G.R. No.

L-55729 March 28, 1983

ANTONIO PUNSALAN, JR., petitioner,

vs.
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A. ORTIZ, respondents.

Benjamin S. Benito & Associates for petitioner.

Expedito Yummul for private respondent.

MELENCIO-HERRERA, J.:

The sole issue presented by petitioner for resolution is whether or not respondent Court erred in
denying the Motion to Set Case for Pre-trial with respect to respondent Remedios Vda. de Lacsamana as
the case had been dismissed on the ground of improper venue upon motion of co-respondent Philippine
National Bank (PNB).

It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land
consisting of 340 square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to
respondent PNB (Tarlac Branch) in the amount of P10,000.00, but for failure to pay said amount, the
property was foreclosed on December 16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder
in said foreclosure proceedings. However, the bank secured title thereto only on December 14, 1977.

In the meantime, in 1974, while the property was still in the alleged possession of petitioner and with
the alleged acquiescence of respondent PNB (Tarlac Branch), and upon securing a permit from the
Municipal Mayor, petitioner constructed a warehouse on said property. Petitioner declared said
warehouse for tax purposes for which he was issued Tax Declaration No. 5619. Petitioner then leased the
warehouse to one Hermogenes Sibal for a period of 10 years starting January 1975.

On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent
Lacsamana over the property. This contract was amended on July 31, 1978, particularly to include in the
sale, the building and improvement thereon. By virtue of said instruments, respondent - Lacsamana
secured title over the property in her name (TCT No. 173744) as well as separate tax declarations for the
land and building. 1

On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages"
against herein respondents PNB and Lacsamana before respondent Court of First Instance of Rizal,
Branch XXXI, Quezon City, essentially impugning the validity of the sale of the building as embodied in
the Amended Deed of Sale. In this connection, petitioner alleged:

xxx xxx xxx

22. That defendant, Philippine National Bank, through its Branch Manager ... by virtue of the request of
defendant ... executed a document dated July 31, 1978, entitled Amendment to Deed of Absolute Sale ...
wherein said defendant bank as Vendor sold to defendant Lacsamana the building owned by the plaintif
under Tax Declaration No. 5619, notwithstanding the fact that said building is not owned by the bank
either by virtue of the public auction sale conducted by the Sherif and sold to the Philippine National
Bank or by virtue of the Deed of Sale executed by the bank itself in its favor on September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ... that the sale in its favor should likewise have
included the building, notwithstanding no legal basis for the same and despite full knowledge that the
Certificate of Sale executed by the sherif in its favor ... only limited the sale to the land, hence, by selling
the building which never became the property of defendant, they have violated the principle against
'pactum commisorium'.

Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana be declared
null and void and that damages in the total sum of P230,000.00, more or less, be awarded to him. 2

In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense of lack of
cause of action in that she was a purchaser for value and invoked the principle in Civil Law that the
"accessory follows the principal".3

On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly
laid considering that the building was real property under article 415 (1) of the New Civil Code and
therefore section 2(a) of Rule 4 should apply. 4

Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale
with damages is in the nature of a personal action, which seeks to recover not the title nor possession of
the property but to compel payment of damages, which is not an action afecting title to real property.

On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows:

Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated March 13, 1980,
considered against the plaintif's opposition thereto dated April 1, 1980, including the reply therewith of
said defendant, this Court resolves to DISMISS the plaintif's complaint for improper venue considering
that the plaintif's complaint which seeks for the declaration as null and void, the amendment to Deed of
Absolute Sale executed by the defendant Philippine National Bank in favor of the defendant Remedios T.
Vda. de Lacsamana, on July 31, 1978, involves a warehouse allegedly owned and constructed by the
plaintif on the land of the defendant Philippine National Bank situated in the Municipality of Bamban,
Province of Tarlac, which warehouse is an immovable property pursuant to Article 415, No. 1 of the New
Civil Code; and, as such the action of the plaintif is a real action afecting title to real property which,
under Section 2, Rule 4 of the New Rules of Court, must be tried in the province where the property or
any part thereof lies.5

In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that the
action to annul does not involve ownership or title to property but is limited to the validity of the deed
of sale and emphasized that the case should proceed with or without respondent PNB as respondent
Lacsamana had already filed her Answer to the Complaint and no issue on venue had been raised by the
latter.

On September 1, 1980,.respondent Court denied reconsideration for lack of merit.

Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana was
concerned, as the issues had already been joined with the filing of respondent Lacsamana's Answer.

In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial as the
case was already dismissed in the previous Orders of April 25, 1980 and September 1, 1980.

Hence, this Petition for Certiorari, to which we gave due course.

We affirm respondent Court's Order denying the setting for pre-trial.

The warehouse claimed to be owned by petitioner is an immovable or real property as provided in

article 415(l) of the Civil Code. 6 Buildings are always immovable under the Code. 7 A building treated
separately from the land on which it stood is immovable property and the mere fact that the parties to a
contract seem to have dealt with it separate and apart from the land on which it stood in no wise
changed its character as immovable property. 8

While it is true that petitioner does not directly seek the recovery of title or possession of the property in
question, his action for annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the building which, under the law, is considered immovable property, the recovery
of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to eface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is a real action. 9

Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue
(Section 2, Rule 4) 10, which was timely raised (Section 1, Rule 16) 11.

Petitioner's other contention that the case should proceed in so far as respondent Lacsamana is
concerned as she had already filed an Answer, which did not allege improper venue and, therefore,
issues had already been joined, is likewise untenable. Respondent PNB is an indispensable party as the
validity of the Amended Contract of Sale between the former and respondent Lacsamana is in issue. It
would, indeed, be futile to proceed with the case against respondent Lacsamana alone.

WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitioner
Antonio Punsalan, Jr. in the proper forum.

Costs against petitioner.

SO ORDERED.

Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

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

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,

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

AQUINO, J.:

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

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

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

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

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

However, Meralco Securities notes that segments of the pipeline can be moved from one place to
another as shown in the permit issued by the Secretary of Public Works and Communications which
permit provides that the government reserves the right to require the removal or transfer of the pipes by
and at the concessionaire's expense should they be afected by any road repair or improvement.

Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna treated
the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro; 7473-7478,
Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Biñan and 15806-15810, Calamba, containing the assessed
values of portions of the pipeline.

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

Meralco Securities brought the case to the Central Board of Assessment Appeals. As already stated, that
Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of Justice
Vicente Abad Santos and Secretary of Local Government and Community Development Jose Roño as
members, ruled that the pipeline is subject to realty tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on August 27, 1976. Section 36 of the
Real Property Tax Code, Presidential Decree No. 464, which took efect on June 1, 1974, provides that
the Board's decision becomes final and executory after the lapse of fifteen days from the date of receipt
of a copy of the decision by the appellant.

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

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

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

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

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

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

"The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect
substantial rights of parties afected by its decisions" (73 C.J.S. 507, See. 165). The review is a part of the
system of checks and balances which is a limitation on the separation of powers and which forestalls
arbitrary and unjust adjudications.

Judicial review of the decision of an official or administrative agency exercising quasi-judicial functions is
proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case
the administrative decision is corrupt, arbitrary or capricious (Mafinco Trading Corporation vs. Ople, L-
37790, March 25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs. Secretary of Labor, L-39195, May
16, 1975, 64 SCRA 56, 60, Mun. Council of Lemery vs. Prov. Board of Batangas, 56 Phil. 260, 268).

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

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

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

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

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

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

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

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

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

It should be borne in mind that what are being characterized as real property are not the steel pipes but
the pipeline system as a whole. Meralco Securities has apparently two pipeline systems.

A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller County
Highway, etc., Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red River Levee Dist.
No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note 86).

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

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

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

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

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

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

SO ORDERED.

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

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

G.R. No. 166102, August 05, 2015

MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA
CITY, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Manila
Electric Company (MERALCO), seeking the reversal of the Decision 1 dated May 13, 2004 and
Resolution2dated November 18, 2004 of the Court of Appeals in CA-G.R. SP No. 67027. The appellate
court affirmed the Decision3 dated May 3, 2001 of the Central Board of Assessment Appeals (CBAA) in
CBAA Case No. L-20-98, which, in turn, affirmed with modification the Decision 4 dated June 17, 19985 of
the Local Board of Assessment Appeals (LBAA) of Lucena City, Quezon Province, as regards Tax
Declaration Nos. 019-6500 and 019-7394, ruling that MERALCO is liable for real property tax on its
transformers, electric posts (or poles), transmission lines, insulators, and electric meters, beginning
1992.

MERALCO is a private corporation organized and existing under Philippine laws to operate as a public
utility engaged in electric distribution. MERALCO has been successively granted franchises to operate in
Lucena City beginning 1922 until present time, particularly, by: (1) Resolution No. 36 6 dated May 15,
1922 of the Municipal Council of Lucena; (2) Resolution No. 108 7 dated July 1, 1957 of the Municipal
Council of Lucena; (3) Resolution No. 26798 dated June 13, 1972 of the Municipal Board of Lucena
City;9(4) Certificate of Franchise10 dated October 28, 1993 issued by the National Electrification
Commission; and (5) Republic Act No. 9209 11 approved on June 9, 2003 by Congress. 12

On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No.
019-650013 covering the following electric facilities, classified as capital investment, of the company: (a)
transformer and electric post; (b) transmission line; (c) insulator; and (d) electric meter, located in
Quezon Ave. Ext., Brgy. Gulang-Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric
facilities had a market value of P81,811,000.00 and an assessed value of P65,448,800.00, and were
subjected to real property tax as of 1985.

MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of Lucena City, which was docketed
as LBAA-89-2. MERALCO claimed that its capital investment consisted only of its substation facilities, the
true and correct value of which was only P9,454,400.00; and that MERALCO was exempted from
payment of real property tax on said substation facilities.

The LBAA rendered a Decision14 in LBAA-89-2 on July 5, 1989, finding that under its franchise, MERALCO
was required to pay the City Government of Lucena a tax equal to 5% of its gross earnings, and "[s]aid
tax shall be due and payable quarterly and shall be in lieu of any and all taxes of any kind, nature, or
description levied, established, or collected x x x, on its poles, wires, insulators, transformers and
structures, installations, conductors, and accessories, x x x, from which taxes the grantee (MERALCO) is
hereby expressly exempted."15 As regards the issue of whether or not the poles, wires, insulators,
transformers, and electric meters of MERALCO were real properties, the LBAA cited the 1964 case
of Board of Assessment Appeals v. Manila Electric Company 16 (1964 MERALCO case) in which the Court
held that: (1) the steel towers fell within the term "poles" expressly exempted from taxes under the
franchise of MERALCO; and (2) the steel towers were personal properties under the provisions of the
Civil Code and, hence, not subject to real property tax. The LBAA lastly ordered that Tax Declaration No.
019-6500 would remain and the poles, wires, insulators, transformers, and electric meters of MERALCO
would be continuously assessed, but the City Assessor would stamp on the said Tax Declaration the word
"exempt." The LBAA decreed in the end:cralawlawlibrary

WHEREFORE, from the evidence adduced by the parties, the Board overrules the claim of the [City
Assessor of Lucena] and sustain the claim of [MERALCO].

