the Torrens system
shall be permitted to have the same registered and to have the benefit resulting from the
certificate of title finally issued, the burden is upon him to show that he is the real and absolute
owner, in fee simple, of the lands which he is attempting to have registered. The petitioner is not
entitled to have his lands registered under the Torrens system simply because no one appears to
oppose his title and to oppose the registration of his lands. In order that land may be registered
under the Torrens system, the petitioner must show, even though there is no opposition, that he
is the absolute owner, in fee simple, of the same. . . ."cralaw virtua1aw library

On the other hand, it is well-settled that no public land can be acquired by private persons
without any grant, express or implied, from the government. A grant is conclusively presumed
by law when the claimant, by himself or through his predecessors in interest, has occupied the
land openly, continuously, exclusively, and under a claim of title since July 26, 1894, or prior
thereto. (Ongsiaco v. Magsilang, 50 Phil., 380.) In the case before us, appellee has failed to
prove any express grant from the government; neither has he succeeded in proving possession
from which a constructive grant can be predicated.
It results that the judgment appealed from must be reversed, and it is hereby decreed and
adjudged that the property sought to be registered in this case is public land. Without any
special pronouncement as to costs in this instance. So ordered.

Street, Butte, Goddard and Diaz, JJ., concur.

REPUBLIC OF THE PHILIPPINES, petitioner, vs. JEREMIAS AND DAVID HERBIETO, respondents.

DECISION
CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari, under Rule 45 of the 1997 Rules of Civil
Procedure, seeking the reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 67625, dated 22
November 2002,[1] which affirmed the Judgment of the Municipal Trial Court (MTC) of Consolacion, Cebu,
dated 21 December 1999,[2] granting the application for land registration of the respondents.
Respondents in the present Petition are the Herbieto brothers, Jeremias and David, who filed with the
MTC, on 23 September 1998, a single application for registration of two parcels of land, Lots No. 8422 and
8423, located in Cabangahan, Consolacion, Cebu (Subject Lots). They claimed to be owners in fee simple of
the Subject Lots, which they purchased from their parents, spouses Gregorio Herbieto and Isabel Owatan, on
25 June 1976.[3] Together with their application for registration, respondents submitted the following set of
documents:

(a) Advance Survey Plan of Lot No. 8422, in the name of respondent Jeremias; and Advance Survey Plan of Lot
No. 8423, in the name of respondent David;[4]

(b) The technical descriptions of the Subject Lots;[5]

(c) Certifications by the Department of Environment and Natural Resources (DENR) dispensing with the need
for Surveyors Certificates for the Subject Lots;[6]

(d) Certifications by the Register of Deeds of Cebu City on the absence of certificates of title covering the
Subject Lots;[7]

(e) Certifications by the Community Environment and Natural Resources Office (CENRO) of the DENR on its
finding that the Subject Lots are alienable and disposable, by virtue of Forestry Administrative Order No.
4-1063, dated 25 June 1963;[8]

(f) Certified True Copies of Assessment of Real Property (ARP) No. 941800301831, in the name of Jeremias,
covering Lot No. 8422, issued in 1994; and ARP No. 941800301833, in the name of David, covering Lot
No. 8423, also issued in 1994;[9] and

(g) Deed of Definite Sale executed on 25 June 1976 by spouses Gregorio Herbieto and Isabel Owatan selling the
Subject Lots and the improvements thereon to their sons and respondents herein, Jeremias and David,
for P1,000. Lot No. 8422 was sold to Jeremias, while Lot No. 8423 was sold to David.[10]

On 11 December 1998, the petitioner Republic of the Philippines (Republic) filed an Opposition to the
respondents application for registration of the Subject Lots arguing that: (1) Respondents failed to comply with
the period of adverse possession of the Subject Lots required by law; (2) Respondents muniments of title were
not genuine and did not constitute competent and sufficient evidence of bona fide acquisition of the Subject
Lots; and (3) The Subject Lots were part of the public domain belonging to the Republic and were not subject
to private appropriation.[11]
The MTC set the initial hearing on 03 September 1999 at 8:30 a.m.[12] All owners of the land adjoining the
Subject Lots were sent copies of the Notice of Initial Hearing.[13] A copy of the Notice was also posted on 27
July 1999 in a conspicuous place on the Subject Lots, as well as on the bulletin board of the municipal building
of Consolacion, Cebu, where the Subject Lots were located.[14] Finally, the Notice was also published in the
Official Gazette on 02 August 1999[15] and The Freeman Banat News on 19 December 1999.[16]
During the initial hearing on 03 September 1999, the MTC issued an Order of Special Default, [17] with only
petitioner Republic opposing the application for registration of the Subject Lots. The respondents, through their
counsel, proceeded to offer and mark documentary evidence to prove jurisdictional facts. The MTC
commissioned the Clerk of Court to receive further evidence from the respondents and to submit a Report to
the MTC after 30 days.
On 21 December 1999, the MTC promulgated its Judgment ordering the registration and confirmation of
the title of respondent Jeremias over Lot No. 8422 and of respondent David over Lot No. 8423. It subsequently
issued an Order on 02 February 2000 declaring its Judgment, dated 21 December 1999, final and executory,
and directing the Administrator of the Land Registration Authority (LRA) to issue a decree of registration for the
Subject Lots.[18]
Petitioner Republic appealed the MTC Judgment, dated 21 December 1999, to the Court of
Appeals.[19] The Court of Appeals, in its Decision, dated 22 November 2002, affirmed the appealed MTC
Judgment reasoning thus:

In the case at bar, there can be no question that the land sought to be registered has been classified as within the alienable
and disposable zone since June 25, 1963. Article 1113 in relation to Article 1137 of the Civil Code, respectively provides
that All things which are within the commerce of men are susceptible of prescription, unless otherwise provided. Property
of the State or any of its subdivisions of patrimonial character shall not be the object of prescription and that Ownership
and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years,
without need of title or of good faith.

As testified to by the appellees in the case at bench, their parents already acquired the subject parcels of lands, subject
matter of this application, since 1950 and that they cultivated the same and planted it with jackfruits, bamboos, coconuts,
and other trees (Judgment dated December 21, 1999, p. 6). In short, it is undisputed that herein appellees or their
predecessors-in-interest had occupied and possessed the subject land openly, continuously, exclusively, and adversely
since 1950. Consequently, even assuming arguendo that appellees possession can be reckoned only from June 25, 1963 or
from the time the subject lots had been classified as within the alienable and disposable zone, still the argument of the
appellant does not hold water.

As earlier stressed, the subject property, being alienable since 1963 as shown by CENRO Report dated June 23, 1963,
may now be the object of prescription, thus susceptible of private ownership. By express provision of Article 1137,
appellees are, with much greater right, entitled to apply for its registration, as provided by Section 14(4) of P.D. 1529
which allows individuals to own land in any manner provided by law. Again, even considering that possession of
appelless should only be reckoned from 1963, the year when CENRO declared the subject lands alienable, herein
appellees have been possessing the subject parcels of land in open, continuous, and in the concept of an owner, for 35
years already when they filed the instant application for registration of title to the land in 1998. As such, this court finds
no reason to disturb the finding of the court a quo.[20]

The Republic filed the present Petition for the review and reversal of the Decision of the Court of Appeals,
dated 22 November 2002, on the basis of the following arguments:
First, respondents failed to establish that they and their predecessors-in-interest had been in open,
continuous, and adverse possession of the Subject Lots in the concept of owners since 12 June 1945 or
earlier. According to the petitioner Republic, possession of the Subject Lots prior to 25 June 1963 cannot be
considered in determining compliance with the periods of possession required by law. The Subject Lots were
classified as alienable and disposable only on 25 June 1963, per CENROs certification. It also alleges that the
Court of Appeals, in applying the 30-year acquisitive prescription period, had overlooked the ruling in Republic
v. Doldol,[21] where this Court declared that Commonwealth Act No. 141, otherwise known as the Public Land
Act, as amended and as it is presently phrased, requires that possession of land of the public domain must be
from 12 June 1945 or earlier, for the same to be acquired through judicial confirmation of imperfect title.
Second, the application for registration suffers from fatal infirmity as the subject of the application
consisted of two parcels of land individually and separately owned by two applicants. Petitioner Republic
contends that it is implicit in the provisions of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, as amended, that the application for registration of title to land shall be filed by a single
applicant; multiple applicants may file a single application only in case they are co-owners. While an
application may cover two parcels of land, it is allowed only when the subject parcels of land belong to the
same applicant or applicants (in case the subject parcels of land are co-owned) and are situated within the
same province. Where the authority of the courts to proceed is conferred by a statute and when the manner of
obtaining jurisdiction is mandatory, it must be strictly complied with or the proceedings will be utterly void.
Since the respondents failed to comply with the procedure for land registration under the Property Registration
Decree, the proceedings held before the MTC is void, as the latter did not acquire jurisdiction over it.
I

Jurisdiction

Addressing first the issue of jurisdiction, this Court finds that the MTC had no jurisdiction to proceed with
and hear the application for registration filed by the respondents but for reasons different from those presented
by petitioner Republic.
A. The misjoinder of causes of action and parties does not affect the jurisdiction of the MTC to hear and
proceed with respondents application for registration.
Respondents filed a single application for registration of the Subject Lots even though they were not co-
owners. Respondents Jeremias and David were actually seeking the individual and separate registration of
Lots No. 8422 and 8423, respectively.
Petitioner Republic believes that the procedural irregularity committed by the respondents was fatal to
their case, depriving the MTC of jurisdiction to proceed with and hear their application for registration of the
Subject Lots, based on this Courts pronouncement in Director of Lands v. Court of Appeals,[22] to wit:

. . . In view of these multiple omissions which constitute non-compliance with the above-cited sections of the Act, We
rule that said defects have not invested the Court with the authority or jurisdiction to proceed with the case because the
manner or mode of obtaining jurisdiction as prescribed by the statute which is mandatory has not been strictly followed,
thereby rendering all proceedings utterly null and void.

This Court, however, disagrees with petitioner Republic in this regard. This procedural lapse committed by
the respondents should not affect the jurisdiction of the MTC to proceed with and hear their application for
registration of the Subject Lots.
The Property Registration Decree[23] recognizes and expressly allows the following situations: (1) the filing
of a single application by several applicants for as long as they are co-owners of the parcel of land sought to
be registered;[24] and (2) the filing of a single application for registration of several parcels of land provided that
the same are located within the same province.[25] The Property Registration Decree is silent, however, as to
the present situation wherein two applicants filed a single application for two parcels of land, but are seeking
the separate and individual registration of the parcels of land in their respective names.
Since the Property Registration Decree failed to provide for such a situation, then this Court refers to the
Rules of Court to determine the proper course of action. Section 34 of the Property Registration Decree itself
provides that, [t]he Rules of Court shall, insofar as not inconsistent with the provisions of this Decree, be
applicable to land registration and cadastral cases by analogy or in a suppletory character and whenever
practicable and convenient.
Considering every application for land registration filed in strict accordance with the Property Registration
Decree as a single cause of action, then the defect in the joint application for registration filed by the
respondents with the MTC constitutes a misjoinder of causes of action and parties. Instead of a single or joint
application for registration, respondents Jeremias and David, more appropriately, should have filed separate
applications for registration of Lots No. 8422 and 8423, respectively.
Misjoinder of causes of action and parties do not involve a question of jurisdiction of the court to hear and
proceed with the case.[26] They are not even accepted grounds for dismissal thereof.[27] Instead, under the
Rules of Court, the misjoinder of causes of action and parties involve an implied admission of the courts
jurisdiction. It acknowledges the power of the court, acting upon the motion of a party to the case or on its own
initiative, to order the severance of the misjoined cause of action, to be proceeded with separately (in case of
misjoinder of causes of action); and/or the dropping of a party and the severance of any claim against said
misjoined party, also to be proceeded with separately (in case of misjoinder of parties).
The misjoinder of causes of action and parties in the present Petition may have been corrected by the
MTC motu propio or on motion of the petitioner Republic. It is regrettable, however, that the MTC failed to
detect the misjoinder when the application for registration was still pending before it; and more regrettable that
the petitioner Republic did not call the attention of the MTC to the fact by filing a motion for severance of the
causes of action and parties, raising the issue of misjoinder only before this Court.
B. Respondents, however, failed to comply with the publication requirements mandated by the Property
Registration Decree, thus, the MTC was not invested with jurisdiction as a land registration court.
Although the misjoinder of causes of action and parties in the present Petition did not affect the jurisdiction
of the MTC over the land registration proceeding, this Court, nonetheless, has discovered a defect in the
publication of the Notice of Initial Hearing, which bars the MTC from assuming jurisdiction to hear and proceed
with respondents application for registration.
A land registration case is a proceeding in rem,[28] and jurisdiction in rem cannot be acquired unless there
be constructive seizure of the land through publication and service of notice.[29]
Section 23 of the Property Registration Decree requires that the public be given Notice of the Initial
Hearing of the application for land registration by means of (1) publication; (2) mailing; and (3) posting.
Publication of the Notice of Initial Hearing shall be made in the following manner:

1. By publication.

Upon receipt of the order of the court setting the time for initial hearing, the Commissioner of Land Registration shall
cause a notice of initial hearing to be published once in the Official Gazette and once in a newspaper of general circulation
in the Philippines: Provided, however, that the publication in the Official Gazette shall be sufficient to confer jurisdiction
upon the court. Said notice shall be addressed to all persons appearing to have an interest in the land involved including
the adjoining owners so far as known, and to all whom it may concern. Said notice shall also require all persons concerned
to appear in court at a certain date and time to show cause why the prayer of said application shall not be granted.

Even as this Court concedes that the aforequoted Section 23(1) of the Property Registration Decree
expressly provides that publication in the Official Gazette shall be sufficient to confer jurisdiction upon the land
registration court, it still affirms its declaration in Director of Lands v. Court of Appeals[30] that publication in a
newspaper of general circulation is mandatory for the land registration court to validly confirm and register the
title of the applicant or applicants. That Section 23 of the Property Registration Decree enumerated and
described in detail the requirements of publication, mailing, and posting of the Notice of Initial Hearing, then all
such requirements, including publication of the Notice in a newspaper of general circulation, is essential and
imperative, and must be strictly complied with. In the same case, this Court expounded on the reason behind
the compulsory publication of the Notice of Initial Hearing in a newspaper of general circulation, thus

It may be asked why publication in a newspaper of general circulation should be deemed mandatory when the law already
requires notice by publication in the Official Gazette as well as by mailing and posting, all of which have already been
complied with in the case at hand. The reason is due process and the reality that the Official Gazette is not as widely read
and circulated as newspaper and is oftentimes delayed in its circulation, such that the notices published therein may not
reach the interested parties on time, if at all. Additionally, such parties may not be owners of neighboring properties, and
may in fact not own any other real estate. In sum, the all encompassing in rem nature of land registration cases, the
consequences of default orders issued against the whole world and the objective of disseminating the notice in as wide a
manner as possible demand a mandatory construction of the requirements for publication, mailing and posting.[31]
In the instant Petition, the initial hearing was set by the MTC, and was in fact held, on 03 September 1999
at 8:30 a.m. While the Notice thereof was printed in the issue of the Official Gazette, dated 02 August 1999,
and officially released on 10 August 1999, it was published in The Freeman Banat News, a daily newspaper
printed in Cebu City and circulated in the province and cities of Cebu and in the rest of Visayas and Mindanao,
only on 19 December 1999, more than three months after the initial hearing.
Indubitably, such publication of the Notice, way after the date of the initial hearing, would already be
worthless and ineffective. Whoever read the Notice as it was published in The Freeman Banat News and had a
claim to the Subject Lots was deprived of due process for it was already too late for him to appear before the
MTC on the day of the initial hearing to oppose respondents application for registration, and to present his
claim and evidence in support of such claim. Worse, as the Notice itself states, should the claimant-oppositor
fail to appear before the MTC on the date of initial hearing, he would be in default and would forever be barred
from contesting respondents application for registration and even the registration decree that may be issued
pursuant thereto. In fact, the MTC did issue an Order of Special Default on 03 September 1999.
The late publication of the Notice of Initial Hearing in the newspaper of general circulation is tantamount to
no publication at all, having the same ultimate result. Owing to such defect in the publication of the Notice, the
MTC failed to constructively seize the Subject Lots and to acquire jurisdiction over respondents application for
registration thereof. Therefore, the MTC Judgment, dated 21 December 1999, ordering the registration and
confirmation of the title of respondents Jeremias and David over Lots No. 8422 and 8423, respectively; as well
as the MTC Order, dated 02 February 2000, declaring its Judgment of 21 December 1999 final and executory,
and directing the LRA Administrator to issue a decree of registration for the Subject Lots, are both null and void
for having been issued by the MTC without jurisdiction.
II

Period of Possession

Respondents failed to comply with the required period of possession of the Subject Lots for the judicial
confirmation or legalization of imperfect or incomplete title.
While this Court has already found that the MTC did not have jurisdiction to hear and proceed with
respondents application for registration, this Court nevertheless deems it necessary to resolve the legal issue
on the required period of possession for acquiring title to public land.
Respondents application filed with the MTC did not state the statutory basis for their title to the Subject
Lots. They only alleged therein that they obtained title to the Subject Lots by purchase from their parents,
spouses Gregorio Herbieto and Isabel Owatan, on 25 June 1976. Respondent Jeremias, in his testimony,
claimed that his parents had been in possession of the Subject Lots in the concept of an owner since 1950.[32]
Yet, according to the DENR-CENRO Certification, submitted by respondents themselves, the Subject Lots
are within Alienable and Disposable, Block I, Project No. 28 per LC Map No. 2545 of Consolacion, Cebu
certified under Forestry Administrative Order No. 4-1063, dated June 25, 1963. Likewise, it is outside Kotkot-
Lusaran Mananga Watershed Forest Reservation per Presidential Proclamation No. 932 dated June 29,
1992.[33] The Subject Lots are thus clearly part of the public domain, classified as alienable and disposable as
of 25 June 1963.
As already well-settled in jurisprudence, no public land can be acquired by private persons without any
grant, express or implied, from the government;[34] and it is indispensable that the person claiming title to public
land should show that his title was acquired from the State or any other mode of acquisition recognized by
law.[35]
The Public Land Act, as amended, governs lands of the public domain, except timber and mineral lands,
friar lands, and privately-owned lands which reverted to the State.[36] It explicitly enumerates the means by
which public lands may be disposed, as follows:

(1) For homestead settlement;


(2) By sale;
(3) By lease;
(4) By confirmation of imperfect or incomplete titles;

(a) By judicial legalization; or


(b) By administrative legalization (free patent).[37]

Each mode of disposition is appropriately covered by separate chapters of the Public Land Act because there
are specific requirements and application procedure for every mode.[38] Since respondents herein filed their
application before the MTC,[39] then it can be reasonably inferred that they are seeking the judicial confirmation
or legalization of their imperfect or incomplete title over the Subject Lots.
Judicial confirmation or legalization of imperfect or incomplete title to land, not exceeding 144
hectares,[40] may be availed of by persons identified under Section 48 of the Public Land Act, as amended by
Presidential Decree No. 1073, which reads

Section 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of
First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of
title thereafter, under the Land Registration Act, to wit:

(a) [Repealed by Presidential Decree No. 1073].

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim
of acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the filing of the
applications for confirmation of title, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall be
entitled to a certificate of title under the provisions of this chapter.

(c) Members of the national cultural minorities who by themselves or through their predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation of lands of the public domain
suitable to agriculture whether disposable or not, under a bona fide claim of ownership since June 12, 1945
shall be entitled to the rights granted in subsection (b) hereof.

Not being members of any national cultural minorities, respondents may only be entitled to judicial
confirmation or legalization of their imperfect or incomplete title under Section 48(b) of the Public Land Act, as
amended. Section 48(b), as amended, now requires adverse possession of the land since 12 June 1945 or
earlier. In the present Petition, the Subject Lots became alienable and disposable only on 25 June 1963. Any
period of possession prior to the date when the Subject Lots were classified as alienable and disposable is
inconsequential and should be excluded from the computation of the period of possession; such possession
can never ripen into ownership and unless the land had been classified as alienable and disposable, the rules
on confirmation of imperfect title shall not apply thereto.[41] It is very apparent then that respondents could not
have complied with the period of possession required by Section 48(b) of the Public Land Act, as amended, to
acquire imperfect or incomplete title to the Subject Lots that may be judicially confirmed or legalized.
The confirmation of respondents title by the Court of Appeals was based on the erroneous supposition that
respondents were claiming title to the Subject Lots under the Property Registration Decree. According to the
Decision of the Court of Appeals, dated 22 November 2002, Section 14(4) of the Property Registration Decree
allows individuals to own land in any other manner provided by law. It then ruled that the respondents, having
possessed the Subject Lots, by themselves and through their predecessors-in-interest, since 25 June 1963 to
23 September 1998, when they filed their application, have acquired title to the Subject Lots by extraordinary
prescription under Article 1113, in relation to Article 1137, both of the Civil Code.[42]
The Court of Appeals overlooked the difference between the Property Registration Decree and the Public
Land Act. Under the Property Registration Decree, there already exists a title which is confirmed by the court;
while under the Public Land Act, the presumption always is that the land applied for pertains to the State, and
that the occupants and possessors only claim an interest in the same by virtue of their imperfect title or
continuous, open, and notorious possession.[43] As established by this Court in the preceding paragraphs, the
Subject Lots respondents wish to register are undoubtedly alienable and disposable lands of the public domain
and respondents may have acquired title thereto only under the provisions of the Public Land Act.
However, it must be clarified herein that even though respondents may acquire imperfect or incomplete
title to the Subject Lots under the Public Land Act, their application for judicial confirmation or legalization
thereof must be in accordance with the Property Registration Decree, for Section 50 of the Public Land Act
reads

SEC. 50. Any person or persons, or their legal representatives or successors in right, claiming any lands or interest in
lands under the provisions of this chapter, must in every case present an application to the proper Court of First Instance,
praying that the validity of the alleged title or claim be inquired into and that a certificate of title be issued to them under
the provisions of the Land Registration Act.[44]

Hence, respondents application for registration of the Subject Lots must have complied with the
substantial requirements under Section 48(b) of the Public Land Act and the procedural requirements under
the Property Registration Decree.
Moreover, provisions of the Civil Code on prescription of ownership and other real rights apply in general
to all types of land, while the Public Land Act specifically governs lands of the public domain. Relative to one
another, the Public Land Act may be considered a special law[45] that must take precedence over the Civil
Code, a general law. It is an established rule of statutory construction that between a general law and a special
law, the special law prevails Generalia specialibus non derogant.[46]
WHEREFORE, based on the foregoing, the instant Petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 67625, dated 22 November 2002, is REVERSED. The Judgment of the MTC of
Consolacion, Cebu in LRC Case No. N-75, dated 21 December 1999, and its Order, dated 02 February 2000
are declared NULL AND VOID. Respondents application for registration is DISMISSED.
SO ORDERED.

EN BANC

G.R. No. 135385 December 6, 2000

ISAGANI CRUZ and CESAR EUROPA, petitioners,


vs.
SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES, SECRETARY OF BUDGET AND
MANAGEMENT and CHAIRMAN and COMMISSIONERS OF THE NATIONAL COMMISSION ON
INDIGENOUS PEOPLES, respondents.
HON. JUAN M .FLAVIER, HON. PONCIANO BENNAGEN, BAYANI ASCARRAGA, EDTAMI
MANSAYANGAN, BASILIO WANDAG, EVELYN DUNUAN, YAOM TUGAS, ALFREMO CARPIANO,
LIBERATO A. GABIN, MATERNIDAD M. COLAS, NARCISA M. DALUPINES, BAI KIRAM-CONNIE
SATURNO, BAE MLOMO-BEATRIZ T. ABASALA, DATU BALITUNGTUNG-ANTONIO D. LUMANDONG,
DATU MANTUMUKAW TEOFISTO SABASALES, DATU EDUAARDO BANDA, DATU JOEL UNAD, DATU
RAMON BAYAAN, TIMUAY JOSE ANOY, TIMUAY MACARIO D. SALACAO, TIMUAY EDWIN B. ENDING,
DATU SAHAMPONG MALANAW VI, DATU BEN PENDAO CABIGON, BAI NANAPNAY-LIZA SAWAY,
BAY INAY DAYA-MELINDA S. REYMUNDO, BAI TINANGHAGA HELINITA T. PANGAN, DATU
MAKAPUKAW ADOLINO L. SAWAY, DATU MAUDAYAW-CRISPEN SAWAY, VICKY MAKAY, LOURDES
D. AMOS, GILBERT P. HOGGANG, TERESA GASPAR, MANUEL S. ONALAN, MIA GRACE L. GIRON,
ROSEMARIE G. PE, BENITO CARINO, JOSEPH JUDE CARANTES, LYNETTE CARANTES-VIVAL,
LANGLEY SEGUNDO, SATUR S. BUGNAY, CARLING DOMULOT, ANDRES MENDIOGRIN, LEOPOLDO
ABUGAN, VIRGILIO CAYETANO, CONCHITA G. DESCAGA, LEVY ESTEVES, ODETTE G. ESTEVEZ,
RODOLFO C. AGUILAR, MAURO VALONES, PEPE H. ATONG, OFELIA T. DAVI, PERFECTO B.
GUINOSAO, WALTER N. TIMOL, MANUEL T. SELEN, OSCAR DALUNHAY, RICO O. SULATAN, RAFFY
MALINDA, ALFREDO ABILLANOS, JESSIE ANDILAB, MIRLANDO H. MANGKULINTAS, SAMIE
SATURNO, ROMEO A. LINDAHAY, ROEL S. MANSANG-CAGAN, PAQUITO S. LIESES, FILIPE G.
SAWAY, HERMINIA S. SAWAY, JULIUS S. SAWAY, LEONARDA SAWAY, JIMMY UGYUB, SALVADOR
TIONGSON, VENANCIO APANG, MADION MALID, SUKIM MALID, NENENG MALID, MANGKATADONG
AUGUSTO DIANO, JOSEPHINE M. ALBESO, MORENO MALID, MARIO MANGCAL, FELAY DIAMILING,
SALOME P. SARZA, FELIPE P. BAGON, SAMMY SALNUNGAN, ANTONIO D. EMBA, NORMA
MAPANSAGONOS, ROMEO SALIGA, SR., JERSON P. GERADA, RENATO T. BAGON, JR., SARING
MASALONG, SOLEDAD M. GERARDA, ELIZABETH L. MENDI, MORANTE S. TIWAN, DANILO M.
MALUDAO, MINORS MARICEL MALID, represented by her father CORNELIO MALID, MARCELINO M.
LADRA, represented by her father MONICO D. LADRA, JENNYLYN MALID, represented by her father
TONY MALID, ARIEL M. EVANGELISTA, represented by her mother LINAY BALBUENA, EDWARD M.
EMUY, SR., SUSAN BOLANIO, OND, PULA BATO B'LAAN TRIBAL FARMER'S ASSOCIATION, INTER-
PEOPLE'S EXCHANGE, INC. and GREEN FORUM-WESTERN VISAYAS, intervenors.
COMMISSION ON HUMAN RIGHTS, intervenor.
IKALAHAN INDIGENOUS PEOPLE and HARIBON FOUNDATION FOR THE CONSERVATION OF
NATURAL RESOURCES, INC., intervenor.

RESOLUTION

PER CURIAM:

Petitioners Isagani Cruz and Cesar Europa brought this suit for prohibition and mandamus as citizens and
taxpayers, assailing the constitutionality of certain provisions of Republic Act No. 8371 (R.A. 8371), otherwise
known as the Indigenous Peoples Rights Act of 1997 (IPRA), and its Implementing Rules and Regulations
(Implementing Rules).

In its resolution of September 29, 1998, the Court required respondents to comment.1 In compliance,
respondents Chairperson and Commissioners of the National Commission on Indigenous Peoples (NCIP), the
government agency created under the IPRA to implement its provisions, filed on October 13, 1998 their
Comment to the Petition, in which they defend the constitutionality of the IPRA and pray that the petition be
dismissed for lack of merit.

On October 19, 1998, respondents Secretary of the Department of Environment and Natural Resources
(DENR) and Secretary of the Department of Budget and Management (DBM) filed through the Solicitor
General a consolidated Comment. The Solicitor General is of the view that the IPRA is partly unconstitutional
on the ground that it grants ownership over natural resources to indigenous peoples and prays that the petition
be granted in part.

On November 10, 1998, a group of intervenors, composed of Sen. Juan Flavier, one of the authors of the
IPRA, Mr. Ponciano Bennagen, a member of the 1986 Constitutional Commission, and the leaders and
members of 112 groups of indigenous peoples (Flavier, et. al), filed their Motion for Leave to Intervene. They
join the NCIP in defending the constitutionality of IPRA and praying for the dismissal of the petition.

On March 22, 1999, the Commission on Human Rights (CHR) likewise filed a Motion to Intervene and/or to
Appear as Amicus Curiae. The CHR asserts that IPRA is an expression of the principle of parens patriae and
that the State has the responsibility to protect and guarantee the rights of those who are at a serious
disadvantage like indigenous peoples. For this reason it prays that the petition be dismissed.