Further, the Appellant (Meralco) is hereby ordered to render an accounting to the City Treasurer of
Lucena and to pay the City Government of Lucena the amount corresponding to the Five (5%) per
centum of the gross earnings in compliance with paragraph 13 both Resolutions 108 and 2679,
respectively, retroactive from November 9, 1957 to date, if said tax has not yet been
paid.17chanrobleslaw

The City Assessor of Lucena filed an appeal with the CBAA, which was docketed as CBAA Case No. 248.In
its Decision18 dated April 10, 1991, the CBAA affirmed the assailed LBAA judgment. Apparently, the City
Assessor of Lucena no longer appealed said CBAA Decision and it became final and executory.

Six years later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997 from the City
Treasurer of Lucena, which stated that the company was being assessed real property tax delinquency on
its machineries beginning 1990, in the total amount of P17,925,117.34, computed as
follows:chanRoblesvirtualLawlibrary

TAX ASSESSED COVERED TAX DUE PENALTY TOTAL

DEC. # VALUE PERIOD

019-6500 P65,448,800.00 1990-94 P3,272,440.00 P2,356,156.80 P5,628,596.80

019-7394 78,538,560.00 1995 785,385.60 534,062.21 1,319,447.81
1996 785,385.60 345,569.66 1,130,955.26
lst-3rd/1997 589,039.20 117,807.84 706,847.04
4th 1997 196,346.40 (19,634.64) 176,711.76
BASIC---- P8,962,558.67
SEF---- 8,962,558.67
TOTAL TAX DELINQUENCY---- P17,925,117.34

The City Treasurer of Lucena requested that MERALCO settle the payable amount soon to avoid
accumulation of penalties. Attached to the letter were the following documents: (a) Notice of
Assessment20 dated October 20, 1997 issued by the City Assessor of Lucena, pertaining to Tax
Declaration No. 019-7394, which increased the market value and assessed value of the machinery; (b)
Property Record Form;21 and (c) Tax Declaration No. 019-6500.22

MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 before the LBAA of Lucena City on
December 23, 1997 and posted a surety bond 23 dated December 10, 1997 to guarantee payment of its
real property tax delinquency. MERALCO asked the LBAA to cancel and nullify the Notice of Assessment
dated October 20, 1997 and declare the properties covered by Tax Declaration Nos. 019-6500 and 019-
7394 exempt from real property tax.

In its Decision dated June 17, 1998 regarding Tax Declaration Nos. 019-6500 and 019-7394, the LBAA
declared that Sections 234 and 534(f) of the Local Government Code repealed the provisions in the
franchise of MERALCO and Presidential Decree No. 551 24 pertaining to the exemption of MERALCO from
payment of real property tax on its poles, wires, insulators, transformers, and meters. The LBAA refused
to apply as res judicata its earlier judgment in LBAA-89-2, as affirmed by the CBAA, because it involved
collection of taxes from 1985 to 1989, while the present case concerned the collection of taxes from
1989 to 1997; and LBAA is only an administrative body, not a court or quasi-judicial body. The LBAA
though instructed that the computation of the real property tax for the machineries should be based on
the prevailing 1991 Schedule of Market Values, less the depreciation cost allowed by law. The LBAA
ultimately disposed:cralawlawlibrary

WHEREFORE, in view of the foregoing, it is hereby ordered that:chanRoblesvirtualLawlibrary

1) MERALCO's appeal be dismissed for lack of merit;ChanRoblesVirtualawlibrary

2) MERALCO be required to pay the realty tax on the questioned properties, because they are not
exempt by law, same to be based on the 1991 level of assessment, less depreciation cost allowed by
law.25chanrobleslaw

MERALCO went before the CBAA on appeal, which was docketed as CBAA Case No. L-20-98. The CBAA,
in its Decision dated May 3, 2001, agreed with the LBAA that MERALCO could no longer claim exemption
from real property tax on its machineries with the enactment of Republic Act No. 7160, otherwise
known as the Local Government Code of 1991, thus:cralawlawlibrary

Indeed, the Central Board of Assessment Appeals has had the opportunity of ruling in [MERALCO's] favor
in connection with this very same issue. The matter was settled on April 10, 1991 where this Authority
ruled that "wires, insulators, transformers and electric meters which are mounted on poles and can be
separated from the poles and moved from place to place without breaking the material or causing [the]
deterioration of the object, are deemed movable or personal property". The same position of MERALCO
would have been tenable and that decision may have stood firm prior to the enactment of R.A. 7160 but
not anymore in this jurisdiction. The Code provides and now sets a more stringent yet broadened
concept of machinery, x x x:
xxxx

The pivotal point where the diference lie between the former and the current case is that by the very
wordings of [Section 199(0)], the ground being anchored upon by MERALCO concerning the properties in
question being personal in nature does not hold anymore for the sole reason that these come now
within the purview and new concept of Machineries. The new law has treated these in an unequivocal
manner as machineries in the sense that they are instruments, mechanical contrivances or apparatus
though not attached permanently to the real properties of [MERALCO] are actually, directly and
exclusively used to meet their business of distributing electricity.

xxxx

Clearly, [Section 234 of the Local Government Code] lists down the instances of exemption in real
property taxation and very apparent is the fact that the enumeration is exclusive in character in view of
the wordings in the last paragraph. Applying the maxim "Expressio Unius est Exclusio Alterius", we can
say that "Where the statute enumerates those who can avail of the exemption, it is construed as
excluding all others not mentioned therein". Therefore, the above-named company [had] lost its
previous exemptions under its franchise because of non-inclusion in the enumeration in Section 234.
Furthermore, all tax exemptions being enjoyed by all persons, whether natural or juridical, including all
government-owned or controlled corporations are expressly withdrawn, upon efectivity of R.A. 7160.

In the given facts, it has been manifested that the Municipal Board of Lucena passed Resolution No. 108
on July 1, 1957 extending the franchise of MERALCO to operate in Lucena city an electric light system for
thirty-five years, which should have expired on November 9, 1992 and under Resolution No. 2679 passed
on June 13, 1972 by the City Council of Lucena City awarding [MERALCO] a franchise to operate for
twenty years an electric light, heat and power system in Lucena City, also to expire in the year 1992.
Under those franchises, they were only bound to pay franchise taxes and nothing more.

Now, granting arguendo that there is no express revocation of the exemption under the franchise of
[MERALCO] since, unquestionably [MERALCO] is a recipient of another franchise granted this time by the
National Electrification Commission as evidenced by a certificate issued on October 28, 1993, such
conferment does not automatically include and/or award exemption from taxes, nor does it impliedly
give the franchisee the right to continue the privileges like exemption granted under its previous
franchise. It is just a plain and simple franchise. In countless times, the Supreme Court has ruled that
exemption must be clear in the language of the law granting such exemption for it is strictly construed
and favored against the person invoking it. In addition, a franchise though in the form of a contract is
also a privilege that must yield to the sublime yet inherent powers of the state, one of these is the power
of taxation.

Looking into the law creating the National Electrification Administration (Commission), P.D. 269 as
amended by P.D. 1645, nowhere in those laws can we find such authority to bestow upon the grantee
any tax exemption of whatever nature except those of cooperatives. This we believe is basically in
consonance with the provisions of the Local Government Code more particularly Section 234.

Furthermore, Section 534(f) of R.A. 7160 which is taken in relation to Section 234 thereof states that "All
general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative
regulations or part or parts thereof which are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly". Anent this unambiguous mandate, P.D. 551 is mandatorily
repealed due to its contradictory and irreconcilable provisions with R.A. 7160. 26
chanrobleslaw

Yet, the CBAA modified the ruling of the LBAA by excluding from the real property tax deficiency
assessment the years 1990 to 1991, considering that:cralawlawlibrary

In the years 1990 and 1991, the exemption granted to MERALCO under its franchise which incidentally
expired upon the efectivity of the Local Government Code of 1991 was very much in efect and the
decision rendered by the Central Board of Assessment Appeals (CBAA) classifying its poles, wires,
insulators, transformers and electric meters as personal property was still controlling as the law of the
case. So, from 1990 to 1991, it would be inappropriate and illegal to make the necessary assessment on
those properties, much more to impose any penalty for nonpayment of such.

But, assessments made beginning 1992 until 1997 by the City Government of Lucena is legal, both
procedurally and substantially. When R.A. 7160, which incorporated amended provisions of the Real
Property Tax Code, took efect on January 1, 1992, as already discussed, the nature of the aforecited
questioned properties considered formerly as personal metamorphosed to machineries and the
exemption being invoked by [MERALCO] was automatically withdrawn pursuant to the letter and spirit of
the law. x x x.27chanrobleslaw

Resultantly, the decretal portion of said CBAA Decision reads:cralawlawlibrary

WHEREFORE, in view of the foregoing, the Decision appealed from is hereby modified. The City Assessor
of Lucena City is hereby directed to make a new assessment on the subject properties to retroact from
the year 1992 and the City Treasurer to collect the tax liabilities in accordance with the provisions of the
cited Section 222 of the Local Government Code. 28chanrobleslaw

The CBAA denied the Motion for Reconsideration of MERALCO in a Resolution 29 dated August 16, 2001.

Disgruntled, MERALCO sought recourse from the Court of Appeals by filing a Petition for Review under
Rule 43 of the Rules of Court, which was docketed as CA-G.R. SP No. 67027.

The Court of Appeals rendered a Decision on May 13, 2004 rejecting all arguments profered by
MERALCO. The appellate court found no deficiency in the Notice of Assessment issued by the City
Assessor of Lucena:cralawlawlibrary

It was not disputed that [MERALCO] failed to provide the [City Assessor and City Treasurer of Lucena]
with a sworn statement declaring the true value of each of the subject transformer and electric post,
transmission line, insulator and electric meter which should have been made the basis of the fair and
current market value of the aforesaid property and which would enable the assessor to identify the
same for assessment purposes. [MERALCO] merely claims that the assessment made by the [City
Assessor and City Treasurer of Lucena] was incorrect but did not even mention in their pleading the true
and correct assessment of the said properties. Absent any sworn statement given by [MERALCO], [the
City Assessor and City Treasurer of Lucena] were constrained to make an assessment based on the
materials within [their reach].30chanrobleslaw

The Court of Appeals further ruled that there was no more basis for the real property tax exemption of
MERALCO under the Local Government Code and that the withdrawal of said exemption did not violate
the non-impairment clause of the Constitution, thus:cralawlawlibrary

Although it could not be denied that [MERALCO] was previously granted a Certificate of Franchise by the
National Electrification Commission on October 28, 1993 x x x, such conferment does not automatically
include an exemption from the payment of realty tax, nor does it impliedly give the franchisee the right
to continue the privileges granted under its previous franchise considering that Sec. 534(f) of the Local
Government Code of 1991 expressly repealed those provisions which are inconsistent with the Code.