On March 23, 1999, another group, composed of the Ikalahan Indigenous People and the Haribon Foundation
for the Conservation of Natural Resources, Inc. (Haribon, et al.), filed a motion to Intervene with attached
Comment-in-Intervention. They agree with the NCIP and Flavier, et al. that IPRA is consistent with the
Constitution and pray that the petition for prohibition and mandamus be dismissed.

The motions for intervention of the aforesaid groups and organizations were granted.
Oral arguments were heard on April 13, 1999. Thereafter, the parties and intervenors filed their respective
memoranda in which they reiterate the arguments adduced in their earlier pleadings and during the hearing.

Petitioners assail the constitutionality of the following provisions of the IPRA and its Implementing Rules on the
ground that they amount to an unlawful deprivation of the States ownership over lands of the public domain as
well as minerals and other natural resources therein, in violation of the regalian doctrine embodied in Section
2, Article XII of the Constitution:

"(1) Section 3(a) which defines the extent and coverage of ancestral domains, and Section 3(b) which, in turn,
defines ancestral lands;

"(2) Section 5, in relation to section 3(a), which provides that ancestral domains including inalienable public
lands, bodies of water, mineral and other resources found within ancestral domains are private but community
property of the indigenous peoples;

"(3) Section 6 in relation to section 3(a) and 3(b) which defines the composition of ancestral domains and
ancestral lands;

"(4) Section 7 which recognizes and enumerates the rights of the indigenous peoples over the ancestral
domains;

(5) Section 8 which recognizes and enumerates the rights of the indigenous peoples over the ancestral lands;

"(6) Section 57 which provides for priority rights of the indigenous peoples in the harvesting, extraction,
development or exploration of minerals and other natural resources within the areas claimed to be their
ancestral domains, and the right to enter into agreements with nonindigenous peoples for the development and
utilization of natural resources therein for a period not exceeding 25 years, renewable for not more than 25
years; and

"(7) Section 58 which gives the indigenous peoples the responsibility to maintain, develop, protect and
conserve the ancestral domains and portions thereof which are found to be necessary for critical watersheds,
mangroves, wildlife sanctuaries, wilderness, protected areas, forest cover or reforestation." 2

Petitioners also content that, by providing for an all-encompassing definition of "ancestral domains" and
"ancestral lands" which might even include private lands found within said areas, Sections 3(a) and 3(b) violate
the rights of private landowners.3

In addition, petitioners question the provisions of the IPRA defining the powers and jurisdiction of the NCIP and
making customary law applicable to the settlement of disputes involving ancestral domains and ancestral lands
on the ground that these provisions violate the due process clause of the Constitution.4

These provisions are:

"(1) sections 51 to 53 and 59 which detail the process of delineation and recognition of ancestral
domains and which vest on the NCIP the sole authority to delineate ancestral domains and ancestral
lands;

"(2) Section 52[i] which provides that upon certification by the NCIP that a particular area is an
ancestral domain and upon notification to the following officials, namely, the Secretary of Environment
and Natural Resources, Secretary of Interior and Local Governments, Secretary of Justice and
Commissioner of the National Development Corporation, the jurisdiction of said officials over said area
terminates;

"(3) Section 63 which provides the customary law, traditions and practices of indigenous peoples shall
be applied first with respect to property rights, claims of ownership, hereditary succession and
settlement of land disputes, and that any doubt or ambiguity in the interpretation thereof shall be
resolved in favor of the indigenous peoples;

"(4) Section 65 which states that customary laws and practices shall be used to resolve disputes
involving indigenous peoples; and

"(5) Section 66 which vests on the NCIP the jurisdiction over all claims and disputes involving rights of
the indigenous peoples."5

Finally, petitioners assail the validity of Rule VII, Part II, Section 1 of the NCIP Administrative Order No. 1,
series of 1998, which provides that "the administrative relationship of the NCIP to the Office of the President is
characterized as a lateral but autonomous relationship for purposes of policy and program coordination." They
contend that said Rule infringes upon the Presidents power of control over executive departments under
Section 17, Article VII of the Constitution.6

Petitioners pray for the following:

"(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59, 63, 65 and 66 and other related
provisions of R.A. 8371 are unconstitutional and invalid;

"(2) The issuance of a writ of prohibition directing the Chairperson and Commissioners of the NCIP to
cease and desist from implementing the assailed provisions of R.A. 8371 and its Implementing Rules;

"(3) The issuance of a writ of prohibition directing the Secretary of the Department of Environment and
Natural Resources to cease and desist from implementing Department of Environment and Natural
Resources Circular No. 2, series of 1998;

"(4) The issuance of a writ of prohibition directing the Secretary of Budget and Management to cease
and desist from disbursing public funds for the implementation of the assailed provisions of R.A. 8371;
and

"(5) The issuance of a writ of mandamus commanding the Secretary of Environment and Natural
Resources to comply with his duty of carrying out the States constitutional mandate to control and
supervise the exploration, development, utilization and conservation of Philippine natural resources."7

After due deliberation on the petition, the members of the Court voted as follows:

Seven (7) voted to dismiss the petition. Justice Kapunan filed an opinion, which the Chief Justice and Justices
Bellosillo, Quisumbing, and Santiago join, sustaining the validity of the challenged provisions of R.A. 8371.
Justice Puno also filed a separate opinion sustaining all challenged provisions of the law with the exception of
Section 1, Part II, Rule III of NCIP Administrative Order No. 1, series of 1998, the Rules and Regulations
Implementing the IPRA, and Section 57 of the IPRA which he contends should be interpreted as dealing with
the large-scale exploitation of natural resources and should be read in conjunction with Section 2, Article XII of
the 1987 Constitution. On the other hand, Justice Mendoza voted to dismiss the petition solely on the ground
that it does not raise a justiciable controversy and petitioners do not have standing to question the
constitutionality of R.A. 8371.

Seven (7) other members of the Court voted to grant the petition. Justice Panganiban filed a separate opinion
expressing the view that Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of R.A. 8371 are
unconstitutional. He reserves judgment on the constitutionality of Sections 58, 59, 65, and 66 of the law, which
he believes must await the filing of specific cases by those whose rights may have been violated by the IPRA.
Justice Vitug also filed a separate opinion expressing the view that Sections 3(a), 7, and 57 of R.A. 8371 are
unconstitutional. Justices Melo, Pardo, Buena, Gonzaga-Reyes, and De Leon join in the separate opinions of
Justices Panganiban and Vitug.
As the votes were equally divided (7 to 7) and the necessary majority was not obtained, the case was
redeliberated upon. However, after redeliberation, the voting remained the same. Accordingly, pursuant to Rule
56, Section 7 of the Rules of Civil Procedure, the petition is DISMISSED.

Attached hereto and made integral parts thereof are the separate opinions of Justices Puno, Vitug, Kapunan,
Mendoza, and Panganiban.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De
Leon, Jr., JJ., concur.

EN BANC

G.R. No. 81564 April 26, 1990

ACTING REGISTRARS OF LAND TITLES AND DEEDS OF PASAY CITY, PASIG AND MAKATI, METRO
MANILA, petitioners,
vs.
THE REGIONAL TRIAL COURT, BRANCH 57, IN MAKATI, METRO MANILA PRESIDED OVER BY THE
HONORABLE JUDGE FRANCISCO X. VELEZ, AND THE INTESTATE ESTATE OF THE LATE DELFIN
CASAL, represented by DOMINGO C. PALOMARES, ADMINISTRATOR, respondents.

G.R. No. 90176 April 26, 1990

THE INTESTATE ESTATE OF THE LATE DELFIN CASAL, represented by DOMINGO C. PALOMARES,
ADMINISTRATOR, petitioner,
vs.
HONORABLE CONRADO VASQUEZ, JR., Presiding Judge, BRANCH 118, RTC, RICARDO P.
SANTIAGO, ET AL., respondents.

Taada, Vivo & Tan for the Intestate Estate of the Late Delfin Casal.
Antonio J. Dalangpan for himself and the heirs of Delfin Casal.
Pedro S. Ravelo for Gerardo Casal.
Filomeno Peralta, Jr. for Domingo C. Palomares.

SARMIENTO, J.:

The petitioners ** charge His Honor, Judge Francisco Velez, of the Regional Trial Court, Branch 57, Makati,
Metro Manila, with grave abuse of discretion in issuing an order authorizing the private respondent, through
Domingo Palomares, to perform acts of ownership over a 2,574-hectare parcel of land known as Hacienda de
Maricabanspread out in various parts of Makati, Pasig, Taguig, Pasay City, and Paraaque. There is no
controversy as to the facts.

On November 5, 1985, the private respondent, Domingo Palomares, as administrator of the heirs of Delfin
Casal, commenced suit with the Regional Trial Court, Branch 132, Makati, Metro Manila for declaratory relief,
quieting of title, cancellation of Transfer Certificate of Title No. 192, and cancellation of entries upon Original
Certificate of Title No. 291.
Palomares had earlier come to this Court (February 27, 1985) on a similar petition, and in addition, to direct the
Register of Deeds to issue a duplicate owner's copy of Original Certificate of Title No. 291, embracing allegedly
Hacienda de Maricaban, in lieu of the (alleged) lost one. On September 9, 1985, the Court denied the petition
for lack of merit. (G.R. No. 69834).

On December 19, 1985, the petitioners filed their answer.

On June 2, 1986, the private respondent filed a motion to admit amended complaint impleading the Republic of
the Philippines and the Registers of Deeds of Pasig, Makati, and Pasay City as parties-respondents, and
alleging, among other things, that: (1) on October 1, 1906, the Court of Land Registration (James Ostrand,
Presiding Judge) confirmed the title of Dolores Pascual Casal y Ochoa, a native of Madrid, Spain, over the
2,574-hectare parcel above-mentioned; (2) on October 17, 1906, the Register of Deeds of Rizal issued OCT
No. 291 in her name; (3) upon her death, and successive deaths of her heirs, the property devolved on
Gerardo, Reynaldo, Lolita, and Erlinda, all surnamed Casal, great grandchildren of Dolores; (4) no
conveyances or dispositions of any kind have been allegedly made upon the parcel; (5) TCT No. 192, which
covers the same landholding, is allegedly spurious and inexistent; (6) the State itself, by placing 27,213,255
square meters thereof under a military reservation (Fort McKinley now Fort Bonifacio), by Proclamation No.
423, and fifty hectares thereof pursuant to Proclamation No. 192, had been guilty of landgrabbing; (7) any and
all holders of any and all TCTs emanating therefrom or from TCT No. 192, are null, void, and of no force and
effect; and (8) as a consequence thereof, the heirs of Dolores Casal suffered various damages and attorney's
fees.

On June 26, 1986, the petitioners filed an answer, stating, among other things, that: (1) the estate of Dolores
Casal (or Delfin Casal, her grandchild) is not a juridical person authorized by law to bring suit; (2) the Registers
of Deeds of Makati, Pasig, and Pasay City are not the real parties in interest, but rather, the registered owners
over which the court had not acquired jurisdiction; (3) the non-joinder of the real parties in interest is fatal; (4)
OCT No. 291 has long been cancelled; (5) Judge Gregorio Pineda of the then Court of First Instance of Rizal,
Branch XXI, Pasig, had earlier denied prayers for the issuance of duplicate owner's copy of OCT No. 291
because the land embraced therein had been validly delivered to the Government; (6) the Supreme Court itself
had denied the Casals' appeal; ***(7) as a consequence, res judicata is a bar; (8) prescription has also set in;
and (9) the Casal's claims can not validly override the titles of innocent purchasers for value.

On August 29, 1986, the respondent judge issued a temporary restraining order, directing the petitioners to
cease and desist from performing the acts complained of.

In a subsequent memorandum, the petitioners alleged that Dolores Casal had conveyed the property to the
Government of the United States in 1906 and the Manila Railroad Company on which Judge Ostrand, the
Presiding Judge of the Court of Land Registration, later Justice of this Court, had stamped his imprimatur.

On October 12, 1987, the respondent court issued an order in the tenor, as follows:

No other opposition having been registered, this Court hereby resolves to grant the plaintiffs' prayer in
the OMNIBUS MOTION in order to safeguard the integrity of the land embraced in OCT 291, hereby
authorizing for this purpose the plaintiff Domingo C. Palomares:

1. To order such subdivision and/or individual survey or surveys within Parcel II, Parcel III and
Parcel IV under Survey Plan Psu-2031 by a licensed geodetic engineer or engineers at
plaintiffs' expense in order to facilitate and simplify the efficient administration of the property
described in OCT 291; and

2. To sell, exchange, lease or otherwise dispose (of) any area or areas or portion or portions
thereof, subject to the approval of the Intestate Estate Court, to cover expenses for the payment
of taxes to which the property is subject, as well as expenses of administration and for the
protection of the integrity of the said lands.
SO ORDERED. 1

Eleven days later, or on October 23, 1987 to be precise, it issued another order, as follows:

Acting on the plaintiffs MOTION dated October 15, 1987 praying for the issuance of a Writ of Execution
implementing the Order of this Court dated October 12, 1987 before the expiration of the time to
appeal, and after inquiring from the plaintiff's counsel for their reason in seeking the same, the Court
hereby issues this clarificatory order affirming the power of the plaintiff Domingo C. Palomares to
execute and perform the acts authorized in the said Order of October 12, 1987 without the need of a
Writ of Execution, where no relief has been sought therefrom by any party, said Order being
implementable at the instance of the said plaintiff Domingo C. Palomares, anytime when the said Order
becomes final 15 days after the said plaintiff received copy of the same (see Section 39, Chapter IV,
B.P. Blg. 129). Plaintiff Domingo C. Palomares may therefore take whatever steps he considers
appropriate for the implementation of the said Order without need of further Orders or additional
authority from this Court.

SO ORDERED. 2

The petitioners filed a notice of appeal; the respondent court, however, denied it" 3 "it being directed against . .
. an interlocutory order. . . 4

Hence, this recourse.

The petitioners interpose the following questions:

A. Whether or not respondent Court can validly decide before trial in favor of private respondent the
ownership and possession of the 25,743,514 square meters (of) land known as "Hacienda de
Maricaban", which is the main issue in this case;

B. Whether or not respondent Court can validly allow private respondent to exercise and perform all
acts of ownership and possession over the said land before trial

C. Whether or not respondent Court has acquired jurisdiction to hear and decide this action;

D. Whether of not respondent Court committed grave abuse of discretion amounting to lack of
5
jurisdiction in not dismissing this action or allowing petitioners to appeal from the orders in question.

In their comment, the private respondent averred, among other things, that: (1) the respondent court, contrary
to the petitioners' claim, did not decide the case "before trial"; (2) OCT No. 291 had not been validly cancelled
and that the rubber stamp impression thereon, "CANCELLED" is a forgery; (3) the act of Judge Pineda, in
denying issuance of OCT No. 291, duplicate owner's copy, can not be considered res judicata because that
case involved purportedly a mere petition for issuance of duplicate owner's copy; (4) non-joinder of proper
parties is not a jurisdictional defect; (5) the TCTs issued thereafter are a nullity because OCT No. 291 had not
been shown to have been duly cancelled; (6) OCT No. 291 has become imprescriptible; and (7) the private
respondent has a valid right of dominion over the property.

In the meantime, the private respondent came to this Court on certiorari (G.R. No. 90176) alleging that on
December 15, 1987, in connection with Sp. Proc. No. P-2993 of the Regional Trial Court, Branch 118, Pasay
City, entitled "In the matter of the Intestate Estate of the Late Fortunato Santiago and Mariano Pantanilla
Crisanta P. Santiago, et al., Petitioners," Judge Conrado Vasquez, Jr. issued an order disposing of certain
parcels which the private respondent claims as forming part and parcel of Hacienda de Maricaban.

On June 20, 1988, the respondent judge in G.R. No. 81564 filed his own comment, asserting, among other
things, that: (1) what he had sought to bar, by virtue of injunction, was incursions and forcible entries of
trespassers and squatters; (2) the petitioners can not rightly claim that he had prematurely adjudicated the
case, because there was allegedly no decision to begin with; (3) that he issued the writ of preliminary injunction
in order only to maintain the status quo ante bellum that is, to re-place the private respondent, which had been
allegedly in prior possession, in possession; (4) he did not allegedly authorize unbridled "acts of ownership" to
be exercised on the property; (5) all rights of dominion given thereon were subject to the approval of the
intestate estate court; (6) he denied the notice of appeal because the order dated October 12, 1987, was
interlocutory in nature from which no appeal lies; (7) as to jurisdiction, the various motions filed by petitioners,
allegedly accepting the court's jurisdiction, have clothed the court with jurisdiction, and that besides, the
jurisdictional question was never raised except now.

On July 7, 1988, the petitioners filed a reply traversing the respondent judge's allegations.

On August 26, 1988, the respondent judge filed a supplemental comment. He reiterated that the writ of
injunction was directed only on such spaces not occupied by the Government (Fort Bonifacio, Libingan ng mga
Bayani, Ninoy Aquino International Airport, Nayong Pilipino, Population Commission, National Science and
Development Board, and National Housing Authority).

Meanwhile, Atty. Antonio J. Dalangpan for and on behalf purportedly of the "Heirs of Delfin Casal" and the
private respondent, Domingo Palomares, file a Comment/Opposition in Intervention", dated December 23,
1988 asking for the outright dismissal of the petition.

On December 14, 1989, the private respondent filed a manifestation, stating, among other things, that
assuming OCT No. 291 had been cancelled, there was still basis for the respondent judge to prevent
landgrabbers from entering into vacant portions of the state embraced thereby.

The Court finds the issues, quintessentially, to be:

(1) Is OCT No. 291 still valid and subsisting?

(2) Did the respondent judge, in issuing the orders, dated October 12 and October 23, 1987, commit a
grave abuse of discretion equivalent to lack or excess of jurisdiction?

I.

Is OCT No. 291 still valid and subsisting?

The Court takes judicial notice of the fact that the hectarage embraced by TCT No. 192 (OCT No. 291)
consists of Government property. Three things persuade the Court: (1) the decrees of Proclamations
Nos. 192 and 435; (2) the incontrovertible fact that OCT No. 291 has been duly cancelled; and (3) the
division of the Court of Appeals in AC-G.R. CV No. 00293, affirming the decision of Hon. Gregorio
Pineda, Judge of the then Court of First Instance of Rizal, Branch XXI, in LRC (GLRO) Rec. No. 2484,
Case No. R-1467 thereof, entitled "In Re: Issuance of Owner's Duplicate of Certificate of Title No. 291,"
as well as our own Resolution, in G.R. No. 69834, entitled "Domingo Palomares, et al., v. Intermediate
Appellate Court".

(a)

Proclamation No. 192 ("RESERVING FOR THE VETERANS CENTER SITE PURPOSES CERTAIN
PARCEL OF LAND OF THE PUBLIC DOMAIN SITUATED IN THE PROVINCE OF RIZAL, ISLAND OF
LUZON") and Proclamation No. 423 ("RESERVING FOR MILITARY PURPOSES CERTAIN PARCELS
OF THE PUBLIC DOMAIN SITUATED IN THE MUNICIPALITY OF PASIG, TAGUIG, AND
PARAAQUE PROVINCE OF RIZAL, AND PASAY CITY") have the character of official assertions of
ownership, and the presumption is that they have been issued by right of sovereignty and in the
exercise of the State's dominical authority. We take not only judicial notice thereof 6 but accept the
same as a valid asseveration of regalian light over property.
With respect to the premises occupied by the Libingan ng mga Bayani, Ninoy Aquino International
Airport, Nayong Pilipino, the Population Commission, National Science and Development Board, and
the National Housing Authority, we do not have the slightest doubt that they stand on Government
property by sheer presumption that, unless otherwise shown, what the Government occupies is what
the Government owns.

While there is no presumption that property is Government property until otherwise shown, because the
law recognizes private ownership, thus:

Art. 425. Property of private ownership, besides the patrimonial property of the State, provinces,
cities, and municipalities, consists of all property belonging to private persons, either individually
or collectively. 7

we find hard evidence on record that: (1) the property covered by OCT No. 291 had been conveyed to
the United States of America; (2) it had been later ceded to the Republic of the Philippines, and (3) as a
consequence, OCT No. 291 was cancelled upon final order of Judge Ostrand.

Be that as it may, the private respondent in G.R. No. 81564 is pressed hard to establish the fact that portions
of the property, especially the open spaces referred to in the lower court's writ of injunction and the private
respondent's manifestation of December 14, 1989, and which open spaces it claims to be outside Maricaban,
are indeed outside Maricaban (or OCT 291). With respect, however, to parts thereof on which Fort Bonifacio,
Libingan ng mga Bayani, Ninoy Aquino International Airport, Nayong Pilipino, Population Commission National
Science and Development Board, and National Housing Authority sit, the hands of the private respondent are
tied.

Claims that Judge Ostrand's decree was a counterfeit is not only self-serving, it finds no support from the
records. The presumptions is "that official duty has been regularly performed," 8 and the burden is on the
private respondent to prove irregular performance. The barren insistence that Judge Ostrands order was a
forgery is not sufficient to overthrow the presumption. To begin with, the act of forgery has been seasonably
disputed by the petitioners. Secondly, the Acting Registrar of Deeds of Pasig, who supposedly certified to the
fake character of Judge Ostrand's order, has himself joined the other petitioners in opposing the reconveyance
sought.

(b)

The decision in AC-G.R. No. 00293, dismissing the private respondent's petition for the issuance of a new
owner's copy of OCT No. 291, a dismissal affirmed by this Court in G.R. No. 69834, also militates against the
return of the property to the heirs of Delfin Casal. The Appellate Court's judgment, a judgment sustained by
this Court, operates as, at the very least, the law of the case between the parties, that OCT No. 291 has been
cancelled and the land covered has been conveyed and ceded to the National Government. The fact that AC-
G.R. CV No. 00293 dealt with a petition for issuance of lost owner's duplicate copy is no argument because be
that as it may, the private respondent can not rightfully say that the heirs of Delfin Casal still have title to the
land. If it can not secure a new owner's copy, it can mean that they have lost title thereto.

(c)

The principle of res judicata is also a bar to the instant proceedings. It should be noted that in G.R. No. 69834,
Mr. Domingo Palomares prayed:

WHEREFORE, premises considered it is most respectfully prayed to the most Honorable Supreme
Court, that in the name of law, justice and fair play, to prevent and frustrate "land-grabbing" by the
government, decision be rendered:

FIRST, That a thorough review of the aforementioned resolution of the Intermediate Appellate
Court be made;
SECOND, That after due consideration, the resolution subject of review be set aside based on
the aforestated assignment of error;

THIRD, That the Order of the Lower Court dated Jan. 19, 1977 be affirmed as the lawful and
valid order;

FOURTH, To erase all doubts by declaring OCT No. 291 as continuously and existing validly
against the whole world;

FIFTH, Clearing OCT No. 291 of all adverse claims, since the herein petitioners are the true and
legally declared heirs; and

SIXTH, Ordering the Register of Deeds of Pasig, Rizal to issue the Owner's Duplicate Copy of
OCT No. 291.

Petitioner-Appellant further prays for other just and equitable reliefs.****

When we therefore denied that petition, we, in effect, held that reconstitution (of lost duplicate owner's copy)
was not possible because the mother title (OCT No. 291) had been duly cancelled. And when we therefore
declared OCT No. 291 to have been cancelled, we perished all doubts as to the invalidity of Mr. Palomares'
pretenses of title to Maricaban. Our judgment was conclusive not only as to Mr. Palomares, but also as to the
existing status of the property. As we have held:

The lower Court correctly ruled that the present action is barred by the final judgment rendered in the
previous case of Tuason & Co. vs. Aguila, Civil Case No. Q-4275, of the Court of First Instance of
Rizal. The reason is plain: if the herein appellants really had a preferential right to a conveyance of the
land from J.M. Tuason & Co., or if the certificate of (Torrens) title held by Tuason & Co. were truly void
and ineffective, then these facts should have been pleaded by these appellants in the previous case
(Q-4275), since such facts, if true, constituted a defense to the claim of Tuason & Co. for recovery of
possession. If appellants failed to plead such defenses in that previous case, they are barred from
litigating the same in any subsequent proceeding, for it is a well established rule that as between the
same parties and on the same subject and cause of action, a final judgment is conclusive not only on
matters directly adjudicated, but also as to any other matter that could have been raised in relation
thereto. 9

II

Did the respondent judge, in issuing the order, dated October 12, 1987, commit a grave abuse of discretion
equivalent to lack of excess of jurisdiction?

(a)

The Court has no doubt that Judge Velez is here guilty of grave abuse of discretion tantamount to lack or
excess of jurisdiction to warrant certiorari. As above-stated, what he gave away, by virtue of reconveyance,
was property that inalienably belongs to the Government or its successors. Worse, he gave away property
without notice to the actual possessors, that is, the present registered owner. It is beyond debate, as we have
indicated, that the land had been, since the cancellation of OCT No. 291, parcelled out to a succession of
buyers and owners. In the absence of notice, it acquired no jurisdiction to decree redelivery or reconveyance. It
is well-established that owners of property over which reconveyance is asserted are indispensable parties,
without whom no relief is available and without whom the court can render no valid judgment. 10

Furthermore, the present holders of the land in question are innocent purchasers for value, or presumed to be
so in the absence of contrary evidence, against whom reconveyance does not lie. 11

(b)
The respondent judge can not conceal his faults behind arguments that he did not intend to convey the
premises, but rather, to secure, allegedly, vacant portions thereof from interlopers. First, this is not stated in his
order. Second, that order is clear and unequivocal that Domingo Palomares has the right "[t]o sell, exchange,
lease or otherwise dispose of any area or areas or portion or portions thereof . . . " 12 Third and last, the
security of the property is the lookout of the claimants, and not the court's. In case the premises the
respondent judge's injunctive writ have been directed belong to others, let them air their plaints.

(c)

The Court is also agreed that the challenged order was issued with no benefit of trial or hearing. The private
respondent can not validly rely on AC-G.R. No. 00293 as the "trial or hearing" to justify the issuance of its said
order, in the first place, because it is a different proceeding. But above all, the private respondent itself says
that AC-G.R. CV No. 00293 can not be made a basis for denying reconveyance because "the . . . petition was
merely for the issuance of a new owner's duplicate copy . . . 13 Accordingly, it can not invoke that case and yet,
repudiate its effects. It is the height of contradiction.

(d)

It was also grave error for the lower court to deny the Solicitor General's notice of appeal. The Government
had all the right to appeal because: (1) the order of October 12, 1987 was in the nature of a final judgment, as
"final judgment" is known in law (however it is captioned), that is to say, one that "finally disposes of the
pending action so that nothing more can be done with it in the trial court; 14 (2) it did not merely maintain
the status quo, but allowed Mr. Domingo Palomares to transact on the property by near right of dominion over
it.

Judge Velez had therefore no reason, indeed, excuse, to deny the Government's notice of appeal. What is
plain is the fact that Judge Velez was hell-bent, so to speak, in blocking the Government's efforts to defend
what rightfully belongs to it.

What has obviously been lost on the parties, Judge Velez in particular, is the established principle that
injunction does not lie "to take property out of the possession or control of one party and place it into that of
another." 15 In this wise it has also been held:

xxx xxx xxx

It is a well established doctrine in this jurisdiction that an injunction is not the proper remedy for the
recovery of possession of real estate and the improvements thereon, as well as for the ejectments
therefrom of the actual occupants who claim to have title to or material interest therein. The use of said
remedy in such cases has invariably been considered unjustified, in open violation of the legal
presumption that the bona fidepossessor of a certain piece of land and improvements thereon, holds
the same under claim of ownership and with a just title, and as an advanced concession of the remedy
to which the claimant might be entitled. (Citations omitted) 16

xxx xxx xxx

Injunction, moreover, is an extraordinary remedy. It lies only in certain cases, to wit:

Sec. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted at any time
after the commencement of the action and before judgment when it is established:

(a) That the plaintiff is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the acts complained of, or in the performance of an act or
acts, either for a limited period or perpetually;
(b) That the commission or continuance of some act complained of during the litigation or the non-
performance thereof would probably work injustice to the plaintiff; or

(c) That the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done,
some act probably in violation of the plaintiffs rights respecting the subject of the action, and tending to
render the judgment ineffectual. 17

xxx xxx xxx

The conspicuous and unusual zeal with which Judge Francisco Velez now defends his acts 18 has not escaped
us. His Honor should have borne in mind that in proceedings under Rule 65 of the Rules, such as the present
cases, the judge is included only as a nominal party. Unless otherwise ordained by this Court, he is not called
upon to answer or comment on the petition, but rather, the private respondent. It is indeed distressing to note
that it is the very judge who has taken the cudgels for the latter, in defending its interests, when he, the judge,
should have remained a neutral magistrate. Res ipsa loquitor. 19 He must get his just deserts.

III

The Court thus closes the long-drawn tale of Hacienda de Maricaban. In this connection, let trial judges be
cautioned on the indiscriminate disposition of our dwindling natural resources to private persons. Accordingly,
we grant G.R. No. 81564 and dismiss G.R. No. 90176, and so also, end what has come down as nearly a
century of uncertainty, doubt, and conflict Maricaban has left in its trail. The Court has finally spoken. Let the
matter rest.

WHEREFORE:

1. The petition in G.R. No. 81564 is GRANTED:

(a) The Writ of Preliminary Injunction issued by our Resolution, dated April 13, 1988, enjoining the
respondent judge from enforcing his: (i) order of October 12, 1987 and (ii) the follow-up order of
October 23, 1987, is made permanent and

(b) Original Certificate of Title No. 291 is declared duly CANCELLED;

2. The petition in G.R. No. 90176 is DISMISSED; and

3. Judge Francisco Velez is ordered to SHOW CAUSE why he should not be administratively dealt with
for giving away, by virtue of reconveyance, property that inalienably belongs to the Government,
without notice to the registered owner, and without benefit of trial or hearing; for blocking Government
efforts to defend what rightfully belongs to it; and for filing his comment of June 17, 1988 and
supplemental comment of August 26, 1988 without express leave of court.

Costs against the private respondent.

SO ORDERED.

EN BANC

G.R. No. L-39919 January 30, 1934

FORTUNATO ORTUA, petitioner-appellant,


vs.
VICENTE SINGSON ENCARNACION, Secretary of Agriculture and Commerce, ET AL., respondents-
appellees.

Villafuerte, Tible and Valer for appellant.


Office of the Solicitor-General Hilado for appellees.

MALCOLM, J.:

in this case the petitioner and appellant seeks the issuance of a writ of mandamus directed against the
Secretary of Agriculture and Commerce and the Director of Lands, for the purpose of compelling them to give
due course to his sale's application for a tract of public land. The demurrers interposed to the complaint by the
respondents and appellees were sustained in the trial court, and on the failure of the petitioner further to
amend his complaint, the action was dismissed, without costs.

The principal facts admitted by the pleadings may be stated as follows: In January, 1920, the petitioner
Fortunato Ortua filed an application with the Bureau of Lands for the purchase of a tract of public land situated
in the municipality of San Jose, Province of Camarines Sur. Following an investigation conducted by the
Bureau of Lands, Ortua's application was rejected, allowing him, however, to file a sale or lease application for
the portion of the land classified to be suitable for commercial purposes, within a period of sixty days from the
date of the decision and upon payment of P3,000 for accrued rents. Two motions for reconsideration of the
decision were filed and denied. On appeal to the then Secretary of Agriculture and Natural Resources
(Agriculture and Commerce), the decision was affirmed, except that the sum of P3,000 was reduced to P400.

It should be explained that one condition for the purchase of a tract of public agricultural land, provided by the
Public Land Law, Act No. 2874, in its sections 23 and 88, is that the purchaser shall be a citizen of lawful age
of the Philippine Islands or of the United States. Fortunato Ortua in his application stated that he was a Filipino
citizen, but the Director of Lands held that on the contrary, Ortua was a Chinese citizen. On this question, the
Director of Lands found established the following facts: Fortunato Ortua was born in 1885 in Lagonoy,
Camarines Sur, Philippine Islands, being the natural son of Irene Demesa, a Filipina, and Joaquin Ortua, a
Chinese. In 1896 Fortunato was sent to China to study. While he was in China his father and mother were
legally married. Fortunato returned to the Philippines in 1906, that is, when he was twenty-one years of age.

It was conceded by the Director of Lands that presumptively Fortunato Ortua was a Philippine citizen, but
certain acts of Ortua were pointed to as demonstrating that he had forfeited his Philippine citizenship. Thus it
was stated that Ortua voluntarily applied for a landing certificate of residence which was issued by the Insular
Collector of Customs and which is only given to Chinese persons. Also, when Ortua applied for the registration
of a boat, and it was denied by the Insular Collector of Customs on the ground that the appellant was a
Chinese citizen, Ortua submitted to the ruling.

The Director of Lands performs his functions pursuant to the provisions of the Public Land Law. In accordance
with this law, the Secretary of Agriculture and Commerce is made the executive officer charged with carrying
out the provisions of the Public Land Law, and he performs this duty through the Director of Lands (sec. 3).
Subject to the control of the executive head, the Director of Lands is by law vested with direct executive control
over land matters, "and his decisions as to questions of fact shall be conclusive when approved by the
Secretary of Agriculture and Commerce." (Sec. 4).

The foregoing analysis of the pertinent provisions of the Public Land Law will show why in the opening
paragraphs of this decision, we accepted the decision of the Director of Lands on questions of facts as
conclusive. We would even go farther and would hold that the Director of Lands has been made by law a
quasi-judicial officer. As such officer he makes findings of fact, even passes upon questions of mixed fact and
law, and considers and decides the qualifications of applicants for the purchase of public lands. A discretion is
lodged by law in the Director of Lands which should not be interfered with. The decisions of the Director of
Lands on the construction of the Public Land Law are entitled to great respect by the courts.
Accordingly, to paraphrase the authorities and decisions coming principally from the United States Supreme
Court, we deduce the rule on the subject to be, that a decision rendered by the Director of Lands and approved
by the Secretary of Agriculture and Commerce, upon a question of fact is conclusive and not subject to be
reviewed by the courts, in the absence of a showing that such decision was rendered in consequence of fraud,
imposition, or mistake, other than error of judgment in estimating the value or effect of evidence, regardless of
whether or not it is consistent with the preponderance of the evidence, so long as there is some evidence upon
which the finding in question could be made. (Vargas and Maalac, The Philippine Land Registration Law, pp.
738-740; Julian vs. Apostol [1928], 52 Phil., 422; 50 C. J., 1089 et seq.; Johnson vs. Riddle [1916], 240 U.S.,
467.)

There is, however, another side to the case. It certainly was not intended by the legislative body to remove
from the jurisdiction of courts all right to review decisions of the Bureau of Lands, for to do so would be to
attempt something which could not be done legally. Giving force to all possible intendments regarding the facts
as found by the Director of Lands, yet so much of the decision of the Director of Lands as relates to a question
of law is in no sense conclusive upon the courts, but is subject to review. In other words, any action of the
Director of Lands which is based upon a misconstruction of the law can be corrected by the courts.
(Shepley vs. Cowan [1876], 91 U.S., 330; Moore vs. Robbins [1878], 96 U.S., 530; Marquez vs. Frisbie [1879],
101 U.S., 473; Black vs. Jackson [1900], 177 U.S., 349; Johnson vs. Riddle, supra.)

Having adjusted this fundamental matter, it is now for the court to determine if the question of law arising from
the undisputed evidence was correctly decided by the Director of Lands. This question is, if the petitioner
Fortunato Ortua should be considered to be a Philippine citizen or a Chinese citizen. Presumptively it is
admitted that he is a Philippine citizen. More correctly stated, Fortunato Ortua had a sort of a dual citizenship,
and had it within his power either to elect to become a Philippine citizen or a Chinese citizen. Predicated on
these assumptions, we doubt very much if it could be found that Ortua has by his own acts repudiated his
Philippine citizenship and chosen Chinese citizenship. The Director of Lands gave too much prominence, we
think, to two minor facts, susceptible of explanation. When Ortua returned from China at the age of twenty-one,
it was the most natural thing in the world for him to land as a Chinese, for this would facilitate entry and obviate
complications. Again, when Ortua applied for the registration of a boat, there may have been any number of
reasons why he did not care to appeal from the decision of the Insular Collector of Customs. On the other
hand, some consideration should be given to the intention of the petitioner, and he vigorously insists that it is
his desire to be considered a Philippine citizen. He has taken a Filipino name. He has gone into business and
has improved the property here in question to a great extent. There has been no implied renunciation of
citizenship, because the petitioner has been domiciled in these Islands except for a short period during his
infancy when he temporarily sojourned in China for study. On the contrary, he states that he has always
considered himself to be a Filipino, and that he has elected to remain as a Philippine citizen. Therefore, on the
facts found by the Director of Lands, we hold that clear error of law resulted in not considering petitioner a
Philippine citizen and so qualified under the Public Land Law to purchase public agricultural lands.

Sustaining the assigned errors, the order of the trial court will be set aside, and the record will be remanded to
the court of origin for further proceedings in accordance with law. No pronouncement as to costs in this
instance.

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

[G.R. No. 95694. October 9, 1997]

VICENTE VILLLAFLOR, substituted by his heirs, petitioner, vs. COURT OF APPEALS and NASIPIT
LUMBER CO., INC., respondents.
DECISION
PANGANIBAN ,J.:

In this rather factually complicated case, the Court reiterates the binding force and effect of findings of
specialized administrative agencies as well as those of trial courts when affirmed by the Court of Appeals;
rejects petitioners theory of simulation of contracts; and passes upon the qualifications of private respondent
corporation to acquire disposable public agricultural lands prior to the effectivity of the 1973 Constitution.

The Case

Before us is a petition for review on certiorari seeking the reversal of the Decision[1] of the Court of
Appeals, dated September 27, 1990, in C.A. G.R. CV No. 09062, affirming the dismissal by the trial court of
Petitioner Vicente Villaflors complaint against Private Respondent Nasipit Lumber Co., Inc. The disposition of
both the trial and the appellate courts are quoted in the statement of facts below.

The Facts

The facts of this case, as narrated in detail by Respondent Court of Appeals, are as follows: [2]

The evidence, testimonial and documentary, presented during the trial show that on January 16, 1940, Cirilo Piencenaves,
in a Deed of Absolute Sale (exh. A), sold to [petitioner], a parcel of agricultural land containing an area of 50
hectares,[3] more or less, and particularly described and bounded as follows:

A certain parcel of agricultural land planted to abaca with visible concrete monuments marking the boundaries and
bounded on the NORTH by Public Land now Private Deeds on the East by Serafin Villaflor, on the SOUTH by Public
Land; and on the West by land claimed by H. Patete, containing an area of 60 hectares more or less, now under Tax Dec.
29451 in the (sic) of said Vicente Villaflor, the whole parcel of which this particular parcel is only a part, is assessed
at P22,550.00 under the above said Tax Dec. Number.

This deed states:

That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but no formal
document was then executed, and since then until the present time, the said Vicente Villaflor has been in possession and
occupation of (the same); (and)

That the above described property was before the sale, of my exclusive property having inherited from my long dead
parents and my ownership to it and that of my [sic] lasted for more than fifty (50) years, possessing and occupying same
peacefully, publicly and continuously without interruption for that length of time.

Also on January 16, 1940, Claudio Otero, in a Deed of Absolute Sale (exh. C) sold to Villaflor a parcel of agricultural
land, containing an area of 24 hectares, more or less, and particularly described and bounded as follows:

A certain land planted to corn with visible concrete measurements marking the boundaries and bounded on the North by
Public Land and Tungao Creek; on the East by Agusan River; on the South by Serafin Villaflor and Cirilo Piencenaves;
and on the West by land of Fermin Bacobo containing an area of 24 hectares more or less, under Tax Declaration No.
29451 in the name already of Vicente Villaflor, the whole parcel of which this particular land is only a part, is assessed
at P22,550.00 under the above said Tax Declaration No. 29451.

This deed states:


That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but no sound
document was then executed, however since then and until the present time, the said Vicente Villaflor has been in open
and continuous possession and occupation of said land; (and)

That the above described land was before the sale, my own exclusive property, being inherited from my deceased parents,
and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying the same,
peacefully, openly and continuously without interruption for that length of time.

Likewise on January 16, 1940, Hermogenes Patete, in a Deed of Absolute Sale (exh. D), sold to Villaflor, a parcel of
agricultural land, containing an area of 20 hectares, more or less, and particularly described and bounded as follows:

A certain parcel of agricultural land planted to abaca and corn with visible concrete monuments marking the boundaries
and bounded on the North by Public Land area-private Road; on the East by land claimed by Cirilo Piencenaves; on the
South by Public Land containing an area of 20 hectares more or less, now under Tax Declaration No. 29451 in the name
of Vicente Villaflor the whole parcel of which this particular parcel, is assessed at P22,550.00 for purposes of taxation
under the above said Tax Declaration No. 29451.

This deed states:

xxx (O)n June 22, 1937 but the formal document was then executed, and since then until the present time, the said
VICENTE VILLAFLOR has been in continuous and open possession and occupation of the same; (and)

That the above described property was before the sale, my own and exclusive property, being inherited from my deceased
parents and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying
same, peacefully, openly and continuously without interruption for that length of time.

On February 15, 1940, Fermin Bocobo, in a Deed of Absolute Sale (exh. B), sold to Villaflor, a parcel of agricultural land,
containing an area of 18 hectares, more or less, and particularly described and bounded as follows:

A certain parcel of agricultural land planted with abaca with visible part marking the corners and bounded on the North by
the corners and bounded on the North by Public Land; on the East by Cirilo Piencenaves; on the South by Hermogenes
Patete and West by Public Land, containing an area of 18 hectares more or less now under Tax Declaration No. 29451 in
the name of Vicente Villaflor. The whole parcel of which this particular parcel is only a part is assessed as P22,550.00 for
purposes of taxation under the above said Tax Declaration Number (Deed of Absolute Sale executed by Fermin Bocobo
date Feb. 15, 1940). This document was annotated in Registry of Deeds on February 16, 1940).

This deed states:

That the above described property was before the sale of my own exclusive property, being inherited from my deceased
parents, and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying
the same peacefully, openly and continuously without interruption for that length of time.

On November 8, 1946, Villaflor, in a Lease Agreement (exh. Q),[4] leased to Nasipit Lumber Co., Inc. a parcel of land,
containing an area of two (2) hectares, together with all the improvements existing thereon, for a period of five (5) years
from June 1, 1946 at a rental of P200.00 per annum to cover the annual rental of house and building sites for thirty three
(33) houses or buildings. This agreement also provides:[5]

3. During the term of this lease, the Lessee is authorized and empowered to build and construct additional houses in
addition to the 33 houses or buildings mentioned in the next preceding paragraph, provided however, that for every
additional house or building constructed the Lessee shall pay unto the Lessor an amount of fifty centavos (50) per month
for every house or building. The Lessee is empowered and authorized by the Lessor to sublot (sic) the premises hereby
leased or assign the same or any portion of the land hereby leased to any person, firm and corporation; (and)

4. The Lessee is hereby authorized to make any construction and/or improvement on the premises hereby leased as he
may deem necessary and proper thereon, provided however, that any and all such improvements shall become the
property of the Lessor upon the termination of this lease without obligation on the part of the latter to reimburse the
Lessee for expenses incurred in the construction of the same.

Villaflor claimed having discovered that after the execution of the lease agreement, that Nasipit Lumber in bad faith x x x
surreptitiously grabbed and occupied a big portion of plaintiffs property x x x; that after a confrontation with the
corporates (sic) field manager, the latter, in a letter dated December 3, 1973 (exh. R),[6] stated recalling having made some
sort of agreement for the occupancy (of the property at Acacia, San Mateo), but I no longer recall the details and I had
forgotten whether or not we did occupy your land. But if, as you say, we did occupy it, then (he is ) sure that the company
is obligated to pay the rental.

On July 7, 1948, in an Agreement to Sell (exh. 2), Villaflor conveyed to Nasipit Lumber, two (2) parcels of land xxx
described as follows:[7]

PARCEL ONE

Bounded on the North by Public Land and Tungao Creek; on the East by Agusan River and Serafin Villaflor; on the South
by Public Land, on the West by Public Land. Improvements thereon consist of abaca, fruit trees, coconuts and thirty
houses of mixed materials belonging to the Nasipit Lumber Company. Divided into Lot Nos. 5412, 5413, 5488, 5490,
5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852. Boundaries of this parcel of
land are marked by concrete monuments of the Bureau of Lands. Containing an area of 112,000 hectares. Assessed at
P17,160.00 according to Tax Declaration No. V-315 dated April 14, 1946.

PARCEL TWO

Bounded on the North by Pagudasan Creek; on the East by Agusan River; on the South by Tungao Creek; on the West by
Public Land. Containing an area of 48,000 hectares more or less. Divided into Lot Nos. 5411, 5410, 5409, and
5399. Improvements 100 coconut trees, productive, and 300 cacao trees. Boundaries of said land are marked by concrete
monuments of the Bureau pf (sic) Lands. Assessed value -- P6,290.00 according to Tax No. 317, April 14, 1946.

This Agreement to Sell provides:

3. That beginning today, the Party of the Second Part shall continue to occupy the property not anymore in concept of
lessee but as prospective owners, it being the sense of the parties hereto that the Party of the Second Part shall not in any
manner be under any obligation to make any compensation to the Party of the First Part, for the use, and occupation of the
property herein before described in such concept of prospective owner, and it likewise being the sense of the parties
hereto to terminate as they do hereby terminate, effective on the date of this present instrument, the Contract of Lease,
otherwise known as Doc. No. 420, Page No. 36, Book No. II, Series of 1946 of Notary Public Gabriel R. Banaag, of the
Province of Agusan.

4. That the Party of the Second Part has bound as it does hereby bind itself, its executors and administrators, to pay unto
the party of the First Part the sum of Five Thousand Pesos (P5,000.00), Philippine Currency, upon presentation by the
latter to the former of satisfactory evidence that:

(a) The Bureau of Lands will not have any objection to the obtainment by the Party of the First Part of a Certificate of
Torrens Title in his favor, either thru ordinary land registration proceedings or thru administrative means procedure.

(b) That there is no other private claimant to the properties hereinbefore described.

5. That the Party of the First Part has bound as he does hereby bind to undertake immediately after the execution of these
presents to secure and obtain, or cause to be secured and obtained, a Certificate of Torrens Title in his favor over the
properties described on Page (One) hereof, and after obtainment of such Certificate of Torrens Title, the said Party of the
First Part shall execute a (D)eed of Absolute Sale unto and in favor of the Party of the Second Part, its executors,
administrators and assigns, it being the sense of the parties that the Party of the Second Part upon delivery to it of such
deed of absolute sale, shall pay unto the Party of the First Part in cash, the sum of Twelve Thousand (P12,000.00) Pesos in
Philippine Currency, provided, however, that the Party of the First Part, shall be reimbursed by the Party of the Second
Part with one half of the expenses incurred by the Party of the First Part for survey and attorneys fees; and other incidental
expenses not exceeding P300.00.

On December 2, 1948, Villaflor filed Sales Application No. V-807[8] (exh. 1) with the Bureau of Lands, Manila, to
purchase under the provisions of Chapter V, XI or IX of Commonwealth Act. No. 141 (The Public Lands Act), as
amended, the tract of public lands x x x and described as follows: North by Public Land; East by Agusan River and
Serafin Villaflor; South by Public Land and West by public land (Lot Nos. 5379, 5489, 5412, 5490, 5491, 5492, 5849,
5850, 5851, 5413, 5488, 5489, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 x x x containing an area of 140
hectares xxx. Paragraph 6 of the Application, states: I understand that this application conveys no right to occupy the land
prior to its approval, and I recognized (sic) that the land covered by the same is of public domain and any and all rights I
may have with respect thereto by virtue of continuous occupation and cultivation are hereby relinquished to the
Government.[9] (exh. 1-D)

On December 7, 1948, Villaflor and Nasipit Lumber executed an Agreement (exh 3).[10] This contract provides:

1. That the First Party is the possessor since 1930 of two (2) parcels of land situated in sitio Tungao, Barrio of San Mateo,
Municipality of Butuan, Province of Agusan;

2. That the first parcel of land abovementioned and described in Plan PLS-97 filed in the office of the Bureau of Lands is
made up of Lots Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5849, 5850, 5851, 5852, 5853, 5854, 5855, 5856, 5857, 5858,
5859 and 5860 and the second parcel of land is made of Lots Nos. 5399, 5409, 5410 and 5411;

3. That on July 7, 1948, a contract of Agreement to Sell was executed between the contracting parties herein, covering the
said two parcels of land, copy of said Agreement to Sell is hereto attached marked as Annex A and made an integral part
of this document. The parties hereto agree that the said Agreement to Sell be maintained in full force and effect with all its
terms and conditions of this present agreement and in no way be considered as modified.

4. That paragraph 4 of the Contract of Agreement to Sell, marked as annex, A stipulates as follows:

Par. 4. That the Party of the Second Part has bound as it does hereby bind itself, its executors and administrators, to pay
unto the Party of the First Part of the sum of FIVE THOUSAND PESOS (P5,000.00)Philippine Currency, upon
presentation by the latter to the former of satisfactory evidence that:

a) The Bureau of Lands will have any objection to the obtainment by Party of the First Part of a favor, either thru ordinary
land registration proceedings or thru administrative means and procedure.

b) That there is no other private claimant to the properties hereinabove described.

That the First Party has on December 2, 1948, submitted to the Bureau of Lands, a Sales Application for the twenty-two
(22) lots comprising the two abovementioned parcels of land, the said Sales Application was registered in the said Bureau
under No. V-807;

6. That in reply to the request made by the First Party to the Bureau of Lands, in connection with the Sales Application
No. V-807, the latter informed the former that action on his request will be expedited, as per letter of the Chief, Public
Land Division, dated December 2, 1948, copy of which is hereto attached marked as annex B and made an integral part of
this agreement:

7. That for and in consideration of the premises above stated and the amount of TWENTY FOUR THOUSAND
(P24,000.00) PESOS that the Second Party shall pay to the First Party, by these presents, the First Party hereby sells,
transfers and conveys unto the Second Party, its successors and assigns, his right, interest and participation under an(d) by
virtue of the Sales Application No. V-807, which he has or may have in the lots mentioned in said Sales Application No.
V-807;

8. That the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS, shall be paid by the Second Party to the First
Party, as follows:
a) The amount of SEVEN THOUSAND (P7,000.00) PESOS, has already been paid by the Second Party to the First Party
upon the execution of the Agreement to Sell, on July 7, 1948;

b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present agreement; and

c) The balance of TWELVE THOUSAND (P12,000.00) PESOS, shall be paid upon the execution by the First Party of the
Absolute Deed of Sale of the two parcels of land in question in favor of the Second Party, and upon delivery to the Second
Party of the Certificate of Ownership of the said two parcels of land.

9. It is specially understood that the mortgage constituted by the First Party in favor of the Second Party, as stated in the
said contract of Agreement to Sell dated July 7, 1948, shall cover not only the amount of SEVEN THOUSAND
(P7,000.00) PESOS as specified in said document, but shall also cover the amount of FIVE THOUSAND (P5,000.00)
PESOS to be paid as stipulated in paragraph 8, sub-paragraph (b) of this present agreement, if the First Party should fail to
comply with the obligations as provided for in paragraphs 2, 4, and 5 of the Agreement to Sell;

10. It is further agreed that the First Party obligates himself to sign, execute and deliver to and in favor of the Second
Party, its successors and assigns, at anytime upon demand by the Second Party such other instruments as may be
necessary in order to give full effect to this present agreement;

In the Report dated December 31, 1949 by the public land inspector, District Land Office, Bureau of Lands, in Butuan, the
report contains an Indorsement of the aforesaid District Land Officer recommending rejection of the Sales Application of
Villaflor for having leased the property to another even before he had acquired transmissible rights thereto.

In a letter of Villaflor dated January 23, 1950, addressed to the Bureau of Lands, he informed the Bureau Director that he
was already occupying the property when the Bureaus Agusan River Valley Subdivision Project was inaugurated, that the
property was formerly claimed as private properties (sic), and that therefore, the property was segregated or excluded
from disposition because of the claim of private ownership. In a letter of Nasipit Lumber dated February 22, 1950 (exh.
X)[11] addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real
owner, claimant and occupant of the land; that since June 1946, Villaflor leased two (2) hectares inside the land to the
company; that it has no other interest on the land; and that the Sales Application of Villaflor should be given favorable
consideration.

xxx xxx xxx

On July 24, 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered
the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest
bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in
full.

xxx xxx xxx

On August 16, 1950, Villaflor executed a document, denominated as a Deed of Relinquishment of Rights (exh.
N),[12] pertinent portion of which reads:

5. That in view of my present business in Manila, and my change in residence from Butuan, Agusan to the City of Manila,
I cannot, therefore, develope (sic) or cultivate the land applied for as projected before;

6. That the Nasipit Lumber Company, Inc., a corporation duly organized xxx is very much interested in acquiring the land
covered by the aforecited application xxx;

7. That I believe the said company is qualified to acquire public land, and has the means to develop (sic) the above-
mentioned land;

xxx xxx xxx


WHEREFORE, and in consideration of the amount of FIVE THOUSAND PESOS (P5,000.00) to be reimbursed to me by
the aforementioned Nasipit Lumber Company, Inc., after its receipt of the order of award, the said amount representing
part of the purchase price of the land aforesaid, the value of the improvements I introduced thereon, and the expenses
incurred in the publication of the Notice of Sale, I, the applicant, Vicente J. Villaflor, hereby voluntarily renounce and
relinquish whatever rights to, and interests I have in the land covered by my above-mentioned application in favor of the
Nasipit Lumber Company, Inc.

Also on August 16, 1950, Nasipit Lumber filed a Sales Application over the two (2) parcels of land, covering an area of
140 hectares, more or less. This application was also numbered V-807 (exh. Y).

On August 17, 1950 the Director of Lands issued an Order of Award[13] in favor of Nasipit Lumber Company, Inc.,
pertinent portion of which reads:

4. That at the auction sale of the land held on July 24, 1950 the highest bid received was that of Nasipit Lumber Company,
Inc. which offered P41.00 per hectare or P5,740.00 for the whole tract, which bid was equaled by applicant Vicente J.
Villaflor, who deposited the amount of P574.00 under Official Receipt No. B-1373826 dated July 24, 1950 which is
equivalent to 10% of the bid. Subsequently, the said xxx Villaflor paid the amount of P5,160.00 in full payment of the
purchase price of the above-mentioned land and for some reasons stated in an instrument of relinquishment dated August
16, 1950, he (Vicente J. Villaflor) relinquished his rights to and interest in the said land in favor of the Nasipit Lumber
Company, Inc. who filed the corresponding application therefore.

In view of the foregoing, and it appearing that the proceedings had xxx were in accordance with law and in [sic] existing
regulations, the land covered thereby is hereby awarded to Nasipit Lumber Company, Inc. at P41.00 per hectare
or P5,740.00 for the whole tract.

This application should be entered in the record of this Office as Sales Entry No. V-407.

It is Villaflors claim that he only learned of the Order of Award on January 16, 1974, or after his arrival to the Philippines,
coming from Indonesia, where he stayed for more than ten (10) years; that he went to Butuan City in the latter part of
1973 upon the call of his brother Serafin Villaflor, who was then sick and learned that Nasipit Lumber (had) failed and
refused to pay the agreed rentals, although his brother was able to collect during the early years; and that Serafin died
three days after his (Vicentes) arrival, and so no accounting of the rentals could be made; that on November 27, 1973,
Villaflor wrote a letter to Mr. G.E.C. Mears of Nasipit Lumber, reminding him of their verbal agreement in 1955 xxx that
Mr. Mears in a Reply dated December 3, 1973, appears to have referred the matter to Mr. Noriega, the corporate general
manager, but the new set of corporate officers refused to recognize (Villaflors) claim, for Mr. Florencio Tamesis, the
general manager of Nasipit Lumber, in a letter dated February 19, 1974, denied Villaflors itemized claim dated January 5,
1974 (exh. V) to be without valid and legal basis. In that 5th January, 1974 letter, Villaflor claimed the total amount
of P427,000.00 x x x.

In a formal protest dated January 31, 1974[14] which Villaflor filed with the Bureau of Lands, he protested the Sales
Application of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as provided in the Deed of
Relinquishment of Rights dated August 16, 1950.

xxx xxx xxx

x x x (T)hat in a Decision dated August 8, 1977 (exh. 8), the Director of Lands found that the payment of the amount
of P5,000.00 in the Deed xxx and the consideration in the Agreement to Sell were duly proven, and ordered the dismissal
of Villaflors protest and gave due course to the Sales Application of Nasipit Lumber. Pertinent portion of the Decision
penned by Director of Lands, Ramon Casanova, in the Matter of SP No. V-807 (C-V-407) xxx reads:

xxx xxx xxx

During the proceedings, Villaflor presented another claim entirely different from his previous claim -- this time, for
recovery of rentals in arrears arising from a supposed contract of lease by Villaflor as lessor in favor of Nasipit as lessee,
and indemnity for damages supposedly caused improvements on his other property xxx in the staggering amount of
Seventeen Million (P17,000,000.00) Pesos. Earlier, he had also demanded from NASIPIT xxx (P427,000.00) xxx also as
indemnity for damages to improvements supposedly caused by NASIPIT on his other real property as well as for
reimbursement of realty taxes allegedly paid by him thereon.

xxx xxx xxx

It would seem that xxx Villaflor has sought to inject so many collaterals, if not extraneous claims, into this case. It is the
considered opinion of this Office that any claim not within the sphere or scope of its adjudicatory authority as an
administrative as well as quasi-judicial body or any issue which seeks to delve into the merits of incidents clearly outside
of the administrative competence of this Office to decide may not be entertained.