At the outset, the Supreme Court has held that "Section 193 of the LGC prescribes the general rule, viz.,
tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons are
withdrawn upon the efectivity of the LGC except with respect to those entities expressly enumerated. In
the same vein, We must hold that the express withdrawal upon efectivity of the LGC of all exemptions
except only as provided therein, can no longer be invoked by MERALCO to disclaim liability for the local
tax." (City Government of San Pablo, Laguna vs. Reyes, 305 SCRA 353, 362-363)

In fine, [MERALCO's] invocation of the non-impairment clause of the Constitution is accordingly

unavailing. The LGC was enacted in pursuance of the constitutional policy to ensure autonomy to local
governments and to enable them to attain fullest development as self-reliant communities. The power to
tax is primarily vested in Congress. However, in our jurisdiction, it may be exercised by local legislative
bodies, no longer merely by virtue of a valid delegation as before, but pursuant to [a] direct authority
conferred by Section 5, Article X of the Constitution. The important legal efect of Section 5 is that
henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be resolved in
favor of the municipal corporations. (Ibid. pp. 363-365) 31chanrobleslaw

MERALCO similarly failed to persuade the Court of Appeals that the transformers, transmission lines,
insulators, and electric meters mounted on the electric posts of MERALCO were not real properties. The
appellate court invoked the definition of "machinery" under Section 199(o) of the Local Government
Code and then wrote that:cralawlawlibrary

We firmly believe and so hold that the wires, insulators, transformers and electric meters mounted on
the poles of [MERALCO] may nevertheless be considered as improvements on the land, enhancing its
utility and rendering it useful in distributing electricity. The said properties are actually, directly and
exclusively used to meet the needs of [MERALCO] in the distribution of electricity.

In addition, "improvements on land are commonly taxed as realty even though for some purposes they
might be considered personalty. It is a familiar personalty phenomenon to see things classed as real
property for purposes of taxation which on general principle might be considered personal property."
(Caltex (Phil) Inc. vs. Central Board of Assessment Appeals, 114 SCRA 296, 301-302) 32chanrobleslaw
Lastly, the Court of Appeals agreed with the CBAA that the new assessment of the transformers, electric
posts, transmission lines, insulators, and electric meters of MERALCO shall retroact to 1992.

Hence, the Court of Appeals adjudged:cralawlawlibrary

WHEREFORE, premises considered, the assailed Decision [dated] May 3, 2001 and Resolution dated
August 16, 2001 are hereby AFFIRMED in toto and the present petition is hereby DENIED DUE COURSE
and accordingly DISMISSED for lack of merit.33
chanrobleslaw

In a Resolution dated November 18, 2004, the Court of Appeals denied the Motion for Reconsideration
of MERALCO.

MERALCO is presently before the Court via the instant Petition for Review on Certiorari grounded on the
following lone assignment of error:cralawlawlibrary

THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN AFFIRMING IN TOTO THE
DECISION OF THE CENTRAL BOARD OF ASSESSMENT APPEALS WHICH HELD THAT THE SUBJECT
PROPERTIES ARE REAL PROPERTIES SUBJECT TO REAL PROPERTY TAX; AND THAT ASSESSMENT ON THE
SUBJECT PROPERTIES SHOULD BE MADE TO TAKE EFFECT RETROACTIVELY FROM 1992 UNTIL 1997, WITH
PENALTIES; THE SAME BEING UNJUST, WHIMSICAL AND NOT IN ACCORD WITH THE LOCAL
GOVERNMENT CODE.34chanrobleslaw

MERALCO argues that its transformers, electric posts, transmission lines, insulators, and electric meters
are not subject to real property tax, given that: (1) the definition of "machinery" under Section 199(o) of
the Local Government Code, on which real property tax is imposed, must still be within the
contemplation of real or immovable property under Article 415 of the Civil Code because it is axiomatic
that a statute should be construed to harmonize with other laws on the same subject matter as to form a
complete, coherent, and intelligible system; (2) the Decision dated April 10, 1991 of the CBAA in CBAA
Case No. 248, which affirmed the Decision dated July 5, 1989 of the LBAA in LBAA-89-2, ruling that the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are movable
or personal properties, is conclusive and binding; and (3) the electric poles are not exclusively used to
meet the needs of MERALCO alone since these are also being utilized by other entities such as cable and
telephone companies.

MERALCO further asserts that even if it is assumed for the sake of argument that the transformers,
electric posts, transmission lines, insulators, and electric meters are real properties, the assessment of
said properties by the City Assessor in 1997 is a patent nullity. The collection letter dated October 16,
1997 of the City Treasurer of Lucena, Notice of Assessment dated October 20, 1997 of the City Assessor
of Lucena, the Property Record Form dated October 20, 1997, and Tax Declaration No. 019-6500 simply
state a lump sum market value for all the transformers, electric posts, transmission lines, insulators, and
electric meters covered and did not provide an inventory/list showing the actual number of said
properties, or a schedule of values presenting the fair market value of each property or type of property,
which would have enabled MERALCO to verify the correctness and reasonableness of the valuation of its
properties. MERALCO was not furnished at all with a copy of Tax Declaration No. 019-7394, and while it
received a copy of Tax Declaration No. 019-6500, said tax declaration did not contain the requisite
information regarding the date of operation of MERALCO and the original cost, depreciation, and market
value for each property covered. For the foregoing reasons, the assessment of the properties of
MERALCO in 1997 was arbitrary, whimsical, and without factual basis - in patent violation of the right to
due process of MERALCO. MERALCO additionally explains that it cannot be expected to make a
declaration of its transformers, electric posts, transmission lines, insulators, and electric meters, because
all the while, it was of the impression that the said properties were personal properties by virtue of the
Decision dated July 5, 1989 of the LBAA in LBAA-89-2 and the Decision dated April 10, 1991 of the CBAA
in CBAA Case No. 248.

Granting that the assessment of its transformers, electric posts, transmission lines, insulators, and
electric meters by the City Assessor of Lucena in 1997 is valid, MERALCO alternatively contends that: (1)
under Sections 22135 and 22236 of the Local Government Code, the assessment should take efect only on
January 1, 1998 and not retroact to 1992; (2) MERALCO should not be held liable for penalties and
interests since its nonpayment of real property tax on its properties was in good faith; and (3) if interest
may be legally imposed on MERALCO, it should only begin to run on the date it received the Notice of
Assessment on October 29, 1997 and not all the way back to 1992.

At the end of its Petition, MERALCO prays:cralawlawlibrary

WHEREFORE, it is respectfully prayed of this Honorable Court that the appealed Decision dated May 13,
2004 of the Court of Appeals, together with its Resolution dated November 18, 2004 be reversed and set
aside, and judgment be rendered x x x nullifying and cancel[l]ing the Notice of Assessment, dated
October 20, 1997, issued by respondent City Assessor, and the collection letter dated October 16, 1997
of respondent City Treasurer.

Petitioner also prays for such other relief as may be deemed just and equitable in the premises. 37
chanrobleslaw

The City Assessor and City Treasurer of Lucena counter that: (1) MERALCO was obliged to pay the real
property tax due, instead of posting a surety bond, while its appeal was pending, because Section 231 of
the Local Government Code provides that the appeal of an assessment shall not suspend the collection
of the real property taxes; (2) the cases cited by MERALCO can no longer be applied to the case at bar
since they had been decided when Presidential Decree No. 464, otherwise known as the Real Property
Tax Code, was still in efect; (3) under the now prevailing Local Government Code, which expressly
repealed the Real Property Tax Code, the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO fall within the new definition of "machineries," deemed as real properties
subject to real property tax; and (4) the Notice of Assessment dated October 20, 1997 covering the
transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO only
retroacts to 1992, which is less than 10 years prior to the date of initial assessment, so it is in compliance
with Section 222 of the Local Government Code, and since MERALCO has yet to pay the real property
taxes due on said assessment, then it is just right and appropriate that it also be held liable to pay for
penalties and interests from 1992 to present time. Ultimately, the City Assessor and City Treasurer of
Lucena seek judgment denying the instant Petition and ordering MERALCO to pay the real property taxes
due.

The Petition is partly meritorious.

The Court finds that the transformers, electric posts, transmission lines, insulators, and electric meters of
MERALCO are no longer exempted from real property tax and may qualify as "machinery" subject to real
property tax under the Local Government Code. Nevertheless, the Court declares null and void the
appraisal and assessment of said properties of MERALCO by the City Assessor in 1997 for failure to
comply with the requirements of the Local Government Code and, thus, violating the right of MERALCO
to due process.

By posting a surety bond before

filing its appeal of the assessment with
the LBAA, MERALCO substantially complied
with the requirement of payment under
protest in Section 252 of the Local
Government Code.

Section 252 of the Local Government Code mandates that "[n]o protest shall be entertained unless the
taxpayer first pays the tax." It is settled that the requirement of "payment under protest" is a
condition sine qua non before an appeal may be entertained.38 Section 231 of the same Code also
dictates that "[a]ppeal on assessments of real property x x x shall, in no case, suspend the collection of
the corresponding realty taxes on the property involved as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon the final outcome of the appeal." Clearly,
under the Local Government Code, even when the assessment of the real property is appealed, the real
property tax due on the basis thereof should be paid to and/or collected by the local government unit
concerned.

In the case at bar, the City Treasurer of Lucena, in his letter dated October 16, 1997, sought to collect
from MERALCO the amount of P17,925,l 17.34 as real property taxes on its machineries, plus penalties,
for the period of 1990 to 1997, based on Tax Declaration Nos. 019-6500 and 019-7394 issued by the City
Assessor of Lucena. MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 with the LBAA, but
instead of paying the real property taxes and penalties due, it posted a surety bond in the amount of PI
7,925,117.34.

By posting the surety bond, MERALCO may be considered to have substantially complied with Section
252 of the Local Government Code for the said bond already guarantees the payment to the Office of the
City Treasurer of Lucena of the total amount of real property taxes and penalties due on Tax Declaration
Nos. 019-6500 and 019-7394. This is not the first time that the Court allowed a surety bond as an
alternative to cash payment of the real property tax before protest/appeal as required by Section 252 of
the Local Government Code. In Camp John Hay Development Corporation v. Central Board of Assessment
Appeals39 the Court affirmed the ruling of the CBAA and the Court of Tax Appeals en bane applying the
"payment under protest" requirement in Section 252 of the Local Government Code and remanding the
case to the LBAA for "further proceedings subject to a full and up-to-date payment, either in cash or
surety, of realty tax on the subject properties x x x."