There is no merit in the contention of Villaflor that owing to Nasipits failure to pay the amount of xxx (P5,000.00) xxx
(assuming that Nasipit had failed) the deed of relinquishment became null and void for lack of consideration. xxxx.

xxx xxx xxx

x x x The records clearly show, however, that since the execution of the deed of relinquishment xxx Villaflor has always
considered and recognized NASIPIT as having the juridical personality to acquire public lands for agricultural
purposes. xxxx.

xxx xxx xxx

Even this Office had not failed to recognize the juridical personality of NASIPIT to apply for the purchase of public lands
xxx when it awarded to it the land so relinquished by Villaflor (Order of Award dated August 17, 1950) and accepted its
application therefor. At any rate, the question whether an applicant is qualified to apply for the acquisition of public lands
is a matter between the applicant and this Office to decide and which a third party like Villaflor has no personality to
question beyond merely calling the attention of this Office thereto.

xxx xxx xxx

Villaflor offered no evidence to support his claim of non-payment beyond his own self-serving assertions and expressions
that he had not been paid said amount. As protestant in this case, he has the affirmative of the issue. He is obliged to prove
his allegations, otherwise his action will fail. For, it is a well settled principle () that if plaintiff upon whom rests the
burden of proving his cause of action fails to show in a satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exceptions or special defenses (Belen vs. Belen, 13 Phil. 202; Mendoza vs.
Fulgencio, 8 Phil. 243).

xxx xxx xxx

Consequently, Villaflors claim that he had not been paid must perforce fail.

On the other hand, there are strong and compelling reasons to presume that Villaflor had already been paid the amount of
Five Thousand (P5,000.00) Pesos.

First, xxx What is surprising, however, is not so much his claims consisting of gigantic amounts as his having forgotten to
adduce evidence to prove his claim of non-payment of the Five Thousand (P5,000.00) Pesos during the investigation
proceedings when he had all the time and opportunity to do so. xxx The fact that he did not adduce or even attempt to
adduce evidence in support thereof shows either that he had no evidence to offer xxx that NASIPIT had already paid him
in fact. What is worse is that Villaflor did not even bother to command payment, orally or in writing, of the Five
Thousand (P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order of award
was issued to Nasipit, and when his cause of action to recover payment had accrued. The fact that he only made a
command (sic) for payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is immediately
nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that the order of award had already been issued to NASIPIT as
he had gone to Indonesia and he had been absent from the Philippines during all those twenty-four (24) years. This of
course taxes credulity. xxx.

Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of Five Thousand
(P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was issued to NASIPIT on August 17,
1950. The said deed of relinquishment was prepared and notarized in Manila with Villaflor and NASIPIT signing the
instrument also in Manila on August 16, 1950 (p.77, (sic)). The following day or barely a day after that, or on August 17,
1950, the order of award was issued by this Office to NASIPIT also in Manila. Now, considering that Villaflor is
presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of the order of award
as the payment of the Five Thousand (P5,000.00) Pesos (consideration) would depend on the issuance of said order to
award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was issued to NASIPIT
on August 17, 1950, or barely a day which (sic) he executed the deed of relinquishment on August 16, 1950, in
Manila? xxx.

Third, on the other hand, NASIPIT has in his possession a sort of order upon itself -- (the deed of relinquishment wherein
he (sic) obligated itself to reimburse or pay Villaflor the xxx consideration of the relinquishment upon its receipt of the
order of award) for the payment of the aforesaid amount the moment the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the Five Thousand (P5,000.00) Pesos to Villaflor.

A person in possession of an order on himself for the payment of money, or the delivery of anything, has paid the money
or delivered the thing accordingly. (Section 5(k) B-131-Revised Rules of Court.

It should be noted that NASIPIT did not produce direct evidence as proof of its payment of the Five Thousand
(P5,000.00) Pesos to Villaflor. Nasipits explanation on this point is found satisfactory.

x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to cope up with all
the records necessary to show that the consideration for the deed of relinquishment had been fully paid. To expect
NASIPIT to keep intact all records pertinent to the transaction for the whole quarter of a century would be to require what
even the law does not. Indeed, even the applicable law itself (Sec. 337, National Internal Revenue Code) requires that all
records of corporations be preserved for only a maximum of five years.

NASIPIT may well have added that at any rate while there are transactions where the proper evidence is impossible or
extremely difficult to produce after the lapse of time xxx the law creates presumptions of regularity in favor of such
transactions (20 Am. Jur. 232) so that when the basic fact is established in an action the existence of the presumed fact
must be assumed by force of law. (Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491).

Anent Villaflors claim that the 140-hectare land relinquished and awarded to NASIPIT is his private property, little (need)
be said. xxxx The tracks of land referred to therein are not identical to the lands awarded to NASIPIT. Even in the
assumption that the lands mentioned in the deeds of transfer are the same as the 140-hectare area awarded to NASIPIT,
their purchase by Villaflor (or) the latters occupation of the same did not change the character of the land from that of
public land to a private property. The provision of the law is specific that public lands can only be acquired in the manner
provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended). The records show that Villaflor had applied
for the purchase of the lands in question with this Office (Sales Application No. V-807) on December 2, 1948. xxxx There
is a condition in the sales application signed by Villaflor to the effect that he recognizes that the land covered by the same
is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and
cultivation are relinquished to the Government (paragraph 6, Sales Application No. V-807 xxx) of which Villaflor is very
much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He
participated in the public auction where he was declared the successful bidder. He had fully paid the purchase prive (sic)
thereof (sic). It would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his claim of
private ownership thereof is to be believed. The most that can be said is that his possession was merely that of a sales
applicant to when it had not been awarded because he relinquished his interest therein in favor of NASIPIT who (sic) filed
a sales application therefor.

xxx xxx xxx


x x x During the investigation proceedings, Villaflor presented as his Exhibit (sic) (which NASIPIT adopted as its own
exhibit and had it marked in evidence as Exhibit 1) a duly notarized agreement to Sell dated July 7, 1948, by virtue of
which Villaflor undertook to sell to Nasipit the tracts of land mentioned therein, for a consideration of Twenty-Four
Thousand (P24,000.00) Pesos. Said tracts of land have been verified to be identical to the parcels of land formerly applied
for by Villaflor and which the latter had relinquished in favor of NASIPIT under a deed of relinquishment executed by
him on August 16, 1950.In another document executed on December 7, 1948 xxx Villaflor as FIRST PARTY and
NASIPIT as SECOND PARTY confirmed the Agreement to Sell of July 7, 1948, which was maintained in full force and
effect with all its terms and conditions x x x (Exh. 38-A); and that for and in consideration of xxx TWENTY FOUR
THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party xxx the First Party hereby sells,
transfers and conveys unto the Second Party xxx his right interest and participation under and by virtue of the Sales
Application No. V-807 and, in its paragraph 8, it made stipulations as to when part of the said consideration xxx was
paid and when the balance was to be paid, to wit:

a) the amount of SEVEN THOUSAND xxx PESOS has already been paid by the Second Party to the First Party upon the
execution of the Agreement to Sell, on July 17, 1948;

b) the amount of FIVE THOUSAND xxx PESOS shall be paid upon the signing of this present agreement; and

c) the amount of TWELVE THOUSAND xxx PESOS, shall be paid upon the execution by the First Party of the Absolute
Sale of the Two parcels of land in question in favor of the Second Party of the Certificate of Ownership of the said two
parcels of land. (Exh. 38-B). (Emphasis ours)

It is thus clear from this subsequent document marked Exhibit 38 ANALCO that of the consideration of the Agreement to
Sell dated July7, 1948, involving the 140-hectare area relinquished by Villaflor in favor of NASIPIT, in the amount of
Twenty-Four Thousand (P24,000.00) Pesos:

(1) the amount of Seven Thousand (P7,000.00) Pesos was already paid upon the execution of the Agreement to Sell on
July 7, 1948, receipt of which incidentally was admitted by Villaflor in the document of December 7, 1948;

(2) the amount of Five Thousand (P5,000.00) Pesos was paid when said document was signed by Vicente J. Villaflor as
the First Party and Nasipit thru its President, as the Second Party, on December 7, 1948; and

(3) the balance of Twelve Thousand (P12,000.00) Pesos to be paid upon the execution by the First Party of the Absolute
Deed of Sale of the two parcels of land in favor of the Second Party, and upon delivery to the Second Party of the
Certificate of Ownership of the said two parcels of land.

Villaflor contends that NASIPIT could not have paid Villaflor the balance of Twelve Thousand (P12,000.00) Pesos x x x
consideration in the Agreement to Sell will only be paid to applicant-assignor (referring to Villaflor) upon obtaining a
Torrens Title in his favor over the 140-hectare of land applied for and upon execution by him of a Deed of Absolute Sale
in favor of Nasipit Lumber Company, Inc. x x x. Inasmuch as applicant-assignor was not able to obtain a Torrens Title
over the land in question he could not execute an absolute Deed of (sic) Nasipit Lumber Co., Inc. Hence, the Agreement
to Sell was not carried out and no Twelve Thousand (P12,000.00) Pesos was overpaid either to the applicant-assignor,
much less to Howard J. Nell Company. (See MEMORANDUM FOR THE APPLICANT-ASSIGNOR, dated January 5,
1977). xxx.

xxx Villaflor did not adduce evidence in support of his claim that he had not been paid the xxx (P12,000.00) xxx
consideration of the Agreement to Sell dated July 7, 1948 (Exh. 38 NALCO) beyond his mere uncorroborated
assertions. On the other hand, there is strong evidence to show that said Twelve Thousand (P12,000.00) Pesos had been
paid by (private respondent) to Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by
Villaflor (Exh. 41 NALCO) for the credit of the latter.

Atty. Gabriel Banaag, resident counsel of NASIPIT who is in a position to know the facts, testified for NASIPIT. He
described that it was he who notarized the Agreement to Sell (Exh. F); that he knew about the execution of the document
of December 7, 1948 (Exh. 38) confirming the said Agreement to Sell having been previously consulted thereon by Jose
Fernandez, who signed said document on behalf of NASIPIT xxx that subsequently, in January 1949, Villaflor executed a
Deed of Assignment of credit in favor of Edward J. Nell Company (Exh. 41 NALCO) whereby Villaflor ceded to the
latter his receivable for NASIPIT corresponding to the remaining balance in the amount of Twelve Thousand xxx Pesos of
the total consideration xxx stipulated in both the Agreement to Sell (Exh. F) and the document dated December 7, 1948
(Exh. 39); xxx. He further testified that the said assignment of credit was communicated to (private respondent) under
cover letter dated January 24, 1949 (Exh. 41-A) and not long thereafter, by virtue of the said assignment of credit, (private
respondent) paid the balance of Twelve Thousand xxx due to Villaflor to Edward J. Nell Company xxx. Atty. Banaags
aforesaid testimony stand unrebutted; hence, must be given full weight and credit. xxx Villaflor and his counsel were
present when Atty. Banaags foregoing testimony was given. Yet, Villaflor did not demur, nor did he rebut the same,
despite having been accorded full opportunity to do so.

xxx xxx xxx

Having found that both the Five Thousand xxx consideration of the deed of Relinquishment xxx and that the remaining
balance of xxx (P12,000.00) to complete the Twenty-Four Thousand (P24,000.00) Pesos consideration of both the
Agreement to Sell dated July 7, 1948, and the document, dated December 7, 1948, executed by the former in favor of the
latter, have been paid Villaflor the issue on prescription and laches becomes academic and needs no further discussion.

But more than all the questions thus far raised and resolved is the question whether a sales patent can be issued to
NASIPIT for the 140-hectare area awarded to it in the light of Section 11, Article XIV of the new Constitution which
provides in its pertinent portion to wit:

x x x No private corporation or association may hold alienable land of the public domain except by lease not to exceed
one thousand hectares in area xxx.

The Secretary of Justice had previous occasion to rule on this point in his opinion No. 140, s. 1974. Said the Honorable
Justice Secretary:

On the second question, (referring to the questions when may a public land be considered to have been acquired by
purchase before the effectivity of the new Constitution posed by the Director of Lands in his query on the effect on
pending applications for the issuance of sales patent in the light of Section 11, Art. XIV of the New Constitution
aforecited), you refer to this Offices Opinion No. 64 series of 1973 in which I stated:

On the other hand, with respect to sales applications ready for issuance of sales patent, it is my opinion that where the
applicant had, before the Constitution took effect, fully complied with all this obligations under the Public Land Act in
order to entitle him to a Sales patent, there would be no legal or equitable justification for refusing to issue or release the
sales patent.

With respect to the point as to when the Sales applicant has complied with all the terms and conditions which would
entitle him to a sales patent, the herein above Secretary of Justice went on:

That as to when the applicant has complied with all the terms and conditions which would entitle him to a patent is a
questioned (sic) fact which your office would be in the best position to determine.However, relating this to the procedure
for the processing of applications mentioned above, I think that as the applicant has fulfilled the construction/cultivation
requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract
of land and (sic) the area (sic) in the provision in question of the new constitution would not apply.

From the decision of the Director of Lands, Villaflor filed a Motion for Reconsideration which was considered as an
Appeal M.N.R. Case 4341, to the Ministry of Natural Resources.

On June 6, 1979, the Minister of Natural Resources rendered a Decision (exh. 9),[15] dismissing the appeal and affirming
the decision of the Director of Lands, pertinent portions of which reads:

After a careful study of the records and the arguments of the parties, we believe that the appeal is not well taken.

Firstly, the area in dispute is not the private property of appellant.


The evidence adduced by appellant to establish his claim of ownership over the subject area consists of deeds of absolute
sale executed in his favor on January 16, and February 15, 1940, by four (4) different persons, namely, Cirilo
Piencenaves, Fermin Balobo, Claudio Otero and Hermogenes Patete.

However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that
said parcels are not identical to, and do not tally with, the area in controversy.

It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless alienated in
accordance with law, it retains its rights over the same as dominus, (Santiago vs. de los Santos, L-20241, November 22,
1974, 61 SCRA 152).

For, it is well-settled that no public land can be acquired by private persons without any grant, express or implied from the
government. It is indispensable then that there be showing of title from the state or any other mode of acquisition
recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379.)

It is well-settled that all lands remain part of the public domain unless severed therefrom by state grant or unless alienated
in accordance with law.

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to establish that the
contested area is of private ownership. Hence, the property must be held to be public domain.

There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors
either by composition title from the Spanish Government or by possessory information title or by any other means for the
acquisition of public lands, the property must be held to be public domain. (Lee Hong Hok, et al., vs. David , et al., L-
30389 December 27, 1972, 48 SCRA 378-379 citing Heirs of Datu Pendatun vs. Director of Lands; see also Director of
Lands vs. Reyes, L-27594, November 28, 1975, 68 SCRA 177).

Be that as it may, appellant, by filing a sales application over the controverted land, acknowledged unequivocably [sic]
that the same is not his private property.

As such sales applicant, appellant manifestly acknowledged that he does not own the land and that the same is a public
land under the administration of the Bureau of Lands, to which the application was submitted, xxx All of its acts prior
thereof, including its real estate tax declarations, characterized its possessions of the land as that of a sales applicant and
consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner. (Palawan
Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 20, 21).

Secondly, appellants alleged failure to pay the consideration stipulated in the deed of relinquishment neither converts said
deed into one without a cause or consideration nor ipso facto rescinds the same.Appellant, though, has the right to demand
payment with legal interest for the delay or to demand rescission.

xxx xxx xxx

However, appellants cause of action, either for specific performance or rescission of contract, with damages, lies within
the jurisdiction of civil courts, not with administrative bodies.

xxx xxx xxx

Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by the new
constitutional provision that no private corporation may hold alienable land of the public domain except by lease.

xxx xxx xxx

Implementing the aforesaid Opinion No. 64 of the Secretary of Justice, the then Secretary of Agriculture and Natural
Resources issued a memorandum, dated February 18, 1974, which pertinently reads as follows:
In the implementation of the foregoing opinion, sales application of private individuals covering areas in excess of 24
hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be
given due course and issued patents, to wit:

1. Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to January 17, 1973;

a. the land covered thereby was awarded;

b. cultivation requirements of law were complied with as shown by investigation reports submitted prior to January 17,
1973;

c. land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and

d. purchase price was fully paid.

From the records, it is evident that the aforestated requisites have been complied with by appellee long before January 17,
1973, the effectivity of the New Constitution. To restate, the disputed area was awarded to appellee on August 17, 1950,
the purchase price was fully paid on July 26, 1951, the cultivation requirements were complied with as per investigation
report dated December 31, 1949, and the land was surveyed under Pls-97.

On July 6, 1978, petitioner filed a complaint[16] in the trial court for Declaration of Nullity of Contract (Deed
of Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the contract), and
Damages at about the same time that he appealed the decision of the Minister of Natural Resources to the
Office of the President.
On January 28, 1983, petitioner died. The trial court ordered his widow, Lourdes D. Villaflor, to be
substituted as petitioner. After trial in due course, the then Court of First Instance of Agusan del Norte and
Butuan City, Branch III,[17] dismissed the complaint on the grounds that: (1) petitioner admitted the due
execution and genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease
agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action were
barred by extinctive prescription and/or laches. It ruled that there was prescription and/or laches because the
alleged verbal lease ended in 1966, but the action was filed only on January 6, 1978. The six-year period
within which to file an action on an oral contract per Article 1145 (1) of the Civil Code expired in 1972. The
decretal portion[18] of the trial courts decision reads:

WHEREFORE, the foregoing premises duly considered, judgment is hereby rendered in favor of the defendant and
against the plaintiff. Consequently, this case is hereby ordered DISMISSED. The defendant is hereby declared the lawful
actual physical possessor-occupant and having a better right of possession over the two (2) parcels of land in litigation
described in par. 1.2 of the complaint as Parcel I and Parcel II, containing a total area of One Hundred Sixty (160)
hectares, and was then the subject of the Sales Application No. V-807 of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to
421-A, Record), and now of the Sales Application No. 807, Entry No. V-407 of the defendant Nasipit Lumber Company
(Exhibit Y, pp. 357-358, Record). The Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to 3-B, and the Deed of
Relinquishment of Rights, Exhibits N to N-1, over the two parcels of land in litigation are hereby declared binding
between the plaintiff and the defendant, their successors and assigns.

Double the costs against the plaintiff.

The heirs of petitioner appealed to Respondent Court of Appeals[19] which, however, rendered judgment
against petitioner via the assailed Decision dated September 27, 1990 finding petitioners prayers -- (1) for the
declaration of nullity of the deed of relinquishment, (2) for the eviction of private respondent from the property
and (3) for the declaration of petitioners heirs as owners to be without basis. The decretal portion[20] of the
assailed 49-page, single-spaced Decision curtly reads:

WHEREFORE, the Decision appealed from, is hereby AFFIRMED, with costs against plaintiff-appellants.
Not satisfied, petitioners heirs filed the instant 57-page petition for review dated December 7, 1990. In a
Resolution dated June 23, 1991, the Court denied this petition for being late. On reconsideration -- upon plea
of counsel that petitioners were poor and that a full decision on the merits should be rendered -- the Court
reinstated the petition and required comment from private respondent. Eventually, the petition was granted due
course and the parties thus filed their respective memoranda.

The Issues

Petitioner, through his heirs, attributes the following errors to the Court of Appeals:

I. Are the findings of the Court of Appeals conclusive and binding upon the Supreme Court?

II. Are the findings of the Court of Appeals fortified by the similar findings made by the Director of Lands and the
Minister of Natural Resources (as well as by the Office of the President)?

III. Was there forum shopping?

IV. Are the findings of facts of the Court of Appeals and the trial court supported by the evidence and the law?

V. Are the findings of the Court of Appeals supported by the very terms of the contracts which were under consideration
by the said court?

VI. Did the Court of Appeals, in construing the subject contracts, consider the contemporaneous and subsequent act of the
parties pursuant to article 1371 of the Civil Code?

VII. Did the Court of Appeals consider the fact and the unrefuted claim of Villaflor that he never knew of the award in
favor of Nasipit?

VIII. Did the Court of Appeals correctly apply the rules on evidence in its findings that Villaflor was paid the P5,000.00
consideration because Villaflor did not adduce any proof that he was not paid?

IX. Is the Court of Appeals conclusion that the contract is not simulated or fictitious simply because it is genuine and duly
executed by the parties, supported by logic or the law?

X. May the prestations in a contract agreeing to transfer certain rights constitute estoppel when this very contract is the
subject of an action for annulment on the ground that it is fictitious?

XI. Is the Court of Appeals conclusion that the lease agreement between Villaflor is verbal and therefore, unenforceable
supported by the evidence and the law?

After a review of the various submissions of the parties, particularly those of petitioner, this Court believes
and holds that the issues can be condensed into three as follows:

(1) Did the Court of Appeals err in adopting or relying on the factual findings of the Bureau of Lands, especially those
affirmed by the Minister (now Secretary) of Natural Resources and the trial court?

(2) Did the Court of Appeals err in upholding the validity of the contracts to sell and the deed of
relinquishment? Otherwise stated, did the Court of Appeals err in finding the deed of relinquishment of rights and the
contracts to sell valid, and not simulated or fictitious?

(3) Is the private respondent qualified to acquire title over the disputed property?
The Courts Ruling

The petition is bereft of merit. It basically questions the sufficiency of the evidence relied upon by the Court
of Appeals, alleging that public respondents factual findings were based on speculations, surmises and
conjectures. Petitioner insists that a review of those findings is in order because they were allegedly (1) rooted,
not on specific evidence, but on conclusions and inferences of the Director of Lands which were, in turn, based
on misapprehension of the applicable law on simulated contracts; (2) arrived at whimsically -- totally ignoring
the substantial and admitted fact that petitioner was not notified of the award in favor of private respondent;
and (3) grounded on errors and misapprehensions, particularly those relating to the identity of the disputed
area.

First Issue: Primary Jurisdiction of the Director of Lands and Finality of Factual Findings of the Court
of Appeals

Underlying the rulings of the trial and appellate courts is the doctrine of primary jurisdiction; i.e., courts
cannot and will not resolve a controversy involving a question which is within the jurisdiction of an
administrative tribunal, especially where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative tribunal to determine technical
and intricate matters of fact.[21]
In recent years, it has been the jurisprudential trend to apply this doctrine to cases involving matters that
demand the special competence of administrative agencies even if the question involved is also judicial in
character. It applies where a claim is originally cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed
within the special competence of an administrative body; in such case, the judicial process is suspended
pending referral of such issues to the administrative body for its view.[22]
In cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot arrogate unto
itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative
body of special competence.[23] In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of
the Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian dispute over the payment of
back rentals under a leasehold contract.[24] In Concerned Officials of the Metropolitan Waterworks and
Sewerage System vs. Vasquez,[25] the Court recognized that the MWSS was in the best position to evaluate
and to decide which bid for a waterworks project was compatible with its development plan.
The rationale underlying the doctrine of primary jurisdiction finds application in this case, since the
questions on the identity of the land in dispute and the factual qualification of private respondent as an
awardee of a sales application require a technical determination by the Bureau of Lands as the administrative
agency with the expertise to determine such matters.Because these issues preclude prior judicial
determination, it behooves the courts to stand aside even when they apparently have statutory power to
proceed, in recognition of the primary jurisdiction of the administrative agency. [26]

One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of
private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular courts[27]

Petitioner initiated his action with a protest before the Bureau of Lands and followed it through in the
Ministry of Natural Resources and thereafter in the Office of the President.Consistent with the doctrine of
primary jurisdiction, the trial and the appellate courts had reason to rely on the findings of these specialized
administrative bodies.
The primary jurisdiction of the director of lands and the minister of natural resources over the issues
regarding the identity of the disputed land and the qualification of an awardee of a sales patent is established
by Sections 3 and 4 of Commonwealth Act No. 141, also known as the Public Land Act:
Section 3. The Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be the executive
officer charged with carrying out the provisions of this Act through the Director of Lands, who shall act under his
immediate control.

Section 4. Subject to said control, the Director of Lands shall have direct executive control of the survey, classification,
lease, sale or any other form of concession or disposition and management of the lands of the public domain, and his
decision as to questions of fact shall be conclusive when approved by the Secretary of Agriculture and Commerce.

Thus, the Director of Lands, in his decision, said:[28]

x x x It is merely whether or not Villaflor has been paid the Five Thousand (P5,000.00) Pesos stipulated consideration of
the deed of relinquishment made by him without touching on the nature of the deed of relinquishment. The administration
and disposition of public lands is primarily vested in the Director of Lands and ultimately with the Secretary of
Agriculture and Natural Resources (now Secretary of Natural Resources), and to this end--

Our Supreme Court has recognized that the Director of Lands is a quasi-judicial officer who passes on issues of mixed
facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440). Sections 3 and 4 of the Public Land Law thus mean that the
Secretary of Agriculture and Natural Resources shall be the final arbiter on questions of fact in public land conflicts (Heirs
of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442).

The ruling of this Office in its order dated September 10, 1975, is worth reiterating, thus:

x x x it is our opinion that in the exercise of his power of executive control, administrative disposition and allegation of
public land, the Director of Lands should entertain the protest of Villaflor and conduct formal investigation xxx to
determine the following points: (a) whether or not the Nasipit Lumber Company, Inc. paid or reimbursed to Villaflor the
consideration of the rights in the amount of P5,000.00 and what evidence the company has to prove payment, the
relinquishment of rights being part of the administrative process in the disposition of the land in question xxx.

xxxx Besides, the authority of the Director of Lands to pass upon and determine questions considered inherent in or
essential to the efficient exercise of his powers like the incident at issue, i.e. , whether Villaflor had been paid or not, is
conceded by law.

Reliance by the trial and the appellate courts on the factual findings of the Director of Lands and the
Minister of Natural Resources is not misplaced. By reason of the special knowledge and expertise of said
administrative agencies over matters falling under their jurisdiction, they are in a better position to pass
judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not
finality,[29] by the courts.[30] The findings of fact of an administrative agency must be respected as long as they
are supported by substantial evidence, even if such evidence might not be overwhelming or even
preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before the
administrative body and to substitute its own judgment for that of the administrative agency in respect of
sufficiency of evidence.[31]
However, the rule that factual findings of an administrative agency are accorded respect and even finality
by courts admits of exceptions. This is true also in assessing factual findings of lower courts.[32] It is incumbent
on the petitioner to show that the resolution of the factual issues by the administrative agency and/or by the
trial court falls under any of the exceptions.Otherwise, this Court will not disturb such findings. [33]
We mention and quote extensively from the rulings of the Bureau of Lands and the Minister of Natural
Resources because the points, questions and issues raised by petitioner before the trial court, the appellate
court and now before this Court are basically the same as those brought up before the aforesaid specialized
administrative agencies. As held by the Court of Appeals:[34]

We find that the contentious points raised by appellant in this action, are substantially the same matters he raised in BL
Claim No. 873 (N). In both actions, he claimed private ownership over the land in question, assailed the validity and
effectiveness of the Deed of Relinquishment of Rights he executed in August 16, 1950, that he had not been paid
the P5,000.00 consideration, the value of the improvements he introduced on the land and other expenses incurred by him.
In this instance, both the principle of primary jurisdiction of administrative agencies and the doctrine of
finality of factual findings of the trial courts, particularly when affirmed by the Court of Appeals as in this case,
militate against petitioners cause. Indeed, petitioner has not given us sufficient reason to deviate from them.

Land in Dispute Is Public Land

Petitioner argues that even if the technical description in the deeds of sale and those in the sales
application were not identical, the area in dispute remains his private property. He alleges that the deeds did
not contain any technical description, as they were executed prior to the survey conducted by the Bureau of
Lands; thus, the properties sold were merely described by reference to natural boundaries. His private
ownership thereof was also allegedly attested to by private respondents former field manager in the latters
February 22, 1950 letter, which contained an admission that the land leased by private respondent was
covered by the sales application.
This contention is specious. The lack of technical description did not prove that the finding of the Director
of Lands lacked substantial evidence. Here, the issue is not so much whether the subject land is identical with
the property purchased by petitioner. The issue, rather, is whether the land covered by the sales application is
private or public land. In his sales application, petitioner expressly admitted that said property was public
land. This is formidable evidence as it amounts to an admission against interest.
In the exercise of his primary jurisdiction over the issue, Director of Lands Casanova ruled that the land
was public:[35]

x x x Even (o)n the assumption that the lands mentioned in the deeds of transfer are the same as the 140-hectare area
awarded to Nasipit, their purchase by Villaflor (or) the latters occupation of the same did not change the character of the
land from that of public land to a private property. The provision of the law is specific that public lands can only be
acquired in the manner provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended). The records show that
Villaflor had applied for the purchase of lands in question with this Office (Sales Application No. V-807) on December 2,
1948. xxx There is a condition in the sales application xxx to the effect that he recognizes that the land covered by the
same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and
cultivation are relinquished to the Government (paragraph 6, Sales Application No. V-807 of Vicente J. Villaflor, p. 21,
carpeta) of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant
to the sale of the land. He participated in the public auction where he was declared the successful bidder. He had fully
paid the purchase prive (sic) thereor (sic). It would be a (sic) height of absurdity for Villaflor to be buying that which is
owned by him if his claim of private ownership thereof is to be believed. xxx.

This finding was affirmed by the Minister of Natural Resources:[36]

Firstly, the area in dispute is not the private property of appellant (herein petitioner).

The evidence adduced by (petitioner) to establish his claim of ownership over the subject area consists of deeds of
absolute sale executed in his favor xxx.

However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that
said parcels are not identical to, and do not tally with, the area in controversy.

It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless alienated in
accordance with law, it retains its rights over the same as dominus. (Santiago vs. de los Santos, L-20241, November 22,
1974, 61 SCRA 152).

For it is well-settled that no public land can be acquired by private persons without any grant, express or implied from the
government. It is indispensable then that there be showing of title from the state or any other mode of acquisition
recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379).
xxx xxx xxx xxx

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to establish that the
contested area is of private ownership. Hence, the property must be held to be public domain.

There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors
either by composition title from the Spanish Government or by possessory information title or by any other means for the
acquisition of public lands, the property must be held to be public domain.

Be that as it may, [petitioner], by filing a sales application over the controverted land, acknowledged unequivocably [sic]
that the same is not his private property.

As such sales applicant manifestly acknowledged that he does not own the land and that the same is a public land under
the administration of the Bureau of Lands, to which the application was submitted, xxx All of its acts prior thereof,
including its real estate tax declarations, characterized its possessions of the land as that of a sales applicant. And
consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner.(Palawan
Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 15).

Clearly, this issue falls under the primary jurisdiction of the Director of Lands because its resolution
requires survey, classification, xxx disposition and management of the lands of the public domain. It follows
that his rulings deserve great respect. As petitioner failed to show that this factual finding of the Director of
Lands was unsupported by substantial evidence, it assumes finality. Thus, both the trial and the appellate
courts correctly relied on such finding.[37] We can do no less.

Second Issue: No Simulation of Contracts Proven

Petitioner insists that contrary to Article 1371[38] of the Civil Code, Respondent Court erroneously ignored
the contemporaneous and subsequent acts of the parties; hence, it failed toascertain their true
intentions. However, the rule on the interpretation of contracts that was alluded to by petitioner is used in
affirming, not negating, their validity. Thus, Article 1373,[39]which is a conjunct of Article 1371, provides that, if
the instrument is susceptible of two or more interpretations, the interpretation which will make it valid and
effectual should be adopted. In this light, it is not difficult to understand that the legal basis urged by petitioner
does not support his allegation that the contracts to sell and the deed of relinquishment are simulated and
fictitious. Properly understood, such rules on interpretation even negate petitioners thesis.
But let us indulge the petitioner awhile and determine whether the cited
contemporaneous and subsequent acts of the parties support his allegation of simulation. Petitioner asserts
that the relinquishment of rights and the agreements to sell were simulated because, first, the language and
terms of said contracts negated private respondents acquisition of ownership of the land in issue; and second,
contemporaneous and subsequent communications between him and private respondent allegedly showed
that the latter admitted that petitioner owned and occupied the two parcels; i.e., that private respondent was
not applying for said parcels but was interested only in the two hectares it had leased, and that private
respondent supported petitioners application for a patent.
Petitioner explains that the Agreement to Sell dated December 7, 1948 did not and could not transfer
ownership because paragraph 8 (c) thereof stipulates that the balance of twelve thousand pesos (P12,000.00)
shall be paid upon the execution by the First Party [petitioner] of the Absolute Deed of Sale of the two parcels
of land in question in favor of the Second Party, and upon delivery to the Second Party [private respondent] of
the Certificate of Ownership of the said two parcels of land. The mortgage provisions in paragraphs 6 and 7 of
the agreement state that the P7,000.00 and P5,000.00 were earnest money or a loan with antichresis by the
free occupancy and use given to Nasipit of the 140 hectares of land not anymore as a lessee.If the agreement
to sell transferred ownership to Nasipit, then why was it necessary to require petitioner, in a second
agreement, to mortgage his property in the event of nonfulfillment of the prestations in the first agreement?
True, the agreement to sell did not absolutely transfer ownership of the land to private respondent. This
fact, however, does not show that the agreement was simulated. Petitioners delivery of the Certificate of
Ownership and execution of the deed of absolute sale were suspensive conditions, which gave rise to a
corresponding obligation on the part of the private respondent, i.e., the payment of the last installment of the
consideration mentioned in the December 7, 1948 Agreement. Such conditions did not affect the perfection of
the contract or prove simulation. Neither did the mortgage.
Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act
which does not exist or is different from that which was really executed. [40] Such an intention is not apparent in
the agreements. The intent to sell, on the other hand, is as clear as daylight.
Petitioner alleges further that the deed of relinquishment of right did not give full effect to the two
agreements to sell, because the preliminary clauses of the deed allegedly served only to give private
respondent an interest in the property as a future owner thereof and to enable respondent to follow up
petitioners sales application.
We disagree. Such an intention is not indicated in the deed. On the contrary, a real and factual sale is
evident in paragraph 6 thereof, which states: That the Nasipit Lumber Co., Inc., xxx is very much interested in
acquiring the land covered by the aforecited application to be used for purposes of mechanized farming and
the penultimate paragraph stating: xxx VICENTE J. VILLAFLOR, hereby voluntarily renounce and relinquish
whatever rights to, and interests I have in the land covered by my above-mentioned application in favor of the
Nasipit Lumber Co., Inc.
We also hold that no simulation is shown either in the letter, dated December 3, 1973, of the former field
manager of private respondent, George Mear. A pertinent portion of the letter reads:

(a)s regards your property at Acacia, San Mateo, I recall that we made some sort of agreement for the occupancy, but I no
longer recall the details and I had forgotten whether or not we actually did occupy your land. But if, as you say, we did
occupy it, then I am sure that the Company is obligated to pay a rental.

The letter did not contain any express admission that private respondent was still leasing the land from
petitioner as of that date. According to Mear, he could no longer recall the details of his agreement with
petitioner. This cannot be read as evidence of the simulation of either the deed of relinquishment or the
agreements to sell. It is evidence merely of an honest lack of recollection.
Petitioner also alleges that he continued to pay realty taxes on the land even after the execution of said
contracts. This is immaterial because payment of realty taxes does not necessarily prove ownership, much
less simulation of said contracts.[41]

Nonpayment of the Consideration


Did Not Prove Simulation

Petitioner insists that nonpayment of the consideration in the contracts proves their simulation. We
disagree. Nonpayment, at most, gives him only the right to sue for collection.Generally, in a contract of sale,
payment of the price is a resolutory condition and the remedy of the seller is to exact fulfillment or, in case of a
substantial breach, to rescind the contract under Article 1191 of the Civil Code.[42] However, failure to pay is not
even a breach, but merely an event which prevents the vendors obligation to convey title from acquiring
binding force.[43]
Petitioner also argues that Respondent Court violated evidentiary rules in upholding the ruling of the
Director of Lands that petitioner did not present evidence to show private respondents failure to pay him. We
disagree. Prior to the amendment of the rules on evidence on March 14, 1989, Section 1, Rule 131, states that
each party must prove his or her own affirmative allegations.[44] Thus, the burden of proof in any cause rested
upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an
issue and remains there until the termination of the action.[45] Although nonpayment is a negative fact which
need not be proved, the party seeking payment is still required to prove the existence of the debt and the fact
that it is already due.[46]
Petitioner showed the existence of the obligation with the presentation of the contracts, but did not present
any evidence that he demanded payment from private respondent. The demand letters dated January 2 and 5,
1974 (Exhs. J and U), adduced in evidence by petitioner, were for the payment of back rentals, damages to
improvements and reimbursement of acquisition costs and realty taxes, not payment arising from the contract
to sell.
Thus, we cannot fault Respondent Court for adopting the finding of the Director of Lands that petitioner
offered no evidence to support his claim of nonpayment beyond his own self-serving assertions, as he did not
even demand payment, orally or in writing, of the five thousand (P5,000.00) pesos which was supposed to be
due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause
of action to recover payment had accrued. Nonpayment of the consideration in the contracts to sell or the deed
of relinquishment was raised for the first time in the protest filed with the Bureau of Lands on January 31,
1974. But this protest letter was not the demand letter required by law.
Petitioner alleges that the assignment of credit and the letter of the former field manager of private
respondent are contemporaneous and subsequent acts revealing the nonpayment of the consideration. He
maintains that the P12,000.00 credit assigned pertains to the P5,000.00 and P7,000.00 initial payments in the
December 7, 1948 Agreement, because the balance of P12,000.00 was not yet due and accruing. This is
consistent, he argues, with the representation that private respondent was not interested in filing a sales
application over the land in issue and that Nasipit was instead supporting petitioners application thereto
in Mears letter to the Director of Lands dated February 22, 1950 (Exh. X).[47]
This argument is too strained to be acceptable. The assignment of credit did not establish the nondelivery
of these initial payments of the total consideration. First, the assignment of credit happened on January 19,
1949, or a month after the signing of the December 7, 1948 Agreement and almost six months after the July 7,
1948 Agreement to Sell. Second, it does not overcome the recitation in the Agreement of December 7,
1948: xxx a) The amount of SEVEN THOUSAND (P7,000.00) PESOS has already been paid by the Second
Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948; b) The amount of FIVE
THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present agreement; xxx.
Aside from these facts, the Director of Lands found evidence of greater weight showing that payment was
actually made:[48]

x x x (T)here is strong evidence to show that said xxx (P12,000.00) had been paid by NASIPIT to Edward J. Nell
Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. 41 NALCO) for the credit of the
latter.

Atty. Gabriel Banaag, resident counsel of NASIPIT xxx declared that it was he who notarized the Agreement to Sell (Exh.
F); xxxx that subsequently, in January 1949, Villaflor executed a Deed of Assignment of credit in favor of Edward J. Nell
Company (Exh. 41 NALCO) whereby Villaflor ceded to the latter his receivable for NASIPIT corresponding to the
remaining balance in the amount of xxx (P12,000.00) xxx of the total consideration xxxx; He further testified that the said
assignment xxx was communicated to NASIPIT under cover letter dated January 24, 1949 (Exh. 41-A) and not long
thereafter, by virtue of the said assignment of credit, NASIPIT paid the balance xxx to Edward J. Nell Company (p. 58,
bid). Atty. Banaags aforesaid testimony stand unrebutted; hence, must be given full weight and credit.

xxx xxx xxx.


The Director of Lands also found that there had been payment of the consideration in the relinquishment
of rights:[49]

On the other hand, there are strong and compelling reasons to presume that Villaflor had already been paid the amount of
Five Thousand (P5,000.00) Pesos.

First, x x x What is surprising, however, is not so much his claims consisting of gigantic amounts as his having forgotten
to adduce evidence to prove his claim of non-payment of the Five Thousand (P5,000.00) Pesos during the investigation
proceedings when he had all the time and opportunity to do so. xxxx The fact that he did not adduce or even attempt to
adduce evidence in support thereof shows either that he had no evidence to offer of that NASIPIT had already paid him in
fact. What is worse is that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand
(P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued
to Nasipit, and when his cause of action to recover payment had accrued. The fact that he only made a command for
payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is immediately nugatory of his
claim for non-payment.

But Villaflor maintains that he had no knowledge or notice that the order of award had already been issued to NASIPIT as
he had gone to Indonesia and he had been absent from the Philippines during all those twenty-four (24) years. This of
course taxes credulity.xxxx

x x x It is more in keeping with the ordinary course of things that he should have acquired information as to what was
transpiring in his affairs in Manila x x x.

Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of Five Thousand
(P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was issued to NASIPIT on August 17,
1950. The said deed of relinquishment was prepared and notarized in Manila with Villaflor and NASIPIT signing the
instrument also in Manila. Now, considering that Villaflor is presumed to be more assiduous in following up with the
Bureau of Lands the expeditious issuance of the order of award as the (consideration) would depend on the issuance of
said order to award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was issued
to NASIPIT on August 17, 1950, or barely a day which he executed the deed of relinquishment on August 16, 1950, in
Manila? xxxx.

Third, on the other hand, NASIPIT has in his possession a sort of order upon itself -- (the deed of relinquishment wherein
he(sic) obligated itself to reimburse or pay Villaflor the xxx consideration of the relinquishment upon its receipt of the
order of award) for the payment of the aforesaid amount the moment the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the (consideration) to Villaflor.

xxx xxx xxx

x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to cope up with all
the records necessary to show that the consideration for the deed of relinquishment had been fully paid. To expect
NASIPIT to keep intact all records pertinent to the transaction for the whole quarter of a century would be to require what
even the law does not. Indeed, even the applicable law itself (Sec. 337, National Internal Revenue Code) requires that all
records of corporations be preserved for only a maximum of five years.

NASIPIT may well have added that at any rate while there are transactions where the proper evidence is impossible or
extremely difficult to produce after the lapse of time xxx the law creates presumptions of regularity in favor of such
transactions (20 Am. Jur. 232) so that when the basic fact is established in an action the existence of the presumed fact
must be assumed by force of law. (Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491).

The Court also notes that Mears letter of February 22, 1950 was sent six months prior to the execution of
the deed of relinquishment of right. At the time of its writing, private respondent had not perfected its ownership
of the land to be able to qualify as a sales applicant. Besides, although he was a party to the July 7, 1948
Agreement to Sell, Mear was not a signatory to the Deed of Relinquishment or to the December 7, 1948
Agreement to Sell. Thus, he cannot be expected to know the existence of and the amendments to the later
contracts. These circumstances explain the mistaken representations, not misrepresentations, in said letter.

Lack of Notice of the Award

Petitioner insists that private respondent suppressed evidence, pointing to his not having been notified of
the Order of Award dated August 17, 1950.[50] At the bottom of page 2 of the order, petitioner was not listed as
one of the parties who were to be furnished a copy by Director of Lands Jose P. Dans. Petitioner also posits
that Public Land Inspector Sulpicio A. Taeza irregularly received the copies for both private respondent and the
city treasurer of Butuan City. The lack of notice for petitioner can be easily explained. Plainly, petitioner was
not entitled to said notice of award from the Director of Lands, because by then, he had already relinquished
his rights to the disputed land in favor of private respondent. In the heading of the order, he was referred to as
sales applicant-assignor. In paragraph number 4, the order stated that, on August 16, 1950, he relinquished his
rights to the land subject of the award to private respondent. From such date, the sales application was
considered to be a matter between the Bureau of Lands and private respondent only. Considering these facts,
the failure to give petitioner a copy of the notice of the award cannot be considered as suppression of
evidence.[51] Furthermore, this order was in fact available to petitioner and had been referred to by him since
January 31, 1974 when he filed his protest with the Bureau of Lands.[52]

Third Issue: Private Respondent Qualified


for an Award of Public Land

Petitioner asserts that private respondent was legally disqualified from acquiring the parcels of land in
question because it was not authorized by its charter to acquire disposable public agricultural lands under
Sections 121, 122 and 123 of the Public Land Act, prior to its amendment by P.D. No. 763. We disagree. The
requirements for a sales application under the Public Land Act are: (1) the possession of the qualifications
required by said Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under
Sections 121, 122, and 123).However, the transfer of ownership via the two agreements dated July 7 and
December 7, 1948 and the relinquishment of rights, being private contracts, were binding only between
petitioner and private respondent. The Public Land Act finds no relevance because the disputed land was
covered by said Act only after the issuance of the order of award in favor of private respondent. Thus, the
possession of any disqualification by private respondent under said Act is immaterial to the private contracts
between the parties thereto. (We are not, however, suggesting a departure from the rule that laws are deemed
written in contracts.) Consideration of said provisions of the Act will further show their inapplicability to these
contracts. Section 121 of the Act pertains to acquisitions of public land by a corporation from a grantee, but
petitioner never became a grantee of the disputed land. On the other hand, private respondent itself was the
direct grantee. Sections 122 and 123 disqualify corporations, which are not authorized by their charter, from
acquiring public land; the records do not show that private respondent was not so authorized under its charter.
Also, the determination by the Director of Lands and the Minister of Natural Resources of the qualification
of private respondent to become an awardee or grantee under the Act is persuasive on Respondent
Court. In Espinosa vs. Makalintal,[53] the Court ruled that, by law, the powers of the Secretary of Agriculture and
Natural Resources regarding the disposition of public lands -- including the approval, rejection, and
reinstatement of applications are of executive and administrative nature. (Such powers, however, do not
include the judicial power to decide controversies arising from disagreements in civil or contractual relations
between the litigants.) Consequently, the determination of whether private respondent is qualified to become
an awardee of public land under C.A. 141 by sales application is included therein.
All told, the only disqualification that can be imputed to private respondent is the prohibition in the 1973
Constitution against the holding of alienable lands of the public domain by corporations. [54] However, this Court
earlier settled the matter, ruling that said constitutional prohibition had no retroactive effect and could not
prevail over a vested right to the land. In Ayog vs. Cusi, Jr.,[55] this Court declared:

We hold that the said constitutional prohibition has no retroactive application to the sales application of Bian
Development Co., Inc. because it had already acquired a vested right to the land applied for at the time the 1973
Constitution took effect.

That vested right has to be respected. It could not be abrogated by the new Constitution. Section 2, Article XIII of the
1935 Constitution allows private corporations to purchase public agricultural lands not exceeding one thousand and
twenty-four hectares. Petitioners prohibition action is barred by the doctrine of vested rights in constitutional law.

A right is vested when the right to enjoyment has become the property of some particular person or persons as a present
interest. (16 C.J.S. 1173). It is the privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights of
property conferred by existing law (12 C.J. 955, Note 46, No. 6) or some right or interest in property which has become
fixed and established and is no longer open to doubt or controversy (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa
vs. Farrales, 51 Phil. 498, 502).

The due process clause prohibits the annihilation of vested rights. A state may not impair vested rights by legislative
enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or by a change in the constitution of
the State, except in a legitimate exercise of the police power (16 C.J.S. 1177-78).

It has been observed that, generally, the term vested right expresses the concept of present fixed interest, which in right
reason and natural justice should be protected against arbitrary State action, or an innately just an imperative right which
an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71,
No. 5, citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2nd 587).

Secretary of Justice Abad Santos in his 1973 opinion ruled that where the applicant, before the Constitution took effect,
had fully complied with all his obligations under the Public Land Act in order to entitle him to a sales patent, there would
seem to be no legal or equitable justification for refusing to issue or release the sales patent (p. 254, Rollo).

In Opinion No. 140, series of 1974, he held that as soon as the applicant had fulfilled the construction or cultivation
requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract
of land and to him the area limitation in the new Constitution would not apply.

In Opinion No. 185, series of 1976, Secretary Abad Santos held that where the cultivation requirements were fulfilled
before the new Constitution took effect but the full payment of the price was completed after January 17, 1973, the
applicant was, nevertheless, entitled to a sales patent (p. 256, Rollo).

Such a contemporaneous construction of the constitutional prohibition by a high executive official carries great weight
and should be accorded much respect. It is a correct interpretation of section 11 of Article XIV.

In the instant case, it is incontestable that prior to the effectivity of the 1973 Constitution the right of the corporation to
purchase the land in question had become fixed and established and was no longer open to doubt or controversy.

Its compliance with the requirements of the Public Land Law for the issuance of a patent had the effect of segregating the
said land from the public domain. The corporations right to obtain a patent for that land is protected by law. It cannot be
deprived of that right without due process (Director of Lands vs. CA, 123 Phil. 919).

The Minister of Natural Resources ruled, and we agree, that private respondent was similarly qualified to
become an awardee of the disputed land because its rights to it vested prior to the effectivity of the 1973
Constitution:[56]

Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by the new
constitutional provision that no private corporation may hold alienable land of the public domain except by lease.

It may be recalled that the Secretary of Justice in his Opinion No. 64, series of 1973, had declared, to wit:

On the other hand, with respect to sales application ready for issuance of sales patent, it is my opinion that where the
applicant had, before, the constitution took effect, fully complied with all his obligations under the Public Land act in
order to entitle him to sales patent, there would seem to be not legal or equitable justification for refusing to issue or
release the sales patent.

Implementing the aforesaid Opinion No. 64 xxx, the then Secretary of Agriculture and Natural Resources issued a
memorandum, dated February 18, 1974, which pertinently reads as follows:

In the implementation of the foregoing opinion, sales application of private individuals covering areas in excess of 24
hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be
given due course and issued patents, to wit:
Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to January 17, 1973,

a. the land covered thereby was awarded;

b. cultivation requirements of law were complied with as shown by investigation reports submitted prior to January 17,
1973;

c. land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and

d. purchase price was fully paid.

From the records, it is evident that the aforestated requisites have been complied with by appellee long before January 17,
1973, the effectivity of the New Constitution. To restate, the disputed area was awarded to appellee on August 17, 1950,
the purchase price was fully paid on July 26, 1951, the cultivation requirements were complied with as per investigation
report dated December 31, 1949, and the land was surveyed under Pls-97.

The same finding was earlier made by the Director of Lands:[57]

It is further contended by Villaflor that Nasipit has no juridical personality to apply for the purchase of public lands for
agricultural purposes. The records clearly show, however, that since the execution of the deed of relinquishment of
August 16, 1950, in favor of Nasipit, Villaflor has always considered and recognized Nasipit as having the juridical
personality to acquire public lands for agricultural purposes. In the deed of relinquishment xxx, it is stated:

6. That the Nasipit Lumber Co., Inc., a corporation duly organized in accordance with the laws of the Philippines, x x x.

Even this Office had not failed to recognize the juridical personality of Nasipit to apply for the purchase of public lands
xxx when it awarded to it the land so relinquished by Villaflor (Order of Award dated August 17, 1950) and accepted its
application therefor. At any rate, the question whether an applicant is qualified to apply for the acquisition of public lands
is a matter between the applicant and this Office to decide and which a third party like Villaflor has no personality to
question beyond merely calling the attention of this Office thereto.

Needless to say, we also agree that the November 8, 1946 Lease Agreement between petitioner and
private respondent had been terminated by the agreements to sell and the relinquishment of rights. By the time
the verbal leases were allegedly made in 1951 and 1955,[58] the disputed land had already been acquired and
awarded to private respondent. In any event, petitioners cause of action on these alleged lease agreements
prescribed long before he filed Civil Case No. 2072-III, as correctly found by the trial and appellate
courts.[59] Thus, it is no longer important, in this case, to pass upon the issue of whether or not amendments to
a lease contract can be proven by parol evidence. The same holds true as regards the issue of forum-
shopping.
All in all, petitioner has not provided us sufficient reason to disturb the cogent findings of the Director of
Lands, the Minister of Natural Resources, the trial court and the Court of Appeals.
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

LEONARDO A. PAAT, in his capacity as Officer-in-Charge (OIC), Regional Executive Director (RED),
Region 2 and JOVITO LAYUGAN, JR., in his capacity as Community Environment and Natural
Resources Officer (CENRO), both of the Department of Environment and Natural Resources
(DENR), petitioners, vs. COURT OF APPEALS, HON. RICARDO A. BACULI in his capacity as
Presiding Judge of Branch 2, Regional Trial Court at Tuguegarao, Cagayan, and SPOUSES
BIENVENIDO and VICTORIA DE GUZMAN, respondents.

DECISION
TORRES, JR., J.:

Without violating the principle of exhaustion of administrative remedies, may an action for replevin prosper
to recover a movable property which is the subject matter of an administrative forfeiture proceeding in the
Department of Environment and Natural Resources pursuant to Section 68-A of P. D. 705, as amended,
entitled The Revised Forestry Code of the Philippines?
Are the Secretary of DENR and his representatives empowered to confiscate and forfeit conveyances
used in transporting illegal forest products in favor of the government?
These are two fundamental questions presented before us for our resolution.
The controversy on hand had its incipiency on May 19, 1989 when the truck of private respondent Victoria
de Guzman while on its way to Bulacan from San Jose, Baggao, Cagayan, was seized by the Department of
Environment and Natural Resources (DENR, for brevity) personnel in Aritao, Nueva Vizcaya because the
driver could not produce the required documents for the forest products found concealed in the truck. Petitioner
Jovito Layugan, the Community Environment and Natural Resources Officer (CENRO) in Aritao, Cagayan,
issued on May 23, 1989 an order of confiscation of the truck and gave the owner thereof fifteen (15) days
within which to submit an explanation why the truck should not be forfeited. Private respondents, however,
failed to submit the required explanation. On June 22, 1989,[1] Regional Executive Director Rogelio Baggayan
of DENR sustained petitioner Layugans action of confiscation andordered the forfeiture of the truck
invoking Section 68-A of Presidential Decree No. 705 as amended by Executive Order No. 277. Private
respondents filed a letter of reconsideration dated June 28, 1989 of the June 22, 1989 order of Executive
Director Baggayan, which was, however, denied in a subsequent order of July 12, 1989.[2] Subsequently, the
case was brought by the petitioners to the Secretary of DENR pursuant to private respondents statement in
their letter dated June 28, 1989 that in case their letter for reconsideration would be denied then this letter
should be considered as an appeal to the Secretary.[3] Pending resolution however of the appeal, a suit for
replevin, docketed as Civil Case 4031, was filed by the private respondents against petitioner Layugan and
Executive Director Baggayan[4] with the Regional Trial Court, Branch 2 of Cagayan,[5] which issued a writ
ordering the return of the truck to private respondents. [6] Petitioner Layugan and Executive Director Baggayan
filed a motion to dismiss with the trial court contending, inter alia, that private respondents had no cause of
action for their failure to exhaust administrative remedies. The trial court denied the motion to dismiss in an
order dated December 28, 1989.[7] Their motion for reconsideration having been likewise denied, a petition
for certiorari was filed by the petitioners with the respondent Court of Appeals which sustained the trial courts
order ruling that the question involved is purely a legal question.[8] Hence, this present petition,[9] with prayer for
temporary restraining order and/or preliminary injunction, seeking to reverse the decision of the respondent
Court of Appeals was filed by the petitioners on September 9, 1993. By virtue of the Resolution dated
September 27, 1993,[10] the prayer for the issuance of temporary restraining order of petitioners was granted by
this Court.
Invoking the doctrine of exhaustion of administrative remedies, petitioners aver that the trial court could
not legally entertain the suit for replevin because the truck was under administrative seizure proceedings
pursuant to Section 68-A of P.D. 705, as amended by E.O. 277. Private respondents, on the other hand, would
seek to avoid the operation of this principle asserting that the instant case falls within the exception of the
doctrine upon the justification that (1) due process was violated because they were not given the chance to be
heard, and (2) the seizure and forfeiture was unlawful on the grounds: (a) that the Secretary of DENR and his
representatives have no authority to confiscate and forfeit conveyances utilized in transporting illegal forest
products, and (b) that the truck as admitted by petitioners was not used in the commission of the crime.
Upon a thorough and delicate scrutiny of the records and relevant jurisprudence on the matter, we are of
the opinion that the plea of petitioners for reversal is in order.
This Court in a long line of cases has consistently held that before a party is allowed to seek the
intervention of the court, it is a pre-condition that he should have availed of all the means of administrative
processes afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by
giving the administrative officer concerned every opportunity to decide on a matter that comes within his
jurisdiction then such remedy should be exhausted first before courts judicial power can be sought. The
premature invocation of courts intervention is fatal to ones cause of action. [11] Accordingly, absent any finding
of waiver or estoppel the case is susceptible of dismissal for lack of cause of action. [12] This doctrine of
exhaustion of administrative remedies was not without its practical and legal reasons, for one thing, availment
of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. It is
no less true to state that the courts of justice for reasons of comity and convenience will shy away from a
dispute until the system of administrative redress has been completed and complied with so as to give the
administrative agency concerned every opportunity to correct its error and to dispose of the case. However, we
are not amiss to reiterate that the principle of exhaustion of administrative remedies as tested by a battery of
cases is not an ironclad rule. This doctrine is a relative one and its flexibility is called upon by the peculiarity
and uniqueness of the factual and circumstantial settings of a case. Hence, it is disregarded (1) when there is a
violation of due process,[13] (2) when the issue involved is purely a legal question,[14] (3) when the
administrative action is patently illegal amounting to lack or excess of jurisdiction, [15] (4) when there
is estoppel on the part of the administrative agency concerned,[16] (5) when there is irreparable injury,[17] (6)
when the respondent is a department secretary whose acts as an alter ego of the President bears the implied
and assumed approval of the latter,[18] (7) when to require exhaustion of administrative remedies would be
unreasonable,[19] (8) when it would amount to a nullification of a claim,[20] (9) when the subject matter is a
private land in land case proceedings,[21] (10) when the rule does not provide a plain, speedy and adequate
remedy, and (11) when there are circumstances indicating the urgency of judicial intervention.[22]
In the case at bar, there is no question that the controversy was pending before the Secretary of DENR
when it was forwarded to him following the denial by the petitioners of the motion for reconsideration of private
respondents through the order of July 12, 1989. In their letter of reconsideration dated June 28,
1989,[23] private respondents clearly recognize the presence of an administrative forum to which they seek to
avail, as they did avail, in the resolution of their case. The letter, reads, thus:

xxx

If this motion for reconsideration does not merit your favorable action, then this letter should be considered as an appeal
to the Secretary.[24]

It was easy to perceive then that the private respondents looked up to the Secretary for the review and
disposition of their case. By appealing to him, they acknowledged the existence of an adequate and plain
remedy still available and open to them in the ordinary course of the law. Thus, they cannot now, without
violating the principle of exhaustion of administrative remedies, seek courts intervention by filing an action for
replevin for the grant of their relief during the pendency of an administrative proceedings.
Moreover, it is important to point out that the enforcement of forestry laws, rules and regulations and the
protection, development and management of forest lands fall within the primary and special responsibilities of
the Department of Environment and Natural Resources. By the very nature of its function, the DENR should be
given a free hand unperturbed by judicial intrusion to determine a controversy which is well within its
jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by private respondents
constitutes an unjustified encroachment into the domain of the administrative agencys prerogative. The
doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a
controversy the jurisdiction over which is initially lodged with an administrative body of special
competence.[25] In Felipe Ismael, Jr. and Co. vs. Deputy Executive Secretary,[26] which was reiterated in the
recent case of Concerned Officials of MWSS vs. Vasquez,[27] this Court held:

Thus, while the administration grapples with the complex and multifarious problems caused by unbriddled exploitation of
these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not interfere
in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities
coming under the special technical knowledge and training of such agencies.