Accordingly, the LBAA herein correctly took cognizance of and gave due course to the appeal of Tax
Declaration Nos. 019-6500 and 019-7394 filed by MERALCO.

Beginning January 1, 1992,

MERALCO can no longer claim
exemption from real property tax of
its transformers, electric posts,
transmission lines, insulators, and
electric meters based on its
franchise.

MERALCO relies heavily on the Decision dated April 10, 1991 of the CBAA in CBAA Case No. 248, which
affirmed the Decision dated July 5, 1989 of the LBAA in LBAA-89-2. Said decisions of the CBAA and the
LBAA, in turn, cited Board of Assessment Appeals v. Manila Electric Co.,40 which was decided by the Court
way back in 1964 (1964 MERALCO case). The decisions in CBAA Case No. 248 and the 1964 MERALCO
case recognizing the exemption from real property tax of the transformers, electric posts, transmission
lines, insulators, and electric meters of MERALCO are no longer applicable because of subsequent
developments that changed the factual and legal milieu for MERALCO in the present case.

In the 1964 MERALCO case, the City Assessor of Quezon City considered the steel towers of MERALCO as
real property and required MERALCO to pay real property taxes for the said steel towers for the years
1952 to 1956. MERALCO was operating pursuant to the franchise granted under Ordinance No. 44 dated
March 24, 1903 of the Municipal Board of Manila, which it acquired from the original grantee, Charles
M. Swift. Under its franchise, MERALCO was expressly granted the following tax exemption
privilege:cralawlawlibrary

Par 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery and personal property as other persons
are or may be hereafter required by law to pay. x x x Said percentage shall be due and payable at the
times stated in paragraph nineteen of Part One hereof, x x x and shall be in lieu of all taxes and
assessments of whatsoever nature, and by whatsoever authority upon the privileges, earnings, income,
franchise, and poles, wires, transformers, and insulators of the grantee from which taxes and
assessments the grantee is hereby expressly exempted, x x x.41chanrobleslaw

Given the express exemption from taxes and assessments of the "poles, wires, transformers, and
insulators" of MERALCO in the aforequoted paragraph, the sole issue in the 1964 MERALCO case was
whether or not the steel towers of MERALCO qualified as "poles" which were exempted from real
property tax. The Court ruled in the affirmative, ratiocinating that:cralawlawlibrary

Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles, and
poles of the PLDT Co. which are made of two steel bars joined together by an interlacing metal rod. They
are called "poles" notwithstanding the fact that they are not made of wood. It must be noted from
paragraph 9, above quoted, that the concept of the "poles" for which exemption is granted, is not
determined by their place or location, nor by the character of the electric current it carries, nor the
material or form of which it is made, but the use to which they are dedicated. In accordance with the
definitions, a pole is not restricted to a long cylindrical piece of wood or metal, but includes "upright
standards to the top of which something is affixed or by which something is supported." As heretofore
described, respondent's steel supports consist of a framework of four steel bars or strips which are
bound by steel cross-arms atop of which are cross-arms supporting five high voltage transmission wires
(See Annex A) and their sole function is to support or carry such wires.

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

xxxx

It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for
which the franchise was granted. The poles as contemplated thereon, should be understood and taken
as a part of the electric power system of the respondent Meralco, for the conveyance of electric current
from the source thereof to its consumers, x x x. 42chanrobleslaw

Similarly, it was clear that under the 20-year franchise granted to MERALCO by the Municipal Board of
Lucena City through Resolution No. 2679 dated June 13, 1972, the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO were exempt from real property tax.
Paragraph 13 of Resolution No. 2679 is quoted in full below:cralawlawlibrary

13. The grantee shall be liable to pay the same taxes upon its real estate, building, machinery, and
personal property (not including poles, wires, transformers, and insulators) as other persons are now or
may hereafter be required by law to pay. In consideration of the franchise and rights hereby granted, the
grantee shall pay into the City Treasury of Lucena a tax equal to FIVE (5%) PER CENTUM of the gross
earnings received from electric current sold or supplied under this franchise. Said tax shall be due and
payable quarterly and shall be in lieu of any and all taxes of any kind, nature or description levied,
established, or collected by any authority whatsoever, municipal, provincial, or national, now or in the
future, on its poles, wires, insulators, switches, transformers and structures, installations, conductors,
and accessories, placed in and over and under all the private and/or public property, including public
streets and highways, provincial roads, bridges, and public squares, and on its franchise rights, privileges,
receipts, revenues and profits, from which taxes the grantee is hereby expressly exempted. (Emphases
supplied.)chanrobleslaw

In CBAA Case No. 248 (and LBAA-89-2), the City Assessor assessed the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO located in Lucena City beginning 1985
under Tax Declaration No. 019-6500. The CBAA in its Decision dated April 10, 1991 in CBAA Case No. 248
sustained the exemption of the said properties of MERALCO from real property tax on the basis of
paragraph 13 of Resolution No. 2679 and the 1964 MERALCO case.

Just when the franchise of MERALCO in Lucena City was about to expire, the Local Government Code
took efect on January 1, 1992, Sections 193 and 234 of which provide:cralawlawlibrary

Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and nonprofit hospitals and educational institutions, are
hereby withdrawn upon the efectivity of this Code.

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

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

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit
or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used
for religious, charitable or educational purposes;ChanRoblesVirtualawlibrary

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

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or
presently enjoyed by, all persons, whether natural or juridical, including all government-owned or
controlled corporations are hereby withdrawn upon the efectivity of this Code.chanrobleslaw

The Local Government Code, in addition, contains a general repealing clause under Section 534(f) which
states that "[a]ll general and special laws, acts, city charters, decrees, executive orders, proclamations
and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions
of this Code are hereby repealed or modified accordingly."

Taking into account the above-mentioned provisions, the evident intent of the Local Government Code is
to withdraw/repeal all exemptions from local taxes, unless otherwise provided by the Code. The limited
and restrictive nature of the tax exemption privileges under the Local Government Code is consistent
with the State policy to ensure autonomy of local governments and the objective of the Local
Government Code to grant genuine and meaningful autonomy to enable local government units to attain
their fullest development as self-reliant communities and make them efective partners in the
attainment of national goals. The obvious intention of the law is to broaden the tax base of local
government units to assure them of substantial sources of revenue. 43

Section 234 of the Local Government Code particularly identifies the exemptions from payment of real
property tax, based on the ownership, character, and use of the property, viz.:cralawlawlibrary

(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real
properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi)
registered cooperatives.

(b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i)
charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents
appurtenant thereto, mosques, and (iii) nonprofit or religious cemeteries.

(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive
use to which they are devoted are: (i) all lands, buildings and improvements which are actually directly
and exclusively used for religious, charitable or educational purposes; (ii) all machineries and equipment
actually, directly and exclusively used by local water districts or by government-owned or controlled
corporations engaged in the supply and distribution of water and/or generation and transmission of
electric power; and (iii) all machinery and equipment used for pollution control and environmental
protection.

To help provide a healthy environment in the midst of the modernization of the country, all machinery
and equipment for pollution control and environmental protection may not be taxed by local
governments.

2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical persons
including government-owned or controlled corporations are withdrawn upon the efectivity of the
Code.44chanrobleslaw

The last paragraph of Section 234 had unequivocally withdrawn, upon the efectivity of the Local
Government Code, exemptions from payment of real property taxes granted to natural or juridical
persons, including government-owned or controlled corporations, except as provided in the same
section.

MERALCO, a private corporation engaged in electric distribution, and its transformers, electric posts,
transmission lines, insulators, and electric meters used commercially do not qualify under any of the
ownership, character, and usage exemptions enumerated in Section 234 of the Local Government Code.
It is a basic precept of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio
alterius.45 Not being among the recognized exemptions from real property tax in Section 234 of the Local
Government Code, then the exemption of the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO from real property tax granted under its franchise was among the
exemptions withdrawn upon the efectivity of the Local Government Code on January 1, 1998.
It is worthy to note that the subsequent franchises for operation granted to MERALCO, i.e., under the
Certificate of Franchise dated October 28, 1993 issued by the National Electrification Commission and
Republic Act No. 9209 enacted on June 9, 2003 by Congress, are completely silent on the matter of
exemption from real property tax of MERALCO or any of its properties.

It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption
must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption
from a common burden. Any doubt whether a tax exemption exists is resolved against the
taxpayer.46MERALCO has failed to present herein any express grant of exemption from real property tax
of its transformers, electric posts, transmission lines, insulators, and electric meters that is valid and
binding even under the Local Government Code.

The transformers, electric posts,

transmission lines, insulators, and electric
meters of MERALCO may qualify as
"machinery" under the Local Government
Code subject to real property tax.

Through the years, the relevant laws have consistently considered "machinery" as real property subject
to real property tax. It is the definition of "machinery" that has been changing and expanding, as the
following table will show:chanRoblesvirtualLawlibrary

Real Property
Incidence of Real Property Tax Definition of Machinery47
Tax Law

The Assessment Section 2. Incidence of real property tax.- Section 3. Property exempt from tax. -
Law Except in chartered cities, there shall be The exemptions shall be as follows:
(Commonwealth levied, assessed, and collected, an annual xxxx
Act No. 470) ad valorem tax on real property, including (f) Machinery, which term shall embrace
land, buildings, machinery, and other machines, mechanical contrivances,
Efectivity: January improvements not hereinafter specifically instruments, appliances, and apparatus
1, 1940 exempted. attached to the real estate, used for
industrial agricultural or manufacturing
purposes, during the first five years of the
operation of the machinery.

Real Property Section 38. Incidence of Real Property
Tax Code Tax. - There shall be levied, assessed and
collected in all provinces, cities and
Efectivity: June 1, municipalities an annual ad valorem tax
1974 on real property, such as land, buildings,
machinery and other improvements
affixed or attached to real property not
hereinafter specifically exempted.
Section 3. Definition of Terms. -
When used in this Code -
xxxx
(m) Machinery - shall embrace machines,
mechanical contrivances, instruments,
appliances and apparatus attached to the
real estate. It includes the physical

Real Property Section 38. Incidence of Real Property
Tax Code, as Tax. - There shall be levied, assessed and
amended by collected in all provinces, cities and
Presidential municipalities an annual ad valorem tax
Decree No. 1383 on real property, such as land, buildings,
machinery and other improvements
Efectivity: May 25, affixed or attached to real property not
1978 hereinafter specifically exempted.
Local Section 232. Power to Levy Real Property
Government Tax. — A province or city or a
Code municipality within the Metropolitan
Manila Area may levy an annual ad
Efectivity: valorem tax on real property such as
January 1, 1992 land, building, machinery, and other
improvement not hereinafter specifically
exempted.
facilities available for production, as well
as the installations and appurtenant
service facilities, together with all other
equipment designed for or essential to its
manufacturing, industrial or agricultural
purposes.
Section 3. Definition of Terms.
When used in this Code -
xxxx
(m) Machinery - shall embrace machines,
equipment, mechanical contrivances,
instruments, appliances and apparatus
attached to the real estate. It shall
include the physical facilities available for
production, as well as the installations
and appurtenant service facilities,
together with all those not permanently
attached to the real estate but are
actually, directly and essentially used to
meet the needs of the particular industry,
business, or works, which by their very
nature and purpose are designed for, or
essential to manufacturing, commercial,
mining, industrial or agricultural
purposes.
Section 199. Definitions. - When used in
this Title:
xxxx
(o) "Machinery" embraces machines,
equipment, mechanical contrivances,
instruments, appliances or
apparatuswhich may or may not be
attached, permanently or temporarily, to
the real property. It includes the physical
facilities for production, the installations
and appurtenant service facilities, those
which are mobile, self-powered or self-
propelled, and those not permanently
attached to the real property which are
actually, directly, and exclusively used to
 meet the needs of the particular industry,
business or activity and which by their
very nature and purpose are designed for,
or necessary to its manufacturing,
mining,logging, commercial, industrial or
agricultural purposes[.]

MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts,
transmission lines, insulators, and electric meters constitute the physical facilities through which
MERALCO delivers electricity to its consumers. Each may be considered as one or more of the following:
a "machine,"48 "equipment,"49 "contrivance,"50 "instrument,"51 "appliance,"52 "apparatus,"53 or
"installation."54

The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be deemed
real property subject to real property tax, need no longer be annexed to the land or building as these
"may or may not be attached, permanently or temporarily to the real property," and in fact, such
machinery may even be "mobile."55 The same provision though requires that to be machinery subject to
real property tax, the physical facilities for production, installations, and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, or not permanently attached to the real
property (a) must be actually, directly, and exclusively used to meet the needs of the particular industry,
business, or activity; and (2) by their very nature and purpose, are designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or agricultural purposes. Thus, Article 290(o) of
the Rules and Regulations Implementing the Local Government Code of 1991 recognizes the following
exemption:cralawlawlibrary

Machinery which are of general purpose use including but not limited to office equipment, typewriters,
telephone equipment, breakable or easily damaged containers (glass or cartons), microcomputers,
facsimile machines, telex machines, cash dispensers, furnitures and fixtures, freezers, refrigerators,
display cases or racks, fruit juice or beverage automatic dispensing machines which are not directly and
exclusively used to meet the needs of a particular industry, business or activity shall not be considered
within the definition of machinery under this Rule. (Emphasis supplied.)chanrobleslaw

The 1964 MERALCO case was decided when The Assessment Law was still in efect and Section 3(f) of
said law still required that the machinery be attached to the real property. Moreover, as the Court
pointed out earlier, the ruling in the 1964 MERALCO case - that the electric poles (including the steel
towers) of MERALCO are not subject to real property tax - was primarily based on the express exemption
granted to MERALCO under its previous franchise. The reference in said case to the Civil Code definition
of real property was only an alternative argument:cralawlawlibrary

Granting for the purpose of argument that the steel supports or towers in question are not embraced
within the term poles, the logical question posited is whether they constitute real properties, so that
they can be subject to a real property tax. The tax law does not provide for a definition of real property;
but Article 415 of the Civil Code does, by stating the following are immovable property:cralawlawlibrary
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;ChanRoblesVirtualawlibrary

xxxx

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

xxxx

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

xxxx

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1,
because they do not constitute buildings or constructions adhered to the soil. They are not constructions
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are
removable and merely attached to a square metal frame by means of bolts, which when unscrewed
could easily be dismantled and moved from place to place. They can not be included under paragraph 3,
as they are not attached to an immovable in a fixed manner, and they can be separated without breaking
the material or causing deterioration upon the object to which they are attached. Each of these steel
towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be
disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or
supports do not also fall under paragraph 5, for they are not machineries or receptacles, instruments or
implements, and even if they were, they are not intended for industry or works on the land. Petitioner is
not engaged in an industry or works on the land in which the steel supports or towers are
constructed.56(Emphases supplied.)chanrobleslaw

The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore under
the Local Government Code.

While the Local Government Code still does not provide for a specific definition of "real property,"
Sections 199(o) and 232 of the said Code, respectively, gives an extensive definition of what constitutes
"machinery" and unequivocally subjects such machinery to real property tax. The Court reiterates that
the machinery subject to real property tax under the Local Government Code "may or may not be
attached, permanently or temporarily to the real property;" and the physical facilities for production,
installations, and appurtenant service facilities, those which are mobile, self-powered or self-propelled,
or are not permanently attached must (a) be actually, directly, and exclusively used to meet the needs of
the particular industry, business, or activity; and (2) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.

Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and, buildings,
roads and constructions of all kinds adhered to the soil." The land, buildings, and roads are immovables
by nature "which cannot be moved from place to place," whereas the constructions adhered to the soil
are immovables by incorporation "which are essentially movables, but are attached to an immovable in
such manner as to be an integral part thereof." 57 Article 415, paragraph (3) of the Civil Code, referring to
"[ejverything attached to an immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object," are likewise immovables by
incorporation. In contrast, the Local Government Code considers as real property machinery which "may
or may not be attached, permanently or temporarily to the real property," and even those which are
"mobile."

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[machinery,
receptacles, instruments or implements intended by the owner of the tenement for an industry or works
which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of
the said industry or works." The Civil Code, however, does not define "machinery."

The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or
"those which are essentially movables, but by the purpose for which they have been placed in an
immovable, partake of the nature of the latter because of the added utility derived therefrom." 58 These
properties, including machinery, become immobilized if the following requisites concur: (a) they are
placed in the tenement by the owner of such tenement; (b) they are destined for use in the industry or
work in the tenement; and (c) they tend to directly meet the needs of said industry or works. 59 The first
two requisites are not found anywhere in the Local Government Code.

MERALCO insists on harmonizing the aforementioned provisions of the Civil Code and the Local
Government Code. The Court disagrees, however, for this would necessarily mean imposing additional
requirements for classifying machinery as real property for real property tax purposes not provided for,
or even in direct conflict with, the provisions of the Local Government Code.

As between the Civil Code, a general law governing property and property relations, and the Local
Government Code, a special law granting local government units the power to impose real property tax,
then the latter shall prevail. As the Court pronounced in Disomangcop v. The Secretary of the
Department of Public Works and Highways Simeon A. Datumanong 60:cralawlawlibrary

It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a
general one. Lex specialis derogant generali. As this Court expressed in the case of Leveriza v.
Intermediate Appellate Court, "another basic principle of statutory construction mandates that general
legislation must give way to special legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable, that specific statute prevails over a
general statute and that where two statutes are of equal theoretical application to a particular case, the
one designed therefor specially should prevail." (Citations omitted.)chanrobleslaw

The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco

Corporation61 that:cralawlawlibrary

A general law and a special law on the same subject are statutes in pah materia and should, accordingly,
be read together and harmonized, if possible, with a view to giving efect to both. The rule is that where
there are two acts, one of which is special and particular and the other general which, if standing alone,
would include the same matter and thus conflict with the special act, the special law must prevail since it
evinces the legislative intent more clearly than that of a general statute and must not be taken as
intended to afect the more particular and specific provisions of the earlier act, unless it is absolutely
necessary so to construe it in order to give its words any meaning at all.

The circumstance that the special law is passed before or after the general act does not change the
principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the
prior general act; and where the general act is later, the special statute will be construed as remaining an
exception to its terms, unless repealed expressly or by necessary implication. (Citations
omitted.)chanrobleslaw

Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, 62 the Court
acknowledged that "[i]t is a familiar phenomenon to see things classed as real property for purposes of
taxation which on general principle might be considered personal property[.]"

Therefore, for determining whether machinery is real property subject to real property tax, the
definition and requirements under the Local Government Code are controlling.

MERALCO maintains that its electric posts are not machinery subject to real property tax because said
posts are not being exclusively used by MERALCO; these are also being utilized by cable and telephone
companies. This, however, is a factual issue which the Court cannot take cognizance of in the Petition at
bar as it is not a trier of facts. Whether or not the electric posts of MERALCO are actually being used by
other companies or industries is best left to the determination of the City Assessor or his deputy, who
has been granted the authority to take evidence under Article 304 of the Rules and Regulations
Implementing the Local Government Code of 1991.

Nevertheless, the appraisal and

assessment of the transformers, electric
posts, transmission lines, insulators, and
electric meters of MERALCO as machinery
under Tax Declaration Nos. 019-6500 and
019-7394 were not in accordance with the
Local Government Code and in violation of
the right to due process of MERALCO and,
therefore, null and void.

The Local Government Code defines "appraisal" as the "act or process of determining the value of
property as of a specific date for a specific purpose." "Assessment" is "the act or process of determining
the value of a property, or proportion thereof subject to tax, including the discovery, listing,
classification, and appraisal of the properties[.]" 63 When it comes to machinery, its appraisal and
assessment are particularly governed by Sections 224 and 225 of the Local Government Code, which
read:

Section 224. Appraisal and Assessment of Machinery. - (a) The fair market value of a brand-new
machinery shall be the acquisition cost. In all other cases, the fair market value shall be determined by
dividing the remaining economic life of the machinery by its estimated economic life and multiplied by
the replacement or reproduction cost.

(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and
installation charges at the present site. The cost in foreign currency of imported machinery shall be
converted to peso cost on the basis of foreign currency exchange rates as fixed by the Central Bank.

Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a depreciation
allowance shall be made for machinery at a rate not exceeding five percent (5%) of its original cost or its
replacement or reproduction cost, as the case may be, for each year of use: Provided, however, That the
remaining value for all kinds of machinery shall be fixed at not less than twenty percent (20%) of such
original, replacement, or reproduction cost for so long as the machinery is useful and in
operation.chanrobleslaw

It is apparent from these two provisions that every machinery must be individually appraised and
assessed depending on its acquisition cost, remaining economic life, estimated economic life,
replacement or reproduction cost, and depreciation.

Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991 expressly
authorizes the local assessor or his deputy to receive evidence for the proper appraisal and assessment
of the real property:cralawlawlibrary

Article 304. Authority of Local Assessors to Take Evidence. - For the purpose of obtaining information on
which to base the market value of any real property, the assessor of the province, city, or municipality or
his deputy may summon the owners of the properties to be afected or persons having legal interest
therein and witnesses, administer oaths, and take deposition concerning the property, its ownership,
amount, nature, and value.
chanrobleslaw

The Local Government Code further mandates that the taxpayer be given a notice of the assessment of
real property in the following manner:cralawlawlibrary

Section 223. Notification of New or Revised Assessment. - When real property is assessed for the first
time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor
shall within thirty (30) days give written notice of such new or revised assessment to the person in
whose name the property is declared. The notice may be delivered personally or by registered mail or
through the assistance of the punong barangay to the last known address of the person to
served.chanrobleslaw

A notice of assessment, which stands as the first instance the taxpayer is officially made aware of the
pending tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the
tax.64 In Manila Electric Company v. Barlis,65 the Court described the contents of a valid notice of
assessment of real property and diferentiated the same from a notice of collection:cralawlawlibrary
A notice of assessment as provided for in the Real Property Tax Code should efectively inform the
taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery,
listing, classification, and appraisal of properties. The September 3, 1986 and October 31, 1989 notices
do not contain the essential information that a notice of assessment must specify, namely, the value of a
specific property or proportion thereof which is being taxed, nor does it state the discovery, listing,
classification and appraisal of the property subject to taxation. In fact, the tenor of the notices bespeaks
an intention to collect unpaid taxes, thus the reminder to the taxpayer that the failure to pay the taxes
shall authorize the government to auction of the properties subject to taxes x x x.chanrobleslaw

Although the ruling quoted above was rendered under the Real Property Tax Code, the requirement of a
notice of assessment has not changed under the Local Government Code.

A perusal of the documents received by MERALCO on October 29, 1997 reveals that none of them
constitutes a valid notice of assessment of the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO.

The letter dated October 16, 1997 of the City Treasurer of Lucena (which interestingly precedes the
purported Notice of Assessment dated October 20, 1997 of the City Assessor of Lucena) is a notice of
collection, ending with the request for MERALCO to settle the payable amount soon in order to avoid
accumulation of penalties. It only presented in table form the tax declarations covering the machinery,
assessed values in the tax declarations in lump sums for all the machinery, the periods covered, and the
taxes and penalties due again in lump sums for all the machinery.

The Notice of Assessment dated October 20, 1997 issued by the City Assessor gave a summary of the
new/revised assessment of the "machinery" located in "Quezon Avenue Ext., Brgy. Gulang-Gulang,
Lucena City," covered by Tax Declaration No. 019-7394, with total market value of P98,173,200.00 and
total assessed value of P78,538,560.00. The Property Record Form basically contained the same
information. Without specific description or identification of the machinery covered by said tax
declaration, said Notice of Assessment and Property Record Form give the false impression that there is
only one piece of machinery covered.

In Tax Declaration No. 019-6500, the City Assessor reported its findings under "Building and
Improvements" and not "Machinery." Said tax declaration covered "capital investment-commercial,"
specifically: (a) Transformer and Electric Post; (b) Transmission Line, (c) Insulator, and (d) Electric Meter,
with a total market value of P81,811,000.00, assessment level of 80%, and assessed value of
£65,448,800.00. Conspicuously, the table for "Machinery" - requiring the description, date of operation,
replacement cost, depreciation, and market value of the machinery - is totally blank.

MERALCO avers, and the City Assessor and the City Treasurer of Lucena do not refute at all, that
MERALCO has not been furnished the Owner's Copy of Tax Declaration No. 019-7394, in which the total
market value of the machinery of MERALCO was increased by PI6,632,200.00, compared to that in Tax
Declaration No. 019-6500.

The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack of a
valid appraisal and assessment conducted by the City Assessor of Lucena in the first place. It appears
that the City Assessor of Lucena simply lumped together all the transformers, electric posts, transmission
lines, insulators, and electric meters of MERALCO located in Lucena City under Tax Declaration Nos. 019-
6500 and 019-7394, contrary to the specificity demanded under Sections 224 and 225 of the Local
Government Code for appraisal and assessment of machinery. The City Assessor and the City Treasurer
of Lucena did not even provide the most basic information such as the number of transformers, electric
posts, insulators, and electric meters or the length of the transmission lines appraised and assessed
under Tax Declaration Nos. 019-6500 and 019-7394. There is utter lack of factual basis for the
assessment of the transformers, electric posts, transmission lines, insulators, and electric meters of
MERALCO.

The Court of Appeals laid the blame on MERALCO for the lack of information regarding its transformers,
electric posts, transmission lines, insulators, and electric meters for appraisal and assessment purposes
because MERALCO failed to file a sworn declaration of said properties as required by Section 202 of the
Local Government Code. As MERALCO explained, it cannot be expected to file such a declaration when
all the while it believed that said properties were personal or movable properties not subject to real
property tax. More importantly, Section 204 of the Local Government Code exactly covers such a
situation, thus:

Section 204. Declaration of Real Property by the Assessor. -When any person, natural or juridical, by
whom real property is required to be declared under Section 202 hereof, refuses or fails for any reason
to make such declaration within the time prescribed, the provincial, city or municipal assessor shall
himself declare the property in the name of the defaulting owner, if known, or against an unknown
owner, as the case may be, and shall assess the property for taxation in accordance with the provision of
this Title. No oath shall be required of a declaration thus made by the provincial, city or municipal
assessor.chanrobleslaw

Note that the only diference between the declarations of property made by the taxpayer, on one hand,
and the provincial/city/municipal assessor, on the other, is that the former must be made under oath.
After making the declaration of the property himself for the owner, the provincial/city/municipal
assessor is still required to assess the property for taxation in accordance with the provisions of the Local
Government Code.

It is true that tax assessments by tax examiners are presumed correct and made in good faith, with the
taxpayer having the burden of proving otherwise. 66 In this case, MERALCO was able to overcome the
presumption because it has clearly shown that the assessment of its properties by the City Assessor was
baselessly and arbitrarily done, without regard for the requirements of the Local Government Code.

The exercise of the power of taxation constitutes a deprivation of property under the due process clause,
and the taxpayer's right to due process is violated when arbitrary or oppressive methods are used in
assessing and collecting taxes. 67 The Court applies by analogy its pronouncements in Commissioner of
Internal Revenue v. United Salvage and Towage (Phils.), Inc.,68 concerning an assessment that did not
comply with the requirements of the National Internal Revenue Code:cralawlawlibrary
On the strength of the foregoing observations, we ought to reiterate our earlier teachings that "in
balancing the scales between the power of the State to tax and its inherent right to prosecute perceived
transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and
the equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizen's
right is amply protected by the Bill of Rights under the Constitution." Thus, while "taxes are the lifeblood
of the government," the power to tax has its limits, in spite of all its plenitude. Even as we concede the
inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be
exercised reasonably and in accordance with the prescribed procedure. (Citations
omitted.)chanrobleslaw

The appraisal and assessment of the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO under Tax Declaration Nos. 019-6500 and 019-7394, not being in
compliance with the Local Government Code, are attempts at deprivation of property without due
process of law and, therefore, null and void.

WHEREFORE, premises considered, the Court PARTLY GRANTS the instant Petition and AFFIRMS with
MODIFICATION the Decision dated May 13, 2004 of the Court of Appeals in CA-G.R. SP No. 67027,
affirming in toto the Decision dated May 3, 2001 of the Central Board of Assessment Appeals in CBAA
Case No. L-20-98. The Court DECLARES that the transformers, electric posts, transmission lines,
insulators, and electric meters of Manila Electric Company are NOT EXEMPTED from real property tax
under the Local Government Code. However, the Court also DECLARES the appraisal and assessment of
the said properties under Tax Declaration Nos. 019-6500 and 019-7394 as NULL and VOID for not
complying with the requirements of the Local Government Code and violating the right to due process of
Manila Electric Company, and ORDERS the CANCELLATION of the collection letter dated October 16,
1997 of the City Treasurer of Lucena and the Notice of Assessment dated October 20, 1997 of the City
Assessor of Lucena, but WITHOUT PREJUDICE to the conduct of a new appraisal and assessment of the
same properties by the City Assessor of Lucena in accord with the provisions of the Local Government
Code and guidelines issued by the Bureau of Local Government Financing.

SO ORDERED.chanroblesvirtuallawlibrary

Sereno, CJ., (Chairperson), Bersamin, Perez, and Perlas-Bernabe, JJ., concur.

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

DAVAO SAW MILL CO., INC., plaintif-appellant,

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

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

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

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

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

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

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

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

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

xxx xxx xxx

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or
land for use in connection with any industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no
doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from
the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest
before or at the time of the sale of this property. It must further be pointed out that while not
conclusive, the characterization of the property as chattels by the appellant is indicative of intention and
impresses upon the property the character determined by the parties. In this connection the decision of
this court in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter
dicta or not, furnishes the key to such a situation.

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

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

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

xxx xxx xxx

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

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

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

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

LEON SIBAL , plaintif-appellant,

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

J. E. Blanco for appellant.

Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of
December 1924. The facts are about as conflicting as it is possible for facts to be, in the trial causes.

As a first cause of action the plaintif alleged that the defendant Vitaliano Mamawal, deputy sherif of
the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga,
attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintif and his
tenants on seven parcels of land described in the complaint in the third paragraph of the first cause of
action; that within one year from the date of the attachment and sale the plaintif ofered to redeem
said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by
the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the
purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to
return the sugar cane to the plaintif.

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

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

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

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

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

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

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

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

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

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing the
evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against
the plaintif and in favor of the defendants —

(1) Holding that the sugar cane in question was personal property and, as such, was not subject to
redemption;

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

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

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

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

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

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

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

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

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

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

It appears from the record:

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

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

Parcel
 1 ..................................................................... P1.00

2 ..................................................................... 2,000.00

3 ..................................................................... 120.93

4 ..................................................................... 1,000.00

5 ..................................................................... 1.00

6 ..................................................................... 1.00

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

8 ..................................................................... 1,000.00
==========

4,273.93

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

The record further shows:

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

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

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

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

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

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

The foregoing statement of facts shows:

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

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

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

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

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

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

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

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

xxx xxx xxx

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

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

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

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

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

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

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:

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

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

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

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

It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been
modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage
Law. Said section 450 enumerates the property of a judgment debtor which may be subjected to
execution. The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other
property, both real and personal, * * * shall be liable to execution. Said section 450 and most of the
other sections of the Code of Civil Procedure relating to the execution of judgment were taken from the
Code of Civil Procedure of California. The Supreme Court of California, under section 688 of the Code of
Civil Procedure of that state (Pomeroy, p. 424) has held, without variation, that growing crops were
personal property and subject to execution.

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property.
Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the
provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel
mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an
agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop
while growing.

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

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

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

All the other assignments of error made by the appellant, as above stated, relate to questions of fact
only. Before entering upon a discussion of said assignments of error, we deem it opportune to take
special notice of the failure of the plaintif to appear at the trial during the presentation of evidence by
the defendant. His absence from the trial and his failure to cross-examine the defendant have lent
considerable weight to the evidence then presented for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the complaint,
the plaintif made a futile attempt to show that said two parcels belonged to Agustin Cuyugan and were
the identical parcel 2 which was excluded from the attachment and sale of real property of Sibal to
Valdez on June 25, 1924, as stated above. A comparison of the description of parcel 2 in the certificate of
sale by the sherif (Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show
that they are not the same.

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

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

2. La caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, Ilamado Alejandro Policarpio, en
una parcela de terreno de la pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Tarlac de
unas dos hectareas de superficie poco mas o menos." The description of parcel 2 given in the certificate
of sale (Exhibit A) is as follows:

2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados de superficie,
linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mañu
and others; al S. con Alejandro Dayrit, Isidro Santos and Melecio Mañu; y al O. con Alejandro Dayrit and
Paulino Vergara. Tax No. 2854, vador amillarado P4,200 pesos.

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

Parcels No. 4. — Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I. F. de 145,000

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

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

It appears, however, that the plaintif planted the palay in said parcels and harvested therefrom 190
cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half of the crop,
or 95 cavans. He should therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a
cavan, or the sum of P323, and not for the total of 190 cavans as held by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to
parcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and to parcel 4 in the
certificate of sale to Valdez of real property belonging to Sibal, executed by the sherif as above stated
(Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both
Macondray and Sibal in said parcel.

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

In this connection the following facts are worthy of mention:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said
execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid
P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the redemption of
said parcels of land. (See Exhibits B and C ).

Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the
sugar cane in question. (Exhibit A) The said personal property so attached, sold at public auction May 9
and 10, 1924. April 29, 1924, the real property was attached under the execution in favor of Valdez
(Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A).

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

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

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

The evidence also shows that the defendant was prevented by the acts of the plaintif from cultivating
about 10 hectares of the land involved in the litigation. He expected to have raised about 600 cavans of
palay, 300 cavans of which would have corresponded to him as owner. The lower court has wisely
reduced his share to 150 cavans only. At P4 a cavan, the palay would have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified. The plaintif and his sureties
Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly
and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as follows:

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;

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

600.00 for the palay which defendant could have raised.

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

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

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

G.R. No. 137705 August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,

vs.
PCI LEASING AND FINANCE, INC., respondent.

DECISION

PANGANIBAN, J.:

After agreeing to a contract stipulating that a real or immovable property be considered as personal or
movable, a party is estopped from subsequently claiming otherwise. Hence, such property is a proper
subject of a writ of replevin obtained by the other contracting party.

The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision 1 of the Court of
Appeals (CA)2in CA-GR SP No. 47332 and its February 26, 1999 Resolution 3 denying reconsideration. The
decretal portion of the CA Decision reads as follows:

"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated
March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction
issued on June 15, 1998 is hereby LIFTED."4

In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City (Branch 218) 6 issued a Writ
of Seizure.7 The March 18, 1998 Resolution 8 denied petitioners’ Motion for Special Protective Order,
praying that the deputy sherif be enjoined "from seizing immobilized or other real properties in
(petitioners’) factory in Cainta, Rizal and to return to their original place whatever immobilized
machineries or equipments he may have removed." 9

The Facts

The undisputed facts are summarized by the Court of Appeals as follows: 10

"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for short) filed with the
RTC-QC a complaint for [a] sum of money (Annex ‘E’), with an application for a writ of replevin docketed
as Civil Case No. Q-98-33500.

"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of
replevin (Annex ‘B’) directing its sherif to seize and deliver the machineries and equipment to PCI
Leasing after 5 days and upon the payment of the necessary expenses.

"On March 24, 1998, in implementation of said writ, the sherif proceeded to petitioner’s factory, seized
one machinery with [the] word that he [would] return for the other machineries.

"On March 25, 1998, petitioners filed a motion for special protective order (Annex ‘C’), invoking the
power of the court to control the conduct of its officers and amend and control its processes, praying for
a directive for the sherif to defer enforcement of the writ of replevin.

"This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the properties [were] still
personal and therefore still subject to seizure and a writ of replevin.

"In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined
in Article 415 of the Civil Code, the parties’ agreement to the contrary notwithstanding. They argued that
to give efect to the agreement would be prejudicial to innocent third parties. They further stated that
PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which
the alleged agreement [were] embodied [were] totally sham and farcical.

"On April 6, 1998, the sherif again sought to enforce the writ of seizure and take possession of the
remaining properties. He was able to take two more, but was prevented by the workers from taking the
rest.

"On April 7, 1998, they went to [the CA] via an original action for certiorari."

Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court held that the subject machines were personal
property, and that they had only been leased, not owned, by petitioners. It also ruled that the "words of
the contract are clear and leave no doubt upon the true intention of the contracting parties." Observing
that Petitioner Goquiolay was an experienced businessman who was "not unfamiliar with the ways of
the trade," it ruled that he "should have realized the import of the document he signed." The CA further
held:

"Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the
case below, since the merits of the whole matter are laid down before us via a petition whose sole
purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC] in issuing
the assailed Order and Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being enforced by one, and [its]
validity is attacked by the other – a matter x x x which respondent court is in the best position to
determine."

Hence, this Petition.11

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

"A. Whether or not the machineries purchased and imported by SERG’S became real property by virtue
of immobilization.

B. Whether or not the contract between the parties is a loan or a lease. "12

In the main, the Court will resolve whether the said machines are personal, not immovable, property
which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will also address
briefly the procedural points raised by respondent.

The Court’s Ruling

The Petition is not meritorious.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether it was being filed under Rule
45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously impleaded Judge
Hilario Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds support in the very
title of the Petition, which is "Petition for Review on Certiorari." 13

While Judge Laqui should not have been impleaded as a respondent, 14 substantial justice requires that
such lapse by itself should not warrant the dismissal of the present Petition. In this light, the Court
deems it proper to remove, motu proprio, the name of Judge Laqui from the caption of the present case.

Main Issue: Nature of the Subject Machinery

Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ
issued by the RTC, because they were in fact real property. Serious policy considerations, they argue,
militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal
property only.15Section 3 thereof reads:

"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order
and the corresponding writ of replevin describing the personal property alleged to be wrongfully
detained and requiring the sherif forthwith to take such property into his custody."

On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:

"ART. 415. The following are immovable property:

xxx xxx xxx

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

xxx xxx x x x"

In the present case, the machines that were the subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence, although each of them was movable or personal
property on its own, all of them have become "immobilized by destination because they are essential
and principal elements in the industry." 16 In that sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code. 17

Be that as it may, we disagree with the submission of the petitioners that the said machines are not
proper subjects of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be considered as
personal.18After agreeing to such stipulation, they are consequently estopped from claiming otherwise.
Under the principle of estoppel, a party to a contract is ordinarily precluded from denying the truth of
any material fact found therein.

Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat a house as a
personal property because it had been made the subject of a chattel mortgage. The Court ruled:

"x x x. Although there is no specific statement referring to the subject house as personal property, yet by
ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming otherwise."

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills 20 also held
that the machinery used in a factory and essential to the industry, as in the present case, was a proper
subject of a writ of replevin because it was treated as personal property in a contract. Pertinent portions
of the Court’s ruling are reproduced hereunder:
"x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be
considered as personal property for purposes of executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third party will be prejudiced thereby, there is
absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel mortgage."

In the present case, the Lease Agreement clearly provides that the machines in question are to be
considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows: 21

"12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building thereon, or attached in any
manner to what is permanent."

Clearly then, petitioners are estopped from denying the characterization of the subject machines as
personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed personal
property pursuant to the Lease Agreement – is good only insofar as the contracting parties are
concerned.22 Hence, while the parties are bound by the Agreement, third persons acting in good faith are
not afected by its stipulation characterizing the subject machinery as personal. 23 In any event, there is no
showing that any specific third party would be adversely afected.

Validity of the Lease Agreement

In their Memorandum, petitioners contend that the Agreement is a loan and not a lease. 24 Submitting
documents supposedly showing that they own the subject machines, petitioners also argue in their
Petition that the Agreement sufers from "intrinsic ambiguity which places in serious doubt the intention
of the parties and the validity of the lease agreement itself." 25 In their Reply to respondent’s Comment,
they further allege that the Agreement is invalid. 26

These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the
civil action pending before the RTC. A resolution of these questions, therefore, is efectively a resolution
of the merits of the case. Hence, they should be threshed out in the trial, not in the proceedings
involving the issuance of the Writ of Seizure.

Indeed, in La Tondeña Distillers v. CA,27 the Court explained that the policy under Rule 60 was that
questions involving title to the subject property – questions which petitioners are now raising -- should
be determined in the trial. In that case, the Court noted that the remedy of defendants under Rule 60
was either to post a counter-bond or to question the sufficiency of the plaintif’s bond. They were not
allowed, however, to invoke the title to the subject property. The Court ruled:

"In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ
of seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied upon
therefor, as in proceedings on preliminary attachment or injunction, and thereby put at issue the matter
of the title or right of possession over the specific chattel being replevied, the policy apparently being
that said matter should be ventilated and determined only at the trial on the merits." 28
Besides, these questions require a determination of facts and a presentation of evidence, both of which
have no place in a petition for certiorari in the CA under Rule 65 or in a petition for review in this Court
under Rule 45.29

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on
record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in the RTC
proceedings, which had ironically been instituted by respondent. Accordingly, it must be presumed valid
and binding as the law between the parties.

Makati Leasing and Finance Corporation30 is also instructive on this point. In that case, the Deed of
Chattel Mortgage, which characterized the subject machinery as personal property, was also assailed
because respondent had allegedly been required "to sign a printed form of chattel mortgage which was
in a blank form at the time of signing." The Court rejected the argument and relied on the Deed, ruling as
follows:

"x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract
void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to
Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that
the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x"

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that "if the Court allows these machineries to be seized, then its workers would be
out of work and thrown into the streets." 31 They also allege that the seizure would nullify all eforts to
rehabilitate the corporation.

Petitioners’ arguments do not preclude the implementation of the Writ.1âwphi1 As earlier discussed,
law and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they come
true, should not be blamed on this Court, but on the petitioners for failing to avail themselves of the
remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states:

"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicant’s bond, or of
the surety or sureties thereon, he cannot immediately require the return of the property, but if he does
not so object, he may, at any time before the delivery of the property to the applicant, require the return
thereof, by filing with the court where the action is pending a bond executed to the applicant, in double
the value of the property as stated in the applicant’s affidavit for the delivery thereof to the applicant, if
such delivery be adjudged, and for the payment of such sum to him as may be recovered against the
adverse party, and by serving a copy bond on the applicant."

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs
against petitioners.

SO ORDERED.

Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

G. R. No. L-41001 September 30, 1976

MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF THE ELKS, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CITY OF MANILA, and TARLAC DEVELOPMENT
CORPORATION, respondents.

No. L-41012 September 30, 1976

TARLAC DEVELOPMENT CORPORATION, petitioner,

vs.
HONORABLE COURT OF APPEALS, CITY OF MANILA, LODGE NO. 761, BENEVOLENT AND PROTECTIVE
ORDER OF ELKS, INC., respondents.