To sustain the claim of private respondents would in effect bring the instant controversy beyond the pale of
the principle of exhaustion of administrative remedies and fall within the ambit of excepted cases heretofore
stated. However, considering the circumstances prevailing in this case, we can not but rule out these
assertions of private respondents to be without merit. First, they argued that there was violation of due process
because they did not receive the May 23, 1989 order of confiscation of petitioner Layugan. This contention has
no leg to stand on. Due process does not necessarily mean or require a hearing, but simply an opportunity or
right to be heard.[28] One may be heard , not solely by verbal presentation but also, and perhaps many times
more creditably and practicable than oral argument, through pleadings.[29] In administrative proceedings
moreover, technical rules of procedure and evidence are not strictly applied; administrative process cannot be
fully equated with due process in its strict judicial sense.[30] Indeed, deprivation of due process cannot be
successfully invoked where a party was given the chance to be heard on his motion for reconsideration, [31] as
in the instant case, when private respondents were undisputedly given the opportunity to present their side
when they filed a letter of reconsideration dated June 28, 1989 which was, however, denied in an order of July
12, 1989 of Executive Director Baggayan. In Navarro III vs. Damasco,[32] we ruled that :

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an
opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling complained of. A
formal or trial type hearing is not at all times and in all instances essential. The requirements are satisfied when the parties
are afforded fair and reasonable opportunity to explain their side of the controversy at hand. What is frowned upon is the
absolute lack of notice or hearing.

Second, private respondents imputed the patent illegality of seizure and forfeiture of the truck because the
administrative officers of the DENR allegedly have no power to perform these acts under the law. They insisted
that only the court is authorized to confiscate and forfeit conveyances used in transporting illegal forest
products as can be gleaned from the second paragraph of Section 68 of P.D. 705, as amended by E.O. 277.
The pertinent provision reads as follows:

SECTION 68. xxx

xxx

The court shall further order the confiscation in favor of the government of the timber or any forest products cut, gathered,
collected, removed, or possessed, as well as the machinery, equipments, implements and tools illegaly [sic] used in the
area where the timber or forest products are found. (Underline ours)

A reading, however, of the law persuades us not to go along with private respondents thinking not only
because the aforequoted provision apparently does not mention nor include conveyances that can be the
subject of confiscation by the courts, but to a large extent, due to the fact that private respondents
interpretation of the subject provision unduly restricts the clear intention of the law and inevitably reduces the
other provision of Section 68-A , which is quoted herein below:

SECTION 68-A. Administrative Authority of the Department or His Duly Authorized Representative To Order
Confiscation. In all cases of violation of this Code or other forest laws, rules and regulations, theDepartment Head or his
duly authorized representative, may order the confiscation of any forest products illegally cut, gathered, removed, or
possessed or abandoned, and all conveyances used either by land, water or air in the commission of the offense and to
dispose of the same in accordance with pertinent laws, regulations and policies on the matter. (Underline ours)

It is, thus, clear from the foregoing provision that the Secretary and his duly authorized representatives are
given the authority to confiscate and forfeit any conveyances utilized in violating the Code or other forest laws,
rules and regulations. The phrase to dispose of the same is broad enough to cover the act of
forfeiting conveyances in favor of the government. The only limitation is that it should be made in accordance
with pertinent laws, regulations or policies on the matter. In the construction of statutes, it must be read in such
a way as to give effect to the purpose projected in the statute.[33] Statutes should be construed in the light of
the object to be achieved and the evil or mischief to be suppressed, and they should be given such
construction as will advance the object, suppress the mischief, and secure the benefits intended. [34] In this
wise, the observation of the Solicitor General is significant, thus:

But precisely because of the need to make forestry laws more responsive to present situations and realities and in view of
the urgency to conserve the remaining resources of the country, that the government opted to add Section 68-A. This
amendatory provision is an administrative remedy totally separate and distinct from criminal proceedings. More than
anything else, it is intended to supplant the inadequacies that characterize enforcement of forestry laws through criminal
actions. The preamble of EO 277-the law that added Section 68-A to PD 705-is most revealing:
WHEREAS, there is an urgency to conserve the remaining forest resources of the country for the benefit and welfare of
the present and future generations of Filipinos;

WHEREAS, our forest resources may be effectively conserved and protected through the vigilant enforcement and
implementation of our forestry laws, rules and regulations;

WHEREAS, the implementation of our forestry laws suffers from technical difficulties, due to certain inadequacies in the
penal provisions of the Revised Forestry Code of the Philippines; and

WHEREAS, to overcome this difficulties, there is a need to penalize certain acts more responsive to present situations and
realities;

It is interesting to note that Section 68-A is a new provision authorizing the DENR to confiscate, not only conveyances,
but forest products as well. On the other hand, confiscation of forest products by the court in a criminal action has long
been provided for in Section 68. If as private respondents insist, the power on confiscation cannot be exercised except
only through the court under Section 68, then Section 68-A would have no purpose at all. Simply put, Section 68-A would
not have provided any solution to the problem perceived in EO 277, supra.[35]

Private respondents, likewise, contend that the seizure was illegal because the petitioners themselves
admitted in the Order dated July 12, 1989 of Executive Director Baggayan that the truck of private respondents
was not used in the commission of the crime. This order, a copy of which was given to and received by the
counsel of private respondents, reads in part , viz. :

xxx while it is true that the truck of your client was not used by her in the commission of the crime, we uphold your claim
that the truck owner is not liable for the crime and in no case could a criminal case be filed against her as provided under
Article 309 and 310 of the Revised Penal Code. xxx[36]

We observed that private respondents misread the content of the aforestated order and obviously
misinterpreted the intention of petitioners. What is contemplated by the petitioners when they stated that the
truck "was not used in the commission of the crime" is that it was not used in the commission of the crime of
theft, hence, in no case can a criminal action be filed against the owner thereof for violation of Article 309 and
310 of the Revised Penal Code. Petitioners did not eliminate the possibility that the truck was being used in the
commission of another crime, that is, the breach of Section 68 of P.D.705 as amended by E.O. 277. In the
same order of July 12, 1989, petitioners pointed out:

xxx However, under Section 68 of P.D.705 as amended and further amended by Executive Order No.277 specifically
provides for the confiscation of the conveyance used in the transport of forest products not covered by the required legal
documents. She may not have been involved in the cutting and gathering of the product in question but the fact that she
accepted the goods for a fee or fare the same is therefor liable. xxx[37]

Private respondents, however, contended that there is no crime defined and punishable under Section 68
other than qualified theft, so that, when petitioners admitted in the July 12, 1989 order that private respondents
could not be charged for theft as provided for under Articles 309 and 310 of the Revised Penal Code, then
necessarily private respondents could not have committed an act constituting a crime under Section 68. We
disagree. For clarity, the provision of Section 68 of P.D. 705 before its amendment by E.O. 277 and the
provision of Section 1 of E.O. No.277 amending the aforementioned Section 68 are reproduced herein, thus:

SECTION 68. Cutting, gathering and/or collecting timber or other products without license. - Any person who shall cut ,
gather , collect , or remove timber or other forest products from any forest land, or timber from alienable and disposable
public lands, or from private lands, without any authority under a license agreement, lease, license or permit, shall
be guilty of qualified theft as defined and punished under Articles 309 and 310 of the Revised Penal Code
xxx. (Underscoring ours; Section 68, P.D.705 before its amendment by E.O.277 )

SECTION 1. Section 68 of Presidential Decree No.705, as amended, is hereby amended to read as follows:
Section 68. Cutting, gathering and/or collecting timber or other forest products without license. -Any person who
shall cut, gather, collect, remove timber or other forest products from any forest land, or timber from alienable or
disposable public land, or from private land, without any authority, or possess timber or other forest products without the
legal documents as required under existing forest laws and regulations, shall be punished with the penalties imposed under
Articles 309 and 310 of the Revised Penal Code xxx." (Underscoring ours; Section 1, E.O No. 277 amending Section 68,
P.D. 705 as amended)

With the introduction of Executive Order No. 277 amending Section 68 of P.D. 705, the act of cutting,
gathering, collecting, removing, or possessing forest products without authority constitutes a distinct offense
independent now from the crime of theft under Articles 309 and 310 of the Revised Penal Code, but the
penalty to be imposed is that provided for under Article 309 and 310 of the Revised Penal Code. This is clear
from the language of Executive Order No. 277 when it eliminated the phrase shall be guilty of qualified theft as
defined and punished under Articles 309 and 310 of the Revised Penal Code and inserted the words shall be
punished with the penalties imposed under Article 309 and 310 of the Revised Penal Code . When the statute
is clear and explicit, there is hardly room for any extended court ratiocination or rationalization of the law.[38]
From the foregoing disquisition, it is clear that a suit for replevin can not be sustained against the
petitioners for the subject truck taken and retained by them for administrative forfeiture proceedings in pursuant
to Section 68-A of the P. D. 705, as amended. Dismissal of the replevin suit for lack of cause of action in view
of the private respondents failure to exhaust administrative remedies should have been the proper course of
action by the lower court instead of assuming jurisdiction over the case and consequently issuing the writ
ordering the return of the truck. Exhaustion of the remedies in the administrative forum, being a condition
precedent prior to ones recourse to the courts and more importantly, being an element of private respondents
right of action, is too significant to be waylaid by the lower court.
It is worth stressing at this point, that a suit for replevin is founded solely on the claim that the defendant
wrongfully withholds the property sought to be recovered. It lies to recover possession of personal chattels that
are unlawfully detained.[39] To detain is defined as to mean to hold or keep in custody, [40] and it has been held
that there is tortuous taking whenever there is an unlawful meddling with the property, or an exercise or claim
of dominion over it, without any pretense of authority or right; this, without manual seizing of the property is
sufficient.[41] Under the Rules of Court, it is indispensable in replevin proceedings, that the plaintiff must show
by his own affidavit that he is entitled to the possession of property, that the property is wrongfully detained by
the defendant, alleging the cause of detention, that the same has not been taken for tax assessment, or seized
under execution, or attachment, or if so seized, that it is exempt from such seizure, and the actual value of the
property.[42] Private respondents miserably failed to convince this Court that a wrongful detention of the subject
truck obtains in the instant case. It should be noted that the truck was seized by the petitioners because it was
transporting forest products with out the required permit of the DENR in manifest contravention of Section 68
of P.D. 705 as amended by E.O 277. Section 68-A of P.D. 705, as amended, unquestionably warrants the
confiscation as well as the disposition by the Secretary of DENR or his duly authorized representatives of the
conveyances used in violating the provision of forestry laws. Evidently, the continued possession or detention
of the truck by the petitioners for administrative forfeiture proceeding is legally permissible, hence , no wrongful
detention exists in the case at bar.
Moreover, the suit for replevin is never intended as a procedural tool to question the orders of confiscation
and forfeiture issued by the DENR in pursuance to the authority given under P.D.705, as amended. Section 8
of the said law is explicit that actions taken by the Director of the Bureau of Forest Development concerning
the enforcement of the provisions of the said law are subject to review by the Secretary of DENR and that
courts may not review the decisions of the Secretary except through a special civil action for certiorari or
prohibition. It reads :

SECTION 8 . REVIEW - All actions and decisions of the Director are subject to review, motu propio or upon appeal of
any person aggrieved thereby, by the Department Head whose decision shall be final and executory after the lapse of
thirty (30) days from the receipt of the aggrieved party of said decision, unless appealed to the President in accordance
with Executive Order No. 19, Series of 1966. The Decision of the Department Head may not be reviewed by the courts
except through a special civil action for certiorari or prohibition.
WHEREFORE, the Petition is GRANTED; the Decision of the respondent Court of Appeals dated October
16, 1991 and its Resolution dated July 14, 1992 are hereby SET ASIDE AND REVERSED; the Restraining
Order promulgated on September 27, 1993 is hereby made permanent; and the Secretary of DENR is directed
to resolve the controversy with utmost dispatch.
SO ORDERED.

[G.R. No. 120066. September 9, 1999]

OCTABELA ALBA Vda. De RAZ, Spouses MANUEL and SUSANA BRAULIO, RODOLFO, LOURDES and
BEATRIZ all surnamed ALBA, petitioners, vs. COURT OF APPEALS and JOSE LACHICA, respondents.

DECISION
YNARES-SANTIAGO, J.:

Before us is an appeal by certiorari from a decision rendered by the Court of Appeals dated August 18, 1992
affirming in toto the decision of the Regional Trial Court of Kalibo, Aklan, Branch I, in Land Registration Case No. K-
101, LRC Record No. K. 15104, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered as follows:

1. The parcel of land described in Plan Psu-161277 and the improvements thereon situated in the Poblacion of
the Municipality of Banga, Province of Aklan, Philippines, with an area of 4,845 square meters is brought under the
operation of the property registration decree (PD No. 1529) and the title thereto is registered and confirmed in the
name of applicant Jose Lachica, married to Adela Raz of Kalibo, Aklan, Philippines;
2. A ten (10) meter road width along the national road mentioned in the application be segregated for future road
widening program upon payment of just compensation to be annotated at the back of the title;
3. For lack of merit, the opposition filed by the spouses Manuel and Susana Braulio, Octabela Alba Vda. De
Raz, Rodolfo Alba, Lourdes Alba and Beatriz Alba are hereby DISMISSED.

SO ORDERED.[1]

The factual antecedents of the case as summed by the trial court and adopted by the Court of Appeals are as follows:

Applicant Jose Lachica filed this application for title to land on April 28, 1958 with the claim that the land applied for was
purchased by him and his wife, Adela Raz from, from one Eulalio Raz. The documents attached to the application are:
technical description, surveyors certificate, certification by the chief deputy assessor of Aklan and the blue print of Psu-
161277.

The initial hearing was scheduled for October 31, 1958 and the certificate of publication in the Official Gazette was issued
on September 23, 1958. The certification of posting of the notice of initial hearing was issued on October 13, 1958.

The land applied for is residential, situated in the Poblacion of Banga, Aklan, with an area of 4,845 square meters,
bounded on the northeast by the property of the Municipality of Banga (Sketch, Exh. F).

The initial hearing was held on October 31, 1958. An order of general default was issued but those who presented their
opposition, namely, Octabela Alba Vda. De Raz, Manuel and Susana Braulio, Jose Rago, representing Apolonia Rebeco,
the Director of Lands and the Municipality of Banga represented by the Provincial Fiscal, were given thirty (30) days to
file their written opposition.
Manuel C. Braulio and Susana P. Braulio filed their opposition on October 31, 1958. They opposed the registration of the
southeastern portion of the 240 square meters of the land applied for alleging that they are the owners in fee simple and
possessors of said portion and all the improvements thereon for not less than 70 years together with their predecessor-in-
interest deriving their title by purchase from the original owners. They prayed for the Court to declare them the true and
absolute owners of the disputed portion of the same in their names.

On October 31, 1958, Octabela Vda. de Raz filed her opposition.

Jose Rago filed his opposition on November 29, 1958 as the duly constituted attorney-in-fact of Apolonia Rebeco
although no special power of attorney was attached. He opposed the registration of the northeastern portion of the land
applied for, with an area of 43.83 square meters. He alleged that his principal is the owner by right of succession and is in
the possession of said portion with all its improvements for more than 80 years together with his predecessor-in-interest,
continuously, peacefully and openly under claim of ownership. He prayed that his principal be declared the true and
absolute owner of the disputed portion of 43.83 square meters.

On March 22, 1966, the Court issued an Order allowing the applicant to hire another surveyor to segregate the non-
controversial portion of the land applied for and to notify the oppositors and their counsels.

On January 12, 1970, a motion to lift the order of general default and to admit the attached opposition of Rodolfo Alba,
Lourdes Alba and Beatriz Alba, as well as a motion to admit the attached amended petition of Octabela Vda. de Raz were
filed. The Court in its order dated March 21, 1970 admitted said opposition and set aside the order of default.

In their opposition, Rodolfo Alba, Lourdes Alba, represented by their attorney-in-fact, Octabela Alba Vda. de Raz, alleged
that they are the co-owners of a portion of the land applied for with an area of 2,262 square meters bounded on the north
by Januario Masigon, Nicolas Realtor, Agustina Rebeldia and Apolonia Rebeco, on the south by Eulalio Raz and on the
west by the public market of Banga. They claimed to have inherited the above-mentioned portion from their late father,
Eufrosino M. Alba, who purchased the same from Dionisia Regado in 1918. Hence, they have been in possession
continuously, openly and peacefully under claim of ownership of the above-mentioned portion for not less 70 years. They
prayed that the disputed portion of 2,262 square meters be registered as their pro-indiviso property.

In her amended opposition, Octabela Alba Vda. de Raz opposed the registration of the southeastern portion of the land
applied for with an area of 331.44 square meters. She claimed to have been in peaceful, continuous and open possession
together with her deceased husband, Eulalio Raz, under claim of ownership of the above-mentioned portion for not less
than 70 years, by purchase from its owners. She likewise opposed the registration of the western portion of the land
applied for, with an area of 676 square meters, having purchased the same from its original owners on (sic) her
predecessor-in-interest has been open, peaceful and continuous under claim of ownership for a period of not less than 70
years. She prayed that the portion of 331.44 square meters be registered in her name and that of the heirs of Eulalio
Raz, pro indiviso., and the other portion of 676 square meters be registered solely in her name.

On February 25, 1970, the applicant Dr. Jose Lachica filed his consolidated opposition and reply to the motion to lift order
of default stating that there is no reason to do so under the Rules of Court, and that the opposition of Rodolfo Alba,
Lourdes Alba and Beatriz Alba, as well as the amended opposition of Octabela Alba Vda. de Raz are without merit in law
and in fact.

On March 21, 1970, the motion to lift the order of general default was granted and the opposition of Rodolfo Alba,
Lourdes Alba and Beatriz Alba, as well as the opposition of Octabela Alba Vda. de Raz were all admitted.

In the hearing of March 3, 1972, applicant offered for admission exhibits A to I and the testimonies of Pedro Ruiz (April
20, 1971), Jose Rago (Oct. 23, 1970) and Dr. Jose Lachica (July 16, 1971; Feb. 10, 1972). The Court admitted the same.

On March 13, 1974, the Court issued an order appointing Engr. Angeles Relor to act as Commissioner and delimit the
portions claimed by the three sets of oppositors and submit an amended approved plan together with the technical
description for each portion.
The Commissioners report and sketch was submitted on December 4, 1974. The applicant filed his opposition to the
Commissioners report on December 12, 1974. The Court in its order of December 13, 1974 required the Commissioner to
submit an amended report and amended sketch.

The Commissioners corrected report and sketch was submitted on February 24, 1975 which the Court approved on
February 25, 1975 there being no objection from the parties.

On March 15, 1977, the Court issued an order whereby the testimony of oppositor Octabela Alba Vda. de Raz was
stricken off the record for her failure to appear in the scheduled hearing on March 15, 1977.

Again, in its order dated May 27, 1977 the testimony of Octabela Alba Vda. de Raz was stricken off record because the
latter was bedridden and can not possibly appear for cross-examination.

Oppositor Octabela Alba Vda. de Raz substituted by her heirs filed a formal offer of exhibits on August 24,
1988. Applicant filed his comments thereto on August 29, 1988. The Court admitted said exhibits and the testimony of
their witness on March 1, 1989.

In this applicaton for title to land filed by applicant Jose Lachica, four oppositions were filed by the following:

1. Jose Rago, in representation of Apolonia Rebeco;


2. Manuel C. Braulio and Susana Braulio;
3. Rodolfo, Lourdes and Beatriz, all surnamed Alba, represented by Octabela Alba Vda. de Raz; and
4. Octabela Alba Vda. de Raz.

In the hearing of October 23, 1970, counsel for oppositor Jose Rago manifested that he would file a motion for withdrawal
of opposition and Jose Rago himself declared his conformity (Tsn, Oct. 23, 1970, p. 5). Although no formal motion to
withdraw was actually filed, oppositor Rago has not presented evidence on his behalf; hence, his opposition must be
disregarded.

As regards oppositor Manuel C. Braulio ans Susana Braulio, a deed of sale supposedly executed by Susana Braulio and
Octabela Alba Vda. de Raz in 1956 was identified by Felimon Raz, a witness for the oppositors (Tsn, Sept. 29, 1977, pp. 3
to 4). However, said deed cannot be found in the records. Even so, the Braulios have not presented evidence to show that
by the time this application was filed, they and their predecessors-in-interest have been in actual, open, public, peaceful
and continuous possession of the land claimed, in concept of owner, for at least 10 years sufficient to acquire title thereto
(Arts. 1117, 1118, 1134, Civil Code of the Philippines). As such, the opposition of Manuel C. Braulio and Susana Braulio
must be dismissed.[2]

On the basis of the testimonial and documentary evidence presented by the applicant and the oppositor Raz, the
court a quo rendered judgment in favor of the applicant as stated at the outset. In dismissing the claim of the remaining
oppositors Rodolfo, Lourdes and Beatriz, all surnamed Alba, represented by Octabela Alba Vda. de Raz and Octabela
Alba Vda. de Raz herself, the trial court in sum noted that said oppositors have never offered any explanation as to the
non-payment of realty taxes for the disputed portions of the subject property from 1941 to 1958 while the
respondent/applicant continuously paid taxes under Tax Declaration No. 14181 covering said property from 1945-1958
when the case was filed per certification issued by the Municipal Treasurers Office of Banga. [3] In rendering judgment in
favor of respondent/applicant, the trial court stressed that while it is true that tax receipts and declarations of ownership
for tax purposes are not incontrovertible evidence of ownership, they become strong evidence of ownership acquired by
prescription when accompanied by proof of actual possession.
Dissatisfied, petitioners interposed an appeal to the Court of Appeals which affirmed the decision of the trial court.
Unfazed, petitioners now come to this Court arguing that
1. The Civil law provisions on prescription are inapplicable.
2. The applicable law is Section 48 [a] of the Public Land Law or Act 141, as amended.
3. Private respondent has not acquired ownership in fee simple, much less has he met the conditions for judicial
confirmation of imperfect title under Section 48 [a] of Act 141, as amended, except perhaps for a 620 square
meter portion of the land applied for because:
3.1. There is absolutely no proof of the alleged sales made by Raz and Alba.
3.2. There is absolutely no reliable proof of the alleged theft of the deeds of sale.
3.3. The identity of the land has not been established.
3.4. The Court of Appeals misapplied the basic rules governing the introduction of secondary evidence.
3.5. The applicant/respondents Tax Declaration No. 14181 is a doctored tax declaration.
3.6. Applicant/respondents tax declarations have no probative value.
3.7. Applicant/respondent has not satisfied the required quantum of evidence in land registration cases.
3.8. Petitioners-oppositors have proven their right over the subject property.
In rendering judgment in favor of private respondent, the Court of Appeals reasoned, inter alia, as follows:

On the basis of the testimonial and documentary evidence presented by the applicant, the trial court did not err in
confirming that the applicant is the absolute owner in fee simple of the property subject of the application for registration
entitling him to register the same in his name under the operation of PD 1529.

It is of no moment that the applicant failed to produce the originals of those other deeds/documents of conveyances, for he
was able to present sufficient substantial secondary evidence, in accordance with the requirements of Section 4, Rule 130
of the Revised Rules of Court, now Section 5, same Rule of the Revised Rules on Evidence, and the doctrines in point.

Thus, Government vs. Martinez, 44 Phil. 817, explained that when the original writing is not available for one reason or
another which is the best or primary evidence, to prove its contents is the testimony of some one who has read or known
about it. Republic vs. Court of Appeals, 73 SCRA 148, laid out the foundation before secondary evidence is introduced,
that the due execution, delivery and reason for non-production of the original writing must first be produced. Raylago vs
Jarabe, 22 SCRA 1247, ruled that it is not necessary to prove the loss of the original document beyond all possibility of
mistake. A reasonable probability of its loss is sufficient and this may be shown by a bonafide (sic) and diligent search,
fruitlessly made, for it in places where it is likely to be found. After proving the due execution and delivery of the
document, together with the fact that the same has been lost or destroyed, its contents may be proved, among others, by
the recollection of witnesses. And Beall vs. Dearing, 7 ala. 126; and Bogardas vs. Trinity Church, 4 Sandf. Ch. (Nn.y.)
639, are of the view that that where the lost documents are more than thirty (30) years old and would thus prove
themselves if produced, secondary evidence of their contents is admissible without proof of their execution.

In the case at bar, petitioner acquired the property in 1940-1941. He presented the Deed (Exh. G) executed by the vendor
Faustino Martirez. While he failed to present the other deeds of sale covering the other portions of the property, he has
sufficiently established that they were notarized documents and were taken by his mother-in-law sometime in 1956. He
reported the loss to the authorities and even filed a case of theft. He further exerted efforts and made a diligent search of
those documents from the notary public but in vain. He presented the clerk of the Municipal Treasurers Office of Banga,
who testified having seen those deeds as they were presented to him by the applicant and which were used as basis for the
preparation and issuance of Tax Declaration No. 14181 in the name of the tax declarant. Tax Declaration No. 14181 (Exh.
H) was presented in Court, proving that the land was declared for tax purposes in the name of the applicant and his
wife. The applicant has been paying the realty tax covering the property since 1945 and beyond 1958, when the
application for registration was filed in court, per certification of the Municipal Treasurer of Banga (Exh. 1).

In resume, We find and so hold as did the trial court that Dr. Jose Lachica is the abolute owner in fee simple of the land
described in his application for its original registration in his name. The land contains an area of 4,845 square meters,
more or less, situated in Banga, Aklan, and

Bounded on the NE., along line1-2, by property of Apolonia Rimate; on the SE., along line 2-3, by National road; on the
SW., along line 3-4, by property of the Mpl. Government of Banga (Public Market); and on the NW., along line 4-1, by
property of the Municipal Government of Banga (Public Market). Beginning at a point marked 1 on plan, being N. 45 deg.
02 E., 423.38 m. from B.L.L.M. 1, Mp. of Banga, Aklan;

thence, S. 33 deg. 46 E., 87.66 m. to point 2

thence, S. 56 deg. 42 W., 63.81 m. to point 3

thence, N. 37 deg. 22 W., 59.26 m. to point 4

thence, N. 33 deg. 42 E., 73.08 m. to the point of

beginning, xxx All points referred to are indicated on the plan and are marked on the ground by P.L.S. Cyl. Conc.
Mons. Bearings true date of the survey, January 25, 1957, and that of the approval, October 3, 1957.

The applicant has been in public, open, continuous and adverse possession of the property since 1940-41 up to the present
to the exclusion of all, and thereby also acquired the property by acquisitive prescription, in accordance with Sections 40
and 43 of Act 190, otherwise known as the Code of Civil Procedure, having been in actual and adverse possession under
claim of ownership for over ten (10) years, and thus in whatever way his occupancy might have commenced or continued
under a claim of title exclusive of any other right and adverse to all other claimants, resulted in the acquisition of title to
the land by acquisitive prescription (Vda. de Delima vs. Tio, 32 SCRA 516).

Indeed, to borrow the apt words of the ponente in the Delima case, such proof of ownership of, and the adverse,
continuous possession of the applicant since 1940, strongly xxx militate against any judicial cognizance of a matter that
could have been withheld in its ken, hence, whatever right oppositors may have had over the property or any portion
thereof was thereby also lost through extinctive prescription in favor of the applicant who had been in actual, open,
adverse and continuous possession of the land applied for in the concept of owner for over 10 years when the application
for registration was filed in court.[4]

It is a fundamental and settled rule that findings of fact by the trial court and the Court of Appeals are final, binding
or conclusive on the parties and upon this Court,[5] which will not be reviewed[6] or disturbed on appeal unless these
findings are not supported by evidence[7] or unless strong and cogent reasons dictate otherwise.[8]
More explicitly, the findings of fact of the Court of Appeals, which are as a general rule deemed conclusive, may be
reviewed by this Court in the following instances:
1.] When the factual findings of the Court of Appeals and the trial court are contradictory;[9]
2.] When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;[10]
3.] When the inference made by the Court of Appeals from its findings of fact is manifestly mistaken,
absurd[11] or impossible;
4.] Where there is a grave abuse of discretion in the appreciation of facts;[12]
5.] When the appellate court in making its findings went beyond the issues of the case, and such findings are
contrary to the submission of both appellant and appellee;
6.] When the judgment of the Court of Appeals is premised on a misapprehension of facts;[13]
7.] When the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties which, if
properly considered, would justify a different conclusion;[14]
8.] When the findings of fact are themselves conflicting;
9.] When the findings of fact are conclusions without citation of specific evidence on which they are based; and
10.] When the findings of fact of the Court of Appeals are premised on the absence of evidence but such
findings are contradicted by the evidence on record.[15]
The primordial issue to be resolved is whether or not the private respondent/applicant is entitled to the confirmation
of his ownership in fee simple for the 4, 845 square meter parcel of land he applied for.
In sum, both the trial court and the Court of Appeals adjudicated and confirmed private respondent/applicants title to
the land on the basis of the findings that: 1.] the private respondent/applicant purchased the land from Faustino Martirez;
2.] the subject land is covered by Tax Declaration No. 14181; 3.] the private respondent/applicant has paid the realty taxes
on the land from 1945 up to the filing of his application in 1958; 4.] the private respondent/applicant has been in actual,
open and continuous possession of the subject land in the concept of owner since 1945, and 5.] the private
respondent/applicant has acquired the land by prescription.
As stated earlier, a review of the findings of fact of the Court of Appeals is not a function that this Court normally
undertakes[16] unless the appellate courts findings are palpably unsupported by the evidence on record or unless the
judgment itself is based on a misapprehension of facts.[17] A thorough review of the record convinces this Court that the
general rule with regard to the conclusiveness of the trial courts and appellate tribunals factual findings should not be
applied because there are material circumstances which, when properly considered, would have altered the result of the
case.
First, a circumspect scrutiny of the evidence extant on record reveals that with the exception of 620 square meters,
there has been no satisfactory showing of how private respondent/applicant acquired the remainder of the subject land.
As can be gathered from the discussion of the appellate court, as well as the arguments proffered by private
respondent, he acquired the land in question from three (3) sources, namely: a.] A Deed of Sale dated August 13, 1941
allegedly executed by Faustino Martirez covering 840 square meters; b.] 300 square meters allegedly purchased from
private respondents father-in-law Eulalio Raz, and c.] 3,725 square meters private respondent allegedly bought in 1940
from Eufrocino Alba.
The sale involving the first parcel of land covering 840 square meters, was not questioned by petitioners as its
technical description delineated in the Escritura De Venta Absoluta dated August 13, 1941,[18] to wit:

Un terreno solar residencia antes palayero regado, actuado en el casco central del municipio de Banga, Capiz. Sin ninguna
mejora, de una extension superficial de ochocientos cuarenta metros cuadrados (840 mts. cds.) 6 sean cuarenta metros de
frente por otros veinte y unmetrode fondo, cuyos linderos por el Norte con propiedad de Eufrosino Alba y con Eulalio
Raz; por Este con Eulalio Raz y con la carretera provincial de Kalibo a Banga; por Sur con la misma carretera provincial y
con terreno del municipio para mercado; y por al Oeste con al terreno del mercado municipal de Banga y con propiedad
de Eufrosino Alba y al terreno tienes sus mojones de cemento en todos sus cuatro cantos de linderia y sin otro limite
visible de linderia mas que dichos mojones y esta amillarado a mi nombre en una sola hoja declaratoria de propiedad Tax
No. 12374 en la Oficina del Tasador Provincial de Capiz, cuyo valor amilarado actual es veinte pesos (P20.00) xxx

leaves no room for doubt as to its identity, total area of 840 square meters as well as its dimensions of 40 meters in front
and 21 meters at the base. How this parcel was further reduced to 620 square meters is explained by the fact that the
Municipal Government of Banga appropriated 220 square meters thereof for the Banga Public Market Road.
What, however, is seriously contested are the alleged purchases of the other two parcels from Eulalio Raz measuring
300 square meters and from Eufrocino Alba measuring 3,725 square meters owing to the questionable circumstances
surrounding their acquisition.
The records disclose that the subject land was originally owned by Dionisia Regado under Tax Declaration No.
[19]
802. The records further reveal that Dionisia Regado sold: [1.] 1,850 square meters of the land to the Municipality of
Banga evidenced by a Spanish document denominated as a deed of sale dated April 29, 1914; [20] [2.] 1,320 square meters
to Eulalio Raz evidenced by a document entitled Escritura de Venta Absoluta dated September 6, 1918,[21] and [3.] 2,938
square meters to Eufrocino Alba evidenced by a deed of conveyance dated September 6, 1918 written in Spanish.[22]
Faustino Martirez acquired a portion of 840 square meters from Eulalio Raz on January 15, 1933.[23] Raz retained 480
square meters, however, he and his wife Octabela Alba conveyed a 240 square meter portion thereof to Susana Braulio on
November 5, 1956.[24] Subsequently on May 29, 1969, the heirs of Eufrocino Alba sold a 676 square meter portion of the
parcel purchased by Eufrocino to Octabela Alba Vda. de Raz.[25] The deed of conveyance was duly registered with the
Registry of Deeds of Aklan pursuant to Act No. 334 on June 17, 1969[26] and is covered by Tax Declaration No. 332 in the
name of Eulalio Raz, her husband.[27]
Other than the foregoing transactions involving the subject land which are borne out by the documentary evidence on
record, private respondent/applicant did not produce the alleged deeds of conveyances evidencing the purported transfers
made by Eulalio Raz and Eufrocino Alba in his favor. Instead he relied chiefly on secondary evidence to prove the
existence thereof which was sustained by both the trial and the appellate courts. Such reliance on secondary evidence vis--
vis the peculiar facts prevailing in this case rests on infirm legal bases much more so in the face of the overwhelming
documentary evidence of petitioners arrayed against it because

. . . [a] contract of sale of realty cannot be proven by means of witnesses, but must necessarily be evidenced by a written
instrument, duly subscribed by the party charged, or by his agent, or by secondary evidence of their contents. No other
evidence, therefore, can be received except the documentary evidence referred to, in so far as regards such contracts, and
these are valueless as evidence unless they are drawn up in writing in the manner aforesaid.[28]

An applicant for registration of land, if he relies on a document evidencing his title thereto, must prove not only the
genuineness of his title but the identity of the land therein referred to. The document in such a case is either a basis of his
claim for registration or not at all. If , as in this case, he only claims a portion of what is included in his title, he must
clearly prove that the property sought to be registered is included in that title.[29]

Second, there are glaring variances in the identities and technical descriptions of the land applied for by private
respondent/applicant and the land he purportedly purchased from Eufrocino Alba.
Private respondent/applicant alleged that he purchased the remainder of the subject land measuring 3,725 square
meters from Eufrocino Alba sometime in 1940 averring that this parcel is listed as Item No. 5 of his Exhibit I which is
denominated as an Inventory And Appraisal Of The Properties Of The Spouses Adela Raz De Lachica (Deceased) and Dr.
Jose Lachica. Item No. 5[30] of the said inventory described the parcel of land mentioned therein as follows:

5. Una parcela de terreno cocal secano, amillarado en nombre de Eufrocino Alba bajo el Tax No. 12792 por valor de
P390.00, situado en el municipio de Banga, Capiz, que linda el Norte con Lorenzo Retiro, y Silverio Relis; al Este con la
carretera provincial Banga-Libacao; al sur con Bienvenido M. Alba y al Oeste con Cirilo rala y Adela Raz; con una
extension aproximada de una (1) hectarea (20) areas y (35) centiareas poco mas o menos. (Note: Said property was
purchased by the spouses Jose Lachica and Adela Raz Lachica from Eufrocino M. Alba in the amount of P500.00 as
evidenced by a Escritura de Compraventa executed on November 25, 1940, at Himamaylan, Negros Occidental and
notarized by Atty. Conrado Gensiano, as Reg. Not. 122, Pag. 67, Libro VIII, Serie 1940).

On the other hand, the land applied for is described technically per Psu 161277 as

A parcel of land (as shown on Plan Psu-161277), situated in Poblacion, Municipality of Banga, Province of
Aklan. Bounded on the NE., along line 1-2, by property of Apolonia Rimate; on the SE., along line 2-3, by National Road;
on the SW., along line 3-4, by property of the Mpl. Government of Banga (Public Market); and on the NW., along line 4-
1, by property of the Municipal Government of Banga (Public Market). Beginning at a point marked 1 on plan, being N.
45 deg. 02 E., 423.38 m. from B.L.L.M. 1, Mp. of Banga, Aklan;

thence S. 33 deg. 46 E. 87.66 m. to point 2

thence S. 56 deg. 42 W., 63.81 m. to point 3

thence N. 37 deg. 22 W., 59.26 m. to point 4

thence N. 33 deg. 42 E., 73.08 m. to the point of

beginning, containing an area of FOUR THOUSAND EIGHT HUNDRED AND FORTY FIVE (4,845) SQUARE
METERS. All points referred to are indicated on the plan and are marked on the ground by P.L.S. Cyl. Conc. Mons.
Bearings true date of survey, January 25, 1957, and that of the approval, October 3, 1957.[31]

It will be readily noted vis--vis the foregoing that: a.] the land applied for is covered by Tax Declaration No. 14181
while the parcel allegedly purchased from Eufrocino Alba is covered by Tax Declaration No. 15792; b.] the land applied
for is palayero whereas the land allegedly acquired from Eufrocino Alba is cocal secano. Palay is unhusked rice,[32] thus,
the term palayero refers to land devoted to the planting of rice; cocal, on the other hand, means coconut tree
plantation[33] while secano denotes unwatered land or a dry sand bank;[34] c.] the land applied for has an area of 4,845
square meters whereas the land supposedly sold by Eufrocino Alba measures 12,035 square meters; d.] the land applied
for is bounded on the NE by the Banga Public Market, on the SE by Apolonia Rimate, on the SW by the Banga-Kalibo
National Road; and on the NW by the Banga Public Market whereas the land allegedly obtained from Eufrocino Alba is
bounded on the N by Ernesto Retino and Silverio Relis, on the E by the Banga-Libacao Carretera Provincial, on the S by
Bienvenido Alba and on the W by Cirilo Rala and Adela Raz. It needs be stressed in this regard that a person who claims
that he has better right to real property must prove not only his ownership of the same but also must satisfactorily prove
the identity thereof.[35]
Third, both trial and appellate courts placed undue reliance on Tax Declaration No. 14181 considering that there is no
satisfactory explanation of how the area of land covered by Tax Declaration No. 14181 geometrically ballooned from a
modest 620 square meter lot to a huge parcel measuring 4, 845 square meters.
As pointed out by petitioners, Tax Declaration No. 14181 was preceded by 1954 Tax Declaration No. 13578 in the
name of private respondent/applicant and his spouse which shows that the land declared therein for taxation purposes
covers an area of 620 square meters. Tax Declaration No. 13578 was preceded by 1953 Tax Declaration No. 13040 in the
name of Adela Raz, private respondents wife. The land declared for taxation purposes therein also has an area of 620
square meters. Tax Declaration No. 134040 was preceded by 1947 Tax Declaration No. 6528 in the name of private
respondents wife, Adela Raz.The land declared therein for taxation purposes likewise measures 620 square meters.
It appears that the quantum leap from 620 square meters in 1947 to 4,845 square meters in 1956 came about on
account of an affidavit dated November 17, 1956 wherein private respondent/applicant requested [36] the Municipal
Assessor of Banga to issue a revised tax declaration covering 4,845 square meters on the bare claim that the area has been
decreased to only 620 square meters. The timing of the revision and its proximity to the date of filing of the application
can not but engender serious doubts on the application more so considering that prior thereto realty tax payments covering
the period 1945 to 1956 covered an area measuring 620 square meters and private respondent/applicant is banking on said
payments to claim possession and ownership over the same period for an infinitely larger area of 4,845 square meters.
A tax declaration, by itself, is not conclusive evidence of ownership. [37] Tax declarations for a certain number of
years, although constituting proof of claim of title to land,[38] is not incontrovertible evidence of ownership unless they are
supported by other effective proof.[39] It was, thus, held in one case[40] that where realty taxes covering thirty-one (31)
years were paid only a few months prior to the filing of an application, such payment does not constitute sufficient proof
that the applicant had a bona fide claim of ownership prior to the filing of the application. Still in another case,[41] the
claim that the applicant had been in continuous and uninterrupted possession of the disputed land was not given credence
because it was negated by the fact that he declared the land for taxation purposes in October 1959 when he filed his
application for registration although he could have done so in 1937 when he allegedly purchased the land. A belated
declaration is, furthermore, indicative that the applicant had no real claim of ownership over the subject land prior to the
declaration[42] and where there are serious discrepancies in the tax declarations as in this case, registration must be
denied.[43] If at all, the foregoing facts only serves to underscore private respondent/applicants crafty attempt to cloak with
judicial color his underhanded scheme to seize the adjoining parcels of land and to enrich himself at the expense of its
rightful owners.
Fourth, the lower courts reliance on prescription is not well-taken given the peculiar facts prevailing in this case.
The law in force at the time an action accrues is what governs the proceeding consistent with the fundamental dictum
that laws shall have no retroactive effect, unless the contrary is proved.[44] Basic is the rule that no statute, decree,
ordinance, rule, regulation or policy shall be given retrospective effect unless explicitly stated so.[45] Along the same vein,
a courts jurisdiction depends on the law existing at the time an action is filed [46]and a law continues to be in force with
regard to all rights which accrued prior to the amendment thereof.[47]
In this case, the controlling statute when the private respondent/applicant filed his application for registration on
April 28, 1958 is Section 48 of Commonwealth Act 141, as amended by RA Nos. 1942 and 6236,[48] which states that:

SEC. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of
First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of
title therefor, under the Land Registration Act, to wit:

(a) Those who prior to the transfer of sovereignty from Spain to the United States have applied for the purchase,
composition or other form of grant of lands of the public domain under the laws and royal decrees then in force and have
instituted and prosecuted the proceedings in connection therewith, but have with or without default upon their part, or for
any other cause, not received title therefor, if such applicants or grantees and their heirs have occupied and cultivated said
lands continuously since the filing of their applications.[49]

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive and
notorious possession and occupation of agricultural lands of the public domain under a bona fide claim of ownership, for
at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by
war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of title under the provisions of this chapter. [50]

(c) Members of the national cultural minorities who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of lands of the public domain suitable to agriculture,
whether disposable or not, under a bona fide claim of ownership for at least 30 years shall be entitled to the rights granted
in subsection (b) hereof.[51]

A circumspect scrutiny of the assailed Decision readily shows that in affirming the ruling of the trial court, the Court
of Appeals relied on the provisions of Section 19 of Act 496[52] in relation to the Civil Codes provisions on prescription on
the assumption that the subject land is private land. Therein lies the flaw in the appellate courts postulate. The application
for registration of private respondent is for the judicial confirmation of an imperfect title considering that the land is
presumed under the Regalian Doctrine to be part of the public domain.
Public lands are broadly classified into 1.] Alienable or disposable lands; and, 2.] Inalienable or non-disposable
public lands. Non-disposable public lands or those not susceptible of private appropriation include a.] Timber lands; and,
b.] Mineral lands.[53] For purposes of administration and disposition, the lands of the public domain classified as
disposable or alienable are further sub-classified into a.] Agricultural; b.] Residential, commercial, industrial or for similar
productive purposes; c.] Educational, charitable or other similar purposes, and d.] Reservations for town sites and for
public and quasi-public purposes.[54]
From the foregoing classifications, public agricultural land may be defined as those alienable portions of the public
domain which are neither timber nor mineral lands. Thus the term includes residential, commercial and industrial lands for
the reason that these lands are neither timber nor mineral lands.[55]
On the other hand, Section 19 of Act No. 496, as amended, permits the registration of private lands claimed to be
owned by the applicant in fee simple which refer to:
1.] Lands acquired by various types of titles from the government during the Spanish Regime by way of grants
by the Spanish crown namely the: a.] Titulo real or royal grant; b.] Concession especial or special grant; c.]
Composicion con el estado title or adjustment title; d.] Titulo de compra or title by purchase and; e.] Informacion
posesoria or possessory information title, which could become a Titulo gratuito or a gratuitous title;[56]
2.] Lands that are claimed to be owned by accession, i.e. accretion, avulsion, formation of islands, abandoned
river beds, as provided for in Articles 457, 461 and 464 of the Civil Code; and
3.] Lands which have been acquired in any other manner provided by law.
Suffice it to state that the land sought to be registered by private respondent hardly falls under any of the latter
classifications of land referred to by Act No. 496, as amended. Given the foregoing facts, prescription in the manner
invoked by both courts can not be pleaded to bolster private respondent/applicants claim because

. . . [N]o public land can be acquired by private persons without any grant, express or implied from the government; it is
indispensable that there be a showing of title from the state . . . .[57]

xxxxxxxxx

Indeed, the possession of public agricultural land, however, long the period may have extended, never confers title thereto
upon the possessor.[58] The reason, to reiterate our ruling, is because the statute of limitations with regard to public
agricultural land does not operate against the State, unless the occupant can prove possession and occupation of the same
under claim of ownership for the required number of years to constitute a grant from the State.[59]
Fifth, even assuming ex gratia argumenti that prescription can be applied in the manner invoked by the trial court
and the appellate court, it must be pointed out that

. . . [W]hile Art. 1134 of the Civil Code provides that (o)wnership and other real rights over immovable property are
acquired by ordinary prescription through possession of ten years, this provision of law must be read in conjunction with
Art. 1117 of the same Code. This article states that xxx (o)rdinary acquisitive prescription of things requires possession in
good faith and with just title for the time fixed by law. Hence, a prescriptive title to real estate is not acquired by mere
possession thereof under claim of ownership for a period of ten years unless such possession was acquired con justo
titulo y buena fe(with color of title and good faith).[60] The good faith of the possessor consists in the reasonable belief
that the person from whom he received the thing was the owner thereof, and could transmit his ownership.[61] For purposes
of prescription, there is just title when the adverse claimant came into possession of the property through one of the
recognized modes of acquisition of ownership or other real rights but the grantor was not the owner or could not transmit
any right.[62]

It can not be said that private respondents possession was con justo titulo y buena fe. On the contrary, private
respondent/applicants act of appropriating for himself the entire area of 4,845 square meters to the exclusion of petitioners
who have been occupying portions of the disputed land constituted acts of deprivation of the latters rights which is
tantamount to bad faith. Indeed this Court has ruled that the

. . . [c]oncealment and misrepresentation in the application that no other persons had any claim or interest in the said land,
constitute specific allegations of extrinsic fraud supported by competent proof.Failure and intentional omission of the
applicants to disclose the fact of actual physical possession by another person constitutes an allegation of actual
fraud.[63] Likewise, it is fraud to knowingly omit or conceal a fact, upon which benefit is obtained to the prejudice of a
third person.[64]

Suffice it to state in this regard that to allow private respondent/applicant to benefit from his own wrong would run
counter to the maxim ex dolo malo non oritur actio - no man can be allowed to found a claim upon his own
wrongdoing.[65]
It need not be overemphasized that extraordinary acquisitive prescription can not similarly vest ownership over the
property upon private respondent/applicant because Article 1137 of the Civil Code states in no uncertain terms that

ART. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession
thereof for thirty years, without need of good faith.

Needless to state, private respondent/applicants possession of thirteen (13) years falls way below the thirty-year
requirement mandated by Article 1137.
Sixth, petitioners/oppositors have, in stark contrast to the secondary proof of private respondent, adduced
overwhelming evidence to prove their ownership of the portions they claim in the subject land.The evidence on record
clearly points to the fact that private respondent/applicants right, if at all, is confined to only 620 square meters or what
has been left of the 840 square meters he purchased from Faustino Martirez after 220 square meters thereof were
appropriated by the Municipality of Banga for the Public Market Road.[66]
The records further bear out that the original owner of the whole area was one Dionisia Regado who executed three
(3) deeds of sale covering certain portions of the disputed lands, namely: 1.] the Deed of Sale dated April 29, 1914
covering 1,850 square meters executed in favor of the Municipality of Banga;[67] 2.] the Deed of Sale dated July 10, 1915
covering 1,320 square meters executed in favor of Eulalio Raz;[68] and, 3.] the Deed of Sale dated September 6, 1918
covering the balance with an area of 2,938 square meters in favor of Eufrocino Alba.[69]
Faustino Martirez acquired only an 840 square meter portion of the land by purchase from Eulalio Raz on January
15, 1933 as confirmed in paragraph 2 of the Escritura De Venta Absoluta executed by him on August 13, 1941.[70] After
selling 840 square meters to Faustino Martirez, Eulalio Raz retained 480 square meters but on November 5, 1956 Eulalio
Raz and his wife Octabela Alba conveyed 240 square meters to Susana Braulio[71] leaving a balance of 240 square meters
which remained undisposed.
On May 29, 1969, Virginia Alba, Inocentes Alba and Estrella Alba, children of the deceased Eufrocino Alba, sold a
676 square meter portion of the 2,938 square meter lot purchased by their father from Dionisia Regado to
petitioner/oppositor Octabela alba Vda. De Raz.[72] This Deed was duly registered with the Registry of Deeds of Aklan in
accordance with Act No. 3344 on June 17, 1969.[73] The land is covered by Tax Declaration No. 332 in the name of
Octabela Alba Vda. De Razs husband.[74]
Petitioner/oppositor Octabela Alba Vda. De Razs ownership of the remaining 240 square meter portion which she
and her husband Eulalio Raz bought from Dionisia Regado[75] and the 676 square meter portion which they bought from
the heirs of Eufrocino Alba[76] is fully substantiated by documentary proof.[77] Rodolfo Alba, Lourdes Alba and Beatriz
Albas ownership of a portion measuring 1,335 square meters[78] and another portion measuring 2,262 square meters[79] is
likewise backed by documentary evidence. Susana Braulios ownership of a 240 square meter portion[80] which she
acquired from Octabela Alba Vda. De Raz on November 11, 1956[81] is also documented, her predecessor-in-interest
having acquired the same from Dionisia Regado on September 6, 1918.[82]
The foregoing only serves to underscore the paucity of the proof of private respondent/applicant to support his claim
of ownership over the entire 4, 845 square meter area. He has not adduced evidence to show how and when he was able to
acquire, with the exception of 840 square meters further reduced to 620 square meters on account of 220 square meters
appropriated for the market road, the bigger area of 3,755 square meters from anybody let alone the ancestral owner,
Dionisia Regado.
His claim is anchored mainly on Revised Tax Declaration No. 14181 which he was able to procure from the
Municipal Assessor of Banga in 1956 on the basis of a self-serving affidavit which proffered the lame excuse that there
was error in the statement of the area of the land which he claimed to be 4,845 square meters instead of 620 square meters
which was the area reflected in earlier tax declarations namely, 1954 Tax Declaration No. 13578; 1953 Tax Declaration
No. 13043; and 1947 Tax Declaration No. 6528.
Be that as it may, the Court has reservations on the propriety of adjudicating to petitioners the contested portions of
the subject land, in view of their failure to present the technical descriptions of these areas. Furthermore, there is no
sufficient evidence showing that petitioners have been in open, adverse, exclusive, peaceful and continuous possession
thereof in the concept of owner, considering that the testimony of Octabela Alba vda. De Raz was stricken off the record.
WHEREFORE, based on foregoing premises, the Decision of the Regional Trial Court of Kalibo, Aklan, Branch 1
dated August 18, 1992 in Land Registration Case No. K-101, LRC Record No. K-15104 is hereby MODIFIED as follows:
1.] The 620 square meter portion on which private respondent Jose N. Lachicas house is situated, clearly
delineating its metes and bounds, is hereby ORDERED segregated from the parcel of land described in Psu-161277
situated in the Poblacion of the Municipality of Banga, Province of Aklan, Philippines with an area of 4,484 square
meters, to be registered and confirmed in the name of private respondent;
2.] A ten (10) meter road width along the National road mentioned in the application be segregated for future
road widening programs upon the payment of just compensation to be annotated at the back of the title.
3.] Insofar as the ownership of the remainder of the subject land is concerned, the case is hereby REMANDED
to the court of origin for the reception of further evidence for the petitioners to establish the other requisites for the
confirmation of title and registration in their names of the areas they respectively claim.
SO ORDERED.

THIRD DIVISION

G.R. No. 112567 February 7, 2000

THE DIRECTOR, LANDS MANAGEMENT BUREAU, petitioner,


vs.
COURT OF APPEALS and AQUILINO L. CARIO, respondents.

PURISIMA, J.:

At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to set aside the
Decision of the Court of Appeals, dated November 11, 1993, in CA-G.R. No. 29218, which affirmed the
Decision, dated February 5, 1990, of Branch XXIV, Regional Trial Court of Laguna, in LRC No. B-467, ordering
the registration of Lot No. 6 in the name of the private respondent.

The facts that matter are as follows:

On May 15, 1975, the private respondent, Aquilino Cario, filed with the then Branch I, Court of First Instance
of Laguna, a petition1 for registration of Lot No. 6, a sugar land with an area of forty-three thousand six
hundred fourteen (43,614) square meters, more or less, forming part of a bigger tract of land surveyed as Psu-
108952 and situated in Barrio Sala, Cabuyao, Laguna.

Private respondent declared that subject land was originally owned by his mother, Teresa Lauchangco, who
died on February 15, 1911,2 and later administered by him in behalf of his five brothers and sisters, after the
death of their father in 1934.3

In 1949, private respondent and his brother, Severino Cario, became co-owners of Lot No. 6 by virtue of an
extra-judicial partition of the land embraced in Plan Psu-108952, among the heirs of Teresa Lauchangco. On
July 26, 1963, through another deed of extrajudicial settlement, sole ownership of Lot No. 6 was adjudicated to
the private respondent.4

Pertinent report of the Land Investigator of the Bureau of Lands (now Bureau of Lands Management),
disclosed:

xxx xxx xxx

1. That the land subject for registration thru judicial confirmation of imperfect title is situated in the barrio
of Sala, municipality of Cabuyao, province of Laguna as described on plan Psu-108952 and is identical
to Lot No. 3015, Cad. 455-0, Cabuyao Cadastre; and that the same is agricultural in nature and the
improvements found thereon are sugarcane, bamboo clumps, chico and mango trees and one house of
the tenant made of light materials;

2. That the land subject for registration is outside any civil or military reservation, riverbed, park and
watershed reservation and that same land is free from claim and conflict;

3. That said land is neither inside the relocation site earmarked for Metro Manila squatters nor any
pasture lease; it is not covered by any existing public land application and no patent or title has been
issued therefor;

4. That the herein petitioner has been in continuous, open and exclusive possession of the land who
acquired the same thru inheritance from his deceased mother, Teresa Lauchangco as mentioned on
the Extra-judicial partition dated July 26, 1963 which applicant requested that said instrument will be
presented on the hearing of this case; and that said land is also declared for taxation purposes under
Tax Declaration No. 6359 in the name of the petitioner;

xxx xxx x x x5

With the private respondent as lone witness for his petition, and the Director of Lands as the only oppositor, the
proceedings below ended. On February 5, 1990, on the basis of the evidence on record, the trial court granted
private respondent's petition, disposing thus:

WHEREFORE, the Count hereby orders and declares the registration and confirmation of title to one
(1) parcel of land identified as Lot 6, plan Psu-108952, identical to Cadastral Lot No. 3015, Cad. 455-D,
Cabuyao Cadastre, situated in the barrio of Sala, municipality of Cabuyao, province of Laguna,
containing an area of FORTY THREE THOUSAND SIX HUNDRED FOURTEEN (43,614) Square
Meters, more or less, in favor of applicant AQUILINO L. CARINO, married to Francisca Alomia, of legal
age, Filipino, with residence and postal address at Bian, Laguna.
After this decision shall have become final, let an order for the issuance of decree of registration be
issued.

SO ORDERED.6

From the aforesaid decision, petitioner (as oppositor) went to the Court of Appeals, which, on November 11,
1993, affirmed the decision appealed from.

Undaunted, petitioner found his way to this Court via the present Petition; theorizing that:

THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT HAS NOT
SUBMITTED PROOF OF HIS FEE SIMPLE TITLE OR PROOF OF POSSESSION IN THE MANNER
AND FOR THE LENGTH OF TIME REQUIRED BY THE LAW TO JUSTIFY CONFIRMATION OF AN
IMPERFECT TITLE.

II

THE COURT OF APPEALS ERRED IN NOT DECLARING THAT PRIVATE RESPONDENT HAS NOT
OVERTHROWN THE PRESUMPTION THAT THE LAND IS A PORTION OF THE PUBLIC DOMAIN
BELONGING TO THE REPUBLIC OF THE PHILIPPINES.7

The Petition is impressed with merit.

The petition for land registration8 at bar is under the Land Registration Act.9 Pursuant to said Act, he who
alleges in his petition or application, ownership in fee simple, must present muniments of title since the
Spanish times, such as a titulo real or royal grant, a concession especial or special grant, a composicion con al
estado or adjustment title, or a titulo de compra or title through purchase; and "informacion possessoria" or
"possessory information title", which would become a "titulo gratuito" or a gratuitous title.10

In the case under consideration, the private respondents (petitioner below) has not produced a single
muniment of title substantiate his claim of ownership.11 The Court has therefore no other recourse, but to
dismiss private respondent's petition for the registration of subject land under Act 496.

Anyway, even if considered as petition for confirmation of imperfect title under the Public land Act (CA No.
141), as amended, private respondent's petition would meet the same fate. For insufficiency of evidence, its
denial is inevitable. The evidence adduced by the private respondent is not enough to prove his possession of
subject lot in concept of owner, in the manner and for the number of years required by law for the confirmation
of imperfect title.

Sec. 48(b) of Commonwealth Act No. 141,12 as amended R.A. No. 1942 and R.A. No. 3872, the law prevailing
at the time the Petition of private respondent was filed on May 15, 1975, provides:

Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or
claiming to own any such lands or an interest therein, but whose titles have not been perfected or
completed, may apply to the Court of First Instance of the province where the land is located for
confirmation of their claim and the issuance of title therefor, under the Land Registration Act, to wit:

xxx xxx xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous,
exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a
bona fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of
the application for confirmation of title except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall
be entitled to a certificate of title under the provisions of this chapter. (Emphasis supplied)

Possession of public lands, however long, never confers title upon the possessor, unless the occupant can
prove possession or occupation of the same under claim of ownership for the required period to constitute a
grant from the State.13

Notwithstanding absence of opposition from the government, the petitioner in land registration cases is not
relieved of the burden of proving the imperfect right or title sought to be confirmed. In Director of Lands vs.
Agustin,14 this Court stressed that:

. . . The petitioner is not necessarily entitled to have the land registered under the Torrens system
simply because no one appears to oppose his title and to oppose the registration of his land. He must
show, even though there is no opposition, to the satisfaction of the court, that he is the absolute owner,
in fee simple. Courts are not justified in registering property under the Torrens system, simply because
there is no opposition offered. Courts may, even in the absence of any opposition, deny the registration
of the land under the Torrens system, upon the ground that the facts presented did not show that
petitioner is the owner, in fee simple, of the land which he is attempting to have registered. 15

There is thus an imperative necessity of the most rigorous scrutiny before imperfect titles over public
agricultural lands may be granted judicial
recognition.16

The underlying principle is that all lands that were not acquired from the government, either by purchase or by
grant, belong to the state as part of the public domain. As enunciated in Republic vs. Lee:17

. . . Both under the 1935 and the present Constitutions, the conservation no less than the utilization of
the natural resources is ordained. There would be a failure to abide by its command if the judiciary does
not scrutinize with care applications to private ownership of real estate. To be granted, they must be
grounded in well-nigh incontrovertible evidence. Where, as in this case, no such proof would be
forthcoming, there is no justification for viewing such claim with favor. It is a basic assumption of our
polity that lands of whatever classification belong to the state. Unless alienated in accordance with law,
it retains its right over the same as dominus. . . .18

In order that a petition for registration of land may prosper and the petitioners may savor the benefit resulting
from the issuance of certificate of title for the land petitioned for, the burden is upon him (petitioner) to show
that he and/or his predecessor-in-interest has been in open, continuous, exclusive, and adverse possession
and occupation of the land sought for registration, for at least (30) thirty years immediately preceding the filing
of the petition for confirmation of title.19

In the case under consideration, private respondent can only trace his own possession of subject parcel of land
to the year 1949, when the same was adjudicated to him by virtue of an extra-judicial settlement and partition.
Assuming that such a partition was truly effected, the private respondent has possessed the property thus
partitioned for only twenty-six (26) years as of 1975, when he filed his petition for the registration thereof. To
bridge the gap, he proceeded to tack his possession to what he theorized upon as possession of the same
land by his parents. However, other than his unilateral assertion, private respondent has not introduced
sufficient evidence to substantiate his allegation that his late mother possessed the land in question even prior
to 1911.1wphi1.nt

Basic is the rule that the petitioner in a land registration case must prove the facts and circumstances
evidencing his alleged ownership of the land applied for. General statements, which are mere conclusions of
law and not factual proof of possession are unavailing and cannot suffice.20

From the relevant documentary evidence, it can be gleaned that the earliest tax declaration covering Lot No. 6
was Tax Declaration No. 3214 issued in 1949 under the names of the private respondent and his brother,
Severino Cario. The same was followed by Tax Declaration No. 1921 issued in 1969 declaring an assessed
value of Five Thousand Two Hundred Thirty-three (P5,233.00) Pesos and Tax Declaration No. 6359 issued in
1974 in the name of private respondent, declaring an assessment of Twenty-One Thousand Seven Hundred
Seventy (P21,770.00) Pesos.21

It bears stressing that the Exhibit "E" referred to in the decision below as the tax declaration for subject land
under the names of the parents of herein private respondent does not appear to have any sustainable basis.
Said Exhibit "E" shows that it is Tax Declaration 1921 for Lot No. 6 in the name of private respondent and not
in the name of his parents.22

The rule that findings of fact by the trial court and the Court of Appeals are binding upon this Court is not
without exceptions. Where, as in this case, pertinent records belie the findings by the lower courts that subject
land was declared for taxation purposes in the name of private respondent's predecessor-in-interest, such
findings have to be disregarded by this Court. In Republic vs. Court of Appeals,23 the Court ratiocinated thus:

This case represents an instance where the findings of the lower court overlooked certain facts of
substance and value that if considered would affect the result of the case (People v. Royeras, 130
SCRA 259) and when it appears that the appellate court based its judgment on a misapprehension of
facts (Carolina Industries, Inc. v. CMS Stock Brokerage, Inc., et al., 97 SCRA 734; Moran, Jr. v. Court
of Appeals, 133 SCRA 88; Director of Lands v. Funtillar, et al., G.R. No. 68533, May 3, 1986). This
case therefore is an exception to the general rule that the findings of facts of the Court of Appeals are
final and conclusive and cannot be reviewed on appeal to this Court.'

and

. . . in the interest of substantial justice this Court is not prevented from considering such a pivotal
factual matter that had been overlooked by the Courts below. The Supreme Court is clothed with ample
authority to review palpable errors not assigned as such if it finds that their consideration is necessary
in arriving at a just decision.24

Verily, the Court of Appeals just adopted entirely the findings of the trial court. Had it examined the original
records of the case, the said court could have verified that the land involved was never declared for taxation
purposes by the parents of the respondent. Tax receipts and tax declarations are not incontrovertible evidence
of ownership. They are mere indicia of claim of ownership.25 In Director of Lands vs. Santiago.26

. . . if it is true that the original owner and possessor, Generosa Santiago, had been in possession since
1925, why were the subject lands declared for taxation purposes for the first time only in 1968, and in
the names of Garcia and Obdin? For although tax receipts and declarations of ownership for taxation
purposes are not incontrovertible evidence of ownership, they constitute at least proof that the holder
had a claim of title over the property.27

As stressed by the Solicitor General, the contention of private respondent that his mother had been in
possession of subject land even prior to 1911 is self-serving, hearsay, and inadmissible in evidence. The
phrase "adverse, continuous, open, public, and in concept of owner", by which characteristics private
respondent describes his possession and that of his parents, are mere conclusions of law requiring evidentiary
support and substantiation. The burden of proof is on the private respondent, as applicant, to prove by clear,
positive and convincing evidence that the alleged possession of his parents was of the nature and duration
required by law. His bare allegations without more, do not amount to preponderant evidence that would shift
the burden of proof to the oppositor.28

In a case,29 this Court set aside the decisions of the trial court and the Court of Appeals for the registration of a
parcel of land in the name of the applicant, pursuant to Section 48 (b) of the Public Land Law; holding as
follows:
Based on the foregoing, it is incumbent upon private respondent to prove that the alleged twenty year
or more possession of the spouses Urbano Diaz and Bernarda Vinluan which supposedly formed part
of the thirty (30) year period prior to the filing of the application, was open, continuous, exclusive,
notorious and in concept of owners. This burden, private respondent failed to discharge to the
satisfaction of the Court. The bare assertion that the spouses Urbano Diaz and Bernarda Vinluan had
been in possession of the property for more than twenty (20) years found in private respondent's
declaration is hardly the "well-nigh incontrovertible" evidence required in cases of this nature. Private
respondent should have presented specific facts that would have shown the nature of such possession.
. . .30

In Director of Lands vs. Datu,31 the application for confirmation of imperfect title was likewise denied on the
basis of the following disquisition, to wit:

We hold that applicants' nebulous evidence does not support their claim of open, continuous, exclusive
and notorious occupation of Lot No. 2027-B en concepto de dueo. Although they claimed that they
have possessed the land since 1950, they declared it for tax purposes only in 1972. It is not clear
whether at the time they filed their application in 1973, the lot was still cogon land or already cultivated
land.

They did not present as witness their predecessor, Peaflor, to testify on his alleged possession of the
land. They alleged in their application that they had tenants on the land. Not a single tenant was
presented as witness to prove that the applicants had possessed the land as owners.

xxx xxx xxx

On the basis of applicants' insubstantial evidence, it cannot justifiably be concluded that they have an
imperfect title that should be confirmed or that they had performed all the conditions essential to a
Government grant of a portion of the public domain.32

Neither can private respondent seek refuge under P.D. No. 1073,33 amending Section 48(b) of Commonwealth
Act No. 141 under which law a certificate of title may issue to any occupant of a public land, who is a Filipino
citizen, upon proof of open, continuous exclusive, and notorious possession and occupation since June 12,
1945, or earlier. Failing to prove that his predecessors-in-interest occupied subject land under the conditions
laid down by law, the private respondent could only establish his possession since 1949, four years later than
June 12, 1945, as set by law.

The Court cannot apply here the juris et de jure presumption that the lot being claimed by the private
respondent ceased to be a public land and has become private property.34 To reiterate, under the Regalian
doctrine all lands belong to the State.35 Unless alienated in accordance with law, it retains its basic rights over
the same as dominus.36

Private respondent having failed to come forward with muniments of title to reinforce his petition for registration
under the Land Registration Act (Act 496), and to present convincing and positive proof of his open,
continuous, exclusive and notorious occupation of Lot No. 6 en concepto de dueo for at least 30 years
immediately preceding the filing of his petition,37 the Court is of the opinion, and so finds, that subject Lot No. 6
surveyed under Psu-108952, forms part of the public domain not registrable in the name of private respondent.

WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals, dated November 11, 1993, in
CA-G.R. No. 29218 affirming the Decision, dated February 5, 1990, of Branch XXIV, Regional Trial Court of
Laguna in LRC No. 8-467, is SET ASIDE; and Lot No. 6, covered by and more particularly described in Psu-
108952, is hereby declared a public land, under the administrative supervision and power of disposition of the
Bureau of Lands Management. No pronouncement as to costs.1wphi1.nt

SO ORDERED.
EN BANC

G.R. No. L-28565 January 30, 1971

IN RE: APPLICATION FOR REGISTRATION OF TITLE. SPOUSES FRANCISCO LAHORA and TORIBIA
MORALIZON, petitioners-appellants,
vs.
EMILIO DAYANGHIRANG, JR., and THE DIRECTOR OF LANDS, oppositors-appellees.

Occena and Ocampo Law Offices for petitioners-appellants.

Jose C. Magune for oppositor-appellee Emilio Dayanghirang, Jr.

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

The spouses Francisco Lahora and Toribia Moralizon brought the present appeal to this Court from the order
of the Court of First Instance of Davao (in Land Reg. Case No. N-86), dismissing their petition with respect to
Lot No. 2228 on the ground of previous registration, said appellants claiming that the question of the validity of
a certificate of title based on a patent allegedly obtained by fraud can be raised by them in a land registration
proceeding, contrary to the ruling of the court a quo.

The records show that on 26 November 1965 herein appellants petitioned the Court of First Instance of Davao
for registration of nine (9) parcels of land located in barrio Zaragosa, municipality of Manay, province of Davao,
one-half of which having been acquired by appellant Toribia Moralizon allegedly by inheritance, and the other
half by purchase and by continuous, open, public and adverse possession in the concept of owner. One of the
said parcels of land is identified as lot No. 2228, plan SWO-36856, Manay Cadastre.

The petition was opposed by Emilio Dayanghirang, Jr., who alleged that lands belonging to him and his wife
were included in the application for registration, mentioning specifically Lot No. 2228 which was said to be
already covered by Original Certificate of Title No. P-6055 in the name of oppositor's wife. The Director of
Lands also filed an opposition to the petition, contending that the applicants or their predecessors-in-interest
never had sufficient title over the parcels of land sought to be registered, nor have they been in open,
continuous, and notorious possession thereof for at least 30 years.

On 14 June 1967, counsel for the private oppositor filed a motion for correction of the number of the certificate
of title covering Lot No. 2228, erroneously referred to as OCT No. P-6055, when it should properly be OCT No.
P-6053. It is likewise prayed in the same motion that the petition be dismissed insofar as it includes Lot No.
2228, for the reason that said lot was already registered and titled in the name of oppositor's wife as of 21 June
1956. In its order of 18 June 1967, which was amended on 29 June 1967, the court granted the oppositor's
motion and directed the dismissal of the petition as regards Lot No. 2228, on the ground that it having been
previously registered and titled, said parcel of land can no longer be the subject of adjudication in another
proceeding. Hence, this appeal by the petitioners.

It may be recalled that the action filed by petitioners-appellants in the lower court on 26 November 1965 was
for original registration of certain parcels of land, including Lot No. 2228 of the Manay Cadastre. It is not here
denied by appellants that said Lot No. 2228 was the subject of a public land grant in favor of the oppositor's
wife, and by virtue of which grant or patent Original Certificate of Title No. P-6053 was issued in her name on
21 June 1956. Appellants, however, try to make a case against the dismissal-order of the lower court by
contending that the patent issued to oppositor's wife was procured by fraud, because appellants, the alleged
actual occupants of the land, were not notified of the application for patent therefor and of its adjudication.
Thus, according to appellants, since they were the actual occupants of the property, the government could not
have awarded it to oppositor's wife, and the patent issued to the latter, as well as the original certificate of title
subsequently obtained by her, were null and void.

The rule in this jurisdiction, regarding public land patents and the character of the certificate of title that may be
issued by virtue thereof, is that where land is granted by the government to a private individual, the
corresponding patent therefor is recorded, and the certificate of title is issued to the grantee; thereafter, the
land is automatically brought within the operation of the Land Registration Act1, the title issued to the grantee
becoming entitled to all the safeguards provided in Section 38 of the said Act.2 In other words, upon expiration
of one year from its issuance, the certificate of title shall become irrevocable and indefeasible like a certificate
issued in a registration proceeding.3

In the present case, Lot No. 2228 was registered and titled in the name of oppositors' wife as of 21 June 1956,
nine (9) years earlier. Clearly, appellants' petition for registration of the same parcel of land on 26 November
1965, on the ground that the first certificate of title (OCT No. P-6053) covering the said property is a nullity, can
no longer prosper. Orderly administration of justice precludes that Lot 2228, of the Manay Cadastre, should be
the subject of two registration proceedings. Having become registered land under Act 496, for all legal
purposes, by the issuance of the public land patent and the recording thereof, further registration of the same
would lead to the obviously undesirable result of two certificates of title being issued for the same piece of land,
even if both certificates should be in the name of the same person. And if they were to be issued to different
persons, the indefeasibility of the first title, which is the most valued characteristic of Torrens titles, would be
torn away. For this reason, this Court has ruled in Pamintuan vs. San Agustin, 43 Phil. 558, that in a cadastral
case the court has no jurisdiction to decree again the registration of land already decreed in an earlier case;
and that a second decree for the same land would be null and void.4 Of course, if the patent had been issued
during the pendency of the registration proceedings, the situation would be different.5

Even assuming arguendo, that there indeed exists a proper case for cancellation of the patent for intrinsic
fraud, the action for review of the decree should have been filed before the one year period had
elapsed.6 Thereafter, the proper party to bring the action would only be the person prejudiced by the alleged
fraudulent act the owner and grantor,7 and not another applicant or claimant. Furthermore, the relief
provided by the law in such instance may be secured by the aggrieved party, not in another registration, for
land already registered in the name of a person can not be the subject of another registration8, but in an
appropriate action such as one for reconveyance or reversion9, or for damages in case the property has
passed into the hands of an innocent purchaser for value. 10

As regards the complaint against the alleged correction of the number of the certificate of title covering Lot No.
2228 which was erroneously stated in the oppositor's motion as OCT No. P-6055, when it should properly be
OCT No. P-6053, it appearing that the motion was intended to rectify a clearly typographical mistake, there is
nothing irregular in the lower court's order granting the same.

WHEREFORE, finding no error in the order appealed from, the same is hereby affirmed, with costs against the
appellants.

REPUBLIC OF THE PHILIPPINES, petitioner, vs. THE HONORABLE COURT OF APPEALS and
CORAZON NAGUIT, respondents.

DECISION
TINGA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeking to
review the Decision[1] of the Sixth Division of the Court of Appeals dated July 12, 2000 in CA-G.R. SP No.
51921. The appellate court affirmed the decisions of both the Regional Trial Court (RTC), [2] Branch 8, of Kalibo,
Aklan dated February 26, 1999, and the 7thMunicipal Circuit Trial Court (MCTC)[3] of Ibajay-Nabas, Aklan dated
February 18, 1998, which granted the application for registration of a parcel of land of Corazon Naguit (Naguit),
the respondent herein.
The facts are as follows:
On January 5, 1993, Naguit, a Filipino citizen, of legal age and married to Manolito S. Naguit, filed with the
MCTC of Ibajay-Nabas, Aklan, a petition for registration of title of a parcel of land situated in Brgy. Union,
Nabas, Aklan. The parcel of land is designated as Lot No. 10049, Cad. 758-D, Nabas Cadastre, AP 060414-
014779, and contains an area of 31,374 square meters. The application seeks judicial confirmation of
respondents imperfect title over the aforesaid land.
On February 20, 1995, the court held initial hearing on the application. The public prosecutor, appearing
for the government, and Jose Angeles, representing the heirs of Rustico Angeles, opposed the petition. On a
later date, however, the heirs of Rustico Angeles filed a formal opposition to the petition. Also on February 20,
1995, the court issued an order of general default against the whole world except as to the heirs of Rustico
Angeles and the government.
The evidence on record reveals that the subject parcel of land was originally declared for taxation
purposes in the name of Ramon Urbano (Urbano) in 1945 under Tax Declaration No. 3888 until 1991. [4] On
July 9, 1992, Urbano executed a Deed of Quitclaim in favor of the heirs of Honorato Maming (Maming),
wherein he renounced all his rights to the subject property and confirmed the sale made by his father to
Maming sometime in 1955 or 1956.[5] Subsequently, the heirs of Maming executed a deed of absolute sale in
favor of respondent Naguit who thereupon started occupying the same. She constituted Manuel Blanco, Jr. as
her attorney-in-fact and administrator. The administrator introduced improvements, planted trees, such as
mahogany, coconut and gemelina trees in addition to existing coconut trees which were then 50 to 60 years
old, and paid the corresponding taxes due on the subject land. At present, there are parcels of land
surrounding the subject land which have been issued titles by virtue of judicial decrees. Naguit and her
predecessors-in-interest have occupied the land openly and in the concept of owner without any objection from
any private person or even the government until she filed her application for registration.
After the presentation of evidence for Naguit, the public prosecutor manifested that the government did not
intend to present any evidence while oppositor Jose Angeles, as representative of the heirs of Rustico
Angeles, failed to appear during the trial despite notice. On September 27, 1997, the MCTC rendered a
decision ordering that the subject parcel be brought under the operation of the Property Registration Decree or
Presidential Decree (P.D.) No. 1529 and that the title thereto registered and confirmed in the name of Naguit. [6]
The Republic of the Philippines (Republic), thru the Office of the Solicitor General (OSG), filed a motion for
reconsideration. The OSG stressed that the land applied for was declared alienable and disposable only on
October 15, 1980, per the certification from Regional Executive Director Raoul T. Geollegue of the Department
of Environment and Natural Resources, Region VI.[7] However, the court denied the motion for reconsideration
in an order dated February 18, 1998.[8]
Thereafter, the Republic appealed the decision and the order of the MCTC to the RTC, Kalibo, Aklan,
Branch 8. On February 26, 1999, the RTC rendered its decision, dismissing the appeal.[9]
Undaunted, the Republic elevated the case to the Court of Appeals via Rule 42 of the 1997 Rules of Civil
Procedure. On July 12, 2000, the appellate court rendered a decision dismissing the petition filed by the
Republic and affirmed in toto the assailed decision of the RTC.
Hence, the present petition for review raising a pure question of law was filed by the Republic on
September 4, 2000.[10]
The OSG assails the decision of the Court of Appeals contending that the appellate court gravely erred in
holding that there is no need for the governments prior release of the subject lot from the public domain before
it can be considered alienable or disposable within the meaning of P.D. No. 1529, and that Naguit had been in
possession of Lot No. 10049 in the concept of owner for the required period.[11]
Hence, the central question for resolution is whether is necessary under Section 14(1) of the Property
Registration Decree that the subject land be first classified as alienable and disposable before the applicants
possession under a bona fide claim of ownership could even start.
The OSG invokes our holding in Director of Lands v. Intermediate Appellate Court[12] in arguing that the
property which is in open, continuous and exclusive possession must first be alienable. Since the subject land
was declared alienable only on October 15, 1980, Naguit could not have maintained a bona fide claim of
ownership since June 12, 1945, as required by Section 14 of the Property Registration Decree, since prior to
1980, the land was not alienable or disposable, the OSG argues.
Section 14 of the Property Registration Decree, governing original registration proceedings, bears close
examination. It expressly provides:

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 duly authorized representatives:

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

(2) Those who have acquired ownership over private lands by prescription under the provisions of existing
laws.

....
There are three obvious requisites for the filing of an application for registration of title under Section 14(1)
that the property in question is alienable and disposable land of the public domain; that the applicants by
themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious
possession and occupation, and; that such possession is under a bona fide claim of ownership since June 12,
1945 or earlier.
Petitioner suggests an interpretation that the alienable and disposable character of the land should have
already been established since June 12, 1945 or earlier. This is not borne out by the plain meaning of Section
14(1). Since June 12, 1945, as used in the provision, qualifies its antecedent phrase under a bonafide claim of
ownership. Generally speaking, qualifying words restrict or modify only the words or phrases to which they are
immediately associated, and not those distantly or remotely located.[13] Ad proximum antecedents fiat relation
nisi impediatur sentencia.
Besides, we are mindful of the absurdity that would result if we adopt petitioners position. Absent a
legislative amendment, the rule would be, adopting the OSGs view, that all lands of the public domain which
were not declared alienable or disposable before June 12, 1945 would not be susceptible to original
registration, no matter the length of unchallenged possession by the occupant. Such interpretation renders
paragraph (1) of Section 14 virtually inoperative and even precludes the government from giving it effect even
as it decides to reclassify public agricultural lands as alienable and disposable. The unreasonableness of the
situation would even be aggravated considering that before June 12, 1945, the Philippines was not yet even
considered an independent state.
Instead, the more reasonable interpretation of Section 14(1) is that it merely requires the property sought
to be registered as already alienable and disposable at the time the application for registration of title is filed. If
the State, at the time the application is made, has not yet deemed it proper to release the property for
alienation or disposition, the presumption is that the government is still reserving the right to utilize the
property; hence, the need to preserve its ownership in the State irrespective of the length of adverse
possession even if in good faith. However, if the property has already been classified as alienable and
disposable, as it is in this case, then there is already an intention on the part of the State to abdicate its
exclusive prerogative over the property.
This reading aligns conformably with our holding in Republic v. Court of Appeals.[14] Therein, the Court
noted that to prove that the land subject of an application for registration is alienable, an applicant must
establish the existence of a positive act of the government such as a presidential proclamation or an executive
order; an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a
statute.[15] In that case, the subject land had been certified by the DENR as alienable and disposable in 1980,
thus the Court concluded that the alienable status of the land, compounded by the established fact that therein
respondents had occupied the land even before 1927, sufficed to allow the application for registration of the
said property. In the case at bar, even the petitioner admits that the subject property was released and certified
as within alienable and disposable zone in 1980 by the DENR.[16]
This case is distinguishable from Bracewell v. Court of Appeals,[17] wherein the Court noted that while the
claimant had been in possession since 1908, it was only in 1972 that the lands in question were classified as
alienable and disposable. Thus, the bid at registration therein did not succeed. In Bracewell, the claimant had
filed his application in 1963, or nine (9) years before the property was declared alienable and disposable. Thus,
in this case, where the application was made years after the property had been certified as alienable and
disposable, the Bracewell ruling does not apply.
A different rule obtains for forest lands,[18] such as those which form part of a reservation for provincial
park purposes[19] the possession of which cannot ripen into ownership.[20] It is elementary in the law governing
natural resources that forest land cannot be owned by private persons. As held in Palomo v. Court of
Appeals,[21] forest land is not registrable and possession thereof, no matter how lengthy, cannot convert it into
private property, unless such lands are reclassified and considered disposable and alienable.[22] In the case at
bar, the property in question was undisputedly classified as disposable and alienable; hence, the ruling
in Palomo is inapplicable, as correctly held by the Court of Appeals.[23]
It must be noted that the present case was decided by the lower courts on the basis of Section 14(1) of the
Property Registration Decree, which pertains to original registration through ordinary registration proceedings.
The right to file the application for registration derives from a bona fide claim of ownership going back to June
12, 1945 or earlier, by reason of the claimants open, continuous, exclusive and notorious possession of
alienable and disposable lands of the public domain.
A similar right is given under Section 48(b) of the Public Land Act, which reads:

Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any
such land or an interest therein, but those titles have not been perfected or completed, may apply to the Court of First
Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title
therefor, under the Land Registration Act, to wit:

xxx xxx xxx

(b) Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive, and
notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of
ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except
when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.

When the Public Land Act was first promulgated in 1936, the period of possession deemed necessary to
vest the right to register their title to agricultural lands of the public domain commenced from July 26, 1894.
However, this period was amended by R.A. No. 1942, which provided that the bona fide claim of ownership
must have been for at least thirty (30) years. Then in 1977, Section 48(b) of the Public Land Act was again
amended, this time by P.D. No. 1073, which pegged the reckoning date at June 12, 1945. This new starting
point is concordant with Section 14(1) of the Property Registration Decree.
Indeed, there are no material differences between Section 14(1) of the Property Registration Decree and
Section 48(b) of the Public Land Act, as amended. True, the Public Land Act does refer to agricultural lands of
the public domain, while the Property Registration Decree uses the term alienable and disposable lands of the
public domain. It must be noted though that the Constitution declares that alienable lands of the public domain
shall be limited to agricultural lands.[24] Clearly, the subject lands under Section 48(b) of the Public Land Act
and Section 14(1) of the Property Registration Decree are of the same type.
Did the enactment of the Property Registration Decree and the amendatory P.D. No. 1073 preclude the
application for registration of alienable lands of the public domain, possession over which commenced only
after June 12, 1945? It did not, considering Section 14(2) of the Property Registration Decree, which governs
and authorizes the application of those who have acquired ownership of private lands by prescription under the
provisions of existing laws.
Prescription is one of the modes of acquiring ownership under the Civil Code. [25] There is a consistent
jurisprudential rule that properties classified as alienable public land may be converted into private property by
reason of open, continuous and exclusive possession of at least thirty (30) years.[26] With such conversion,
such property may now fall within the contemplation of private lands under Section 14(2), and thus susceptible
to registration by those who have acquired ownership through prescription. Thus, even if possession of the
alienable public land commenced on a date later than June 12, 1945, and such possession being been open,
continuous and exclusive, then the possessor may have the right to register the land by virtue of Section 14(2)
of the Property Registration Decree.
The land in question was found to be cocal in nature, it having been planted with coconut trees now over
fifty years old.[27] The inherent nature of the land but confirms its certification in 1980 as alienable, hence
agricultural. There is no impediment to the application of Section 14(1) of the Property Registration Decree, as
correctly accomplished by the lower courts.
The OSG posits that the Court of Appeals erred in holding that Naguit had been in possession in the
concept of owner for the required period. The argument begs the question. It is again hinged on the
assertionshown earlier to be unfoundedthat there could have been no bona fide claim of ownership prior to
1980, when the subject land was declared alienable or disposable.
We find no reason to disturb the conclusion of both the RTC and the Court of Appeals that Naguit had the
right to apply for registration owing to the continuous possession by her and her predecessors-in-interest of the
land since 1945. The basis of such conclusion is primarily factual, and the Court generally respects the factual
findings made by lower courts. Notably, possession since 1945 was established through proof of the existence
of 50 to 60-year old trees at the time Naguit purchased the property as well as tax declarations executed by
Urbano in 1945. Although tax declarations and realty tax payment of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of the possession in the concept of owner for no one in his right
mind would be paying taxes for a property that is not in his actual or at least constructive possession. They
constitute at least proof that the holder has a claim of title over the property. The voluntary declaration of a
piece of property for taxation purposes manifests not only ones sincere and honest desire to obtain title to the
property and announces his adverse claim against the State and all other interested parties, but also the
intention to contribute needed revenues to the Government. Such an act strengthens ones bona fide claim of
acquisition of ownership.[28]
Considering that the possession of the subject parcel of land by the respondent can be traced back to that
of her predecessors-in-interest which commenced since 1945 or for almost fifty (50) years, it is indeed beyond
any cloud of doubt that she has acquired title thereto which may be properly brought under the operation of the
Torrens system. That she has been in possession of the land in the concept of an owner, open, continuous,
peaceful and without any opposition from any private person and the government itself makes her right thereto
undoubtedly settled and deserving of protection under the law.
WHEREFORE, foregoing premises considered, the assailed Decision of the Court of Appeals dated July
12, 2000 is hereby AFFIRMED. No costs.
SO ORDERED.