CASTRO, C.J.:têñ.£îhqwâ£

STATEMENT OF THE CASE AND STATEMENTOF THE FACTS

These two cases are petitions on certiorari to review the decision dated June 30, 1975 of the Court of
Appeals in CA-G.R. No. 51590-R entitled "Tarlac Development Corporation vs. City of Manila, and Manila
Lodge No. 761, Benevolent and Protective Order of Elks, Inc.," affirming the trial court's finding in Civil
Case No. 83009 that the property subject of the decision a quo is a "public park or plaza."

On June 26, 1905 the Philippine Commission enacted Act No. l360 which authorized the City of Manila to
reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act
provided that the reclaimed area "Shall be the property of the City of Manila" and that "the City of
Manila is hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension x x
x at the north end not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to
lease the same, with the approval of the Governor General, to a responsible person or corporation for a
term not exceed ninety-nine years."

Subsequently, the Philippine Commission passed on May 18, 1907 Act No. 1657, amending Act No. 1360,
so as to authorize the City of' Manila either to lease or to sell the portion set aside as a hotel site.

The total area reclaimed was a little over 25 hectares. The City of Manila applied for the registration of
the reclaimed area, and on January 20, 1911, O.C.T. No. 1909 was issued in the name of the City of
Manila. The title described the registered land as "un terreno conocido con el nombre de Luneta
Extension, situato en el distrito de la Ermita x x x." The registration was "subject, however to such of the
incumbrances mentioned in Article 39 of said law (Land Registration Act) as may be subsisting" and
"sujeto a las disposiciones y condiciones impuestas en la Ley No. 1360; y sujeto tambein a los contratos
de venta, celebrados y otorgados por la Ciudad de Manila a favor del Army and Navy Club y la Manila
Lodge No. 761, Benevolent and Protective Order of Elks, fechados respectivamente, en 29 de Diciembre
de 1908 y 16 de Enero de 1909." 1

On July 13, 1911 the City of Manila, affirming a prior sale dated January 16, 1909 cancelled 5,543.07
square meters of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of
Elks of the U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued to the latter over the
Marcela de terreno que es parte de la Luneta Extension, Situada en el Distrito le la Ermita ... ." At the
back of this title vas annotated document 4608/T-1635, which in part reads as follows: "que la citada
Ciusdad de Manila tendra derecho a su opcion, de recomparar la expresada propiedad para fines
publicos solamete in cualquier tiempo despues de cincuenta anos desde el 13 le Julio le 1911, precio de
la misma propiedad, mas el valor que entonces tengan las mejoras."

For the remainder of the Luneta Extension, that is, after segregating therefrom the portion sold to the
Manila Lodge No. 761, PBOE, a new Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City
of Manila.

Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square meters to the Elks Club, Inc., to
which was issued TCT No. 67488. 4 The registered owner, "The Elks Club, Inc.," was later changed by
court oder to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."

In January 1963 the BPOE. petitioned the Court of First Instance of Manila, Branch IV, for the cancellation
of the right of the City of Manila to repurchase the property This petition was granted on February 15,
1963.

On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together with all the
improvements thereon to the Tarlac Development Corporation (TDC, for short) which paid P1,700.000 as
down payment and mortgaged to the vendor the same realty to secure the payment of the balance to be
paid in quarterly installments.5At the time of the sale,, there was no annotation of any subsisting lien on
the title to the property. On December 12, 1963 TCT No. 73444 was issued to TDC over the subject land
still described as "UNA PARCELA DE TERRENO, que es parte de la Luneta Extension, situada en el Distrito
de Ermita ... ."

In June 1964 the City of Manila filed with the Court of First Instance of Manila a petition for the
reannotation of its right to repurchase; the court, after haering, issued an order, dated November 19,
1964, directing the Register of Deeds of the City of Manila to reannotate in toto the entry regarind the
right of the City of Manila to repurchase the property after fifty years. From this order TDC and BPOE
appealed to this Court which on July 31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's
order of reannotation, but reserved to TDC the right to bring another action for the clarification of its
rights.

As a consequence of such reservation, TDC filed on April 28, 1971 against the City of Manila and the
Manila Lodge No. 761, BPOE, a complaint, docketed as Civil Case No. 83009 of the Court of First Instance
of Manila, containing three causes of action and praying -

a) On the first cause of action, that the plaintif TDC be declared to have purchased the parcel of land
now in question with the buildings and improvements thereon from the defendant BPOE for value and in
good faith, and accordingly ordering the cancellation of Entry No. 4608/T-1635 on Transfer Certificate of
Title No. 73444 in the name of the Plaintif;

b) On the second cause of action, ordering the defendant City of Manila to pay the plaintif TDC damages
in the sum of note less than one hundred thousand pesos (P100,000.00);

c) On the third cause of action, reserving to the plaintif TDC the right to recover from the defendant
BPOE the amounts mentioned in par. XVI of the complaint in accordance with Art. 1555 of the Civil Code,
in the remote event that the final judgment in this case should be that the parcel of land now in question
is a public park; and

d) For costs, and for such other and further relief as the Court may deem just and equitable. 6

Therein defendant City of Manila, in its answer dated May 19, 1971, admitted all the facts alleged in the
first cause of action except the allegation that TDC purchased said property "for value and in good faith,"
but denied for lack of knowledge or information the allegations in the second and third causes of action.
As, special and affirmative defense, the City of Manila claimed that TDC was not a purchaser in good
faith for it had actual notice of the City's right to repurchase which was annotated at the back of the title
prior to its cancellation, and that, assuming arguendo that TDC had no notice of the right to repurchase,
it was, nevertheless, under obligation to investigate inasmuch as its title recites that the property is a
part of the Luneta extension. 7

The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971, admitted having sold the land
together with the improvements thereon for value to therein plaintif which was in good faith, but
denied for lack of knowledge as to their veracity the allegations under the second cause of action. It
furthermore admitted that TDC had paid the quarterly installments until October l5, 1964 but claimed
that the latter failed without justifiable cause to pay the subsequent installments. It also asserted that it
was a seller for value in good faith without having misrepresented or concealed tacts relative to the title
on the property. As counterclaim, Manila Lodge No. 761 (BPOE) sought to recover the balance of the
purchase price plus interest and costs. 8

On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that its refusal to make further
payments was fully justified.9

After due trial the court a quo rendered on July 14, 1972 its decision finding the subject land to be part
of the "public park or plaza" and, therefore, part of the public domain. The court consequently declared
that the sale of the subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and void;
that plaintif TDC was a purchaser thereof in g faith and for value from BPOE and can enforce its rights
against the latter; and that BPOE is entitled to recover from the City of Manila whatever consideration it
had 'paid the latter. 'The dispositive part of the decision reads: ñé+.£ªwph!1

WHEREFORE, the Court hereby declares that the parcel of land formerly covered by Transfer Certificate
of Title Nos 2195 and 67488 in the name of BPOE and now by Transfer Certificate of Title No. 73444 in
the name of Tarlac Development Corporation is a public' park or plaza, and, consequently, instant
complaint is dimissed, without pronouncement as to costs.

In view of the reservation made by plaintif Tarlac Development Corporation to recover from defendant
BPOE the amounts mentioned in paragraph XVI of the complaint in accordance with Article 1555 of the
Civil Code, the Court makes no pronouncement on this point. 10

From said decision the therein plaintif TDC as well as the defendant Manila Lodge No. 761, BPOE,
appealed to the Court of Appeals.

In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No. 761, BPOE, avers that the trial court
committed the following errors, namely:

1. In holding that the property subject of the action is not patrimonial property of the City of Manila; and
2. In holding that the Tarlac Development Corporation may recover and enforce its right against the
defendant BPOE. 11

The Tarlac Development Corporation, on the other hand, asserts that the trial court erred:

(1) In finding that the property in question is or was a public park and in consequently nullifying the sale
thereof by the City of Manila to BPOE;

(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil. 602, and Government vs. Cabangis,
53 Phil. 112, to the case at bar; and

(3) In not holding that the plaintif-appellant is entitled to ,recover damages from the defendant City of
Manila. 12

Furthermore, TDC as appellee regarding the second assignment of error raised by BPOE, maintained that
it can recover and enforce its rigth against BPOE in the event that the land in question is declared a
public park or part thereof. 13

In its decision promulgated on June 30, 1975, the Court of Appeals concur ed in the findings and
conclusions of the lower court upon the ground that they are supported by he evidence and are in
accordance with law, and accordingly affirmed the lower court's judgment.

Hence, the present petitions for review on certiorari.

G.R. No. L-41001

The Manila Lodge No. 761, BPOE, contends, in its petition for review on certiorari docketed as G.R. No. L-
41001, that the Court of Appeals erred in (1) disregarding the very enabling acts and/or statutes
according to which the subject property was, and still is, patrimonial property of the City of Manila and
could therefore be sold and/or disposed of like any other private property; and (2) in departing from the
accepted and usual course of judicial proceedings when it simply made a general affirmance of the
court a quo's findings and conclusions without bothering to discuss or resolve several vital points
stressed by the BPOE in its assigned errrors. 14

G.R. No. L-41012

The Tarlac Development Corporation, in its petition for review on certiorari docketed as G.R. No. L-
41012, relies on the following grounds for the allowance of its petition:

1. that the Court of Appeals did not correctly interpret Act No. 1360, as amended by Act No. 1657, of the
Philippine Commission; and

2. that the Court of Appeals has departed from the accepted and usual course of judicial proceedings in
that it did not make its own findings but simply recited those of the lower court. 15

ISSUES AND ARGUMENTS

FIRST ISSUE

Upon the first issue, both petitioners claim that the property subject of the action, pursuant to the
provisions of Act No. 1360, as amended by Act No. 1657, was patrimonial property of the City of Manila
and not a park or plaza.
Arguments of Petitioners

In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there appears to be some logic in the
conclusion" of the Court of Appeals that "neither Act No. 1360 nor Act No. 1657 could have meant to
supply the City of Manila the authority to sell the subject property which is located at the south end not
the north — of the reclaimed area." 16 It argues, however, that when Act No. 1360, as amended,
authorized the City of Manila to undertake the construction of the Luneta extension by reclaimed land
from the Manila Bay, and declared that the reclaimed land shall be the "property of the City of Manila,"
the State expressly granted the ownership thereof to the City of Manila which. consequently. could enter
into transactions involving it; that upon the issuance of O.C.T. No. 1909, there could he no doubt that the
reclaimed area owned by the City was its patrimonial property;" that the south end of the reclaimed
area could not be for public use for. as argued by TDC a street, park or promenade can be property for
public use pursuant to Article 344 of the Spanish Civil Code only when it has already been so constructed
or laid out, and the subject land, at the time it was sold to the Elk's Club, was neither actually
constructed as a street, park or promenade nor laid out as a street, park or promenade;" that even
assuming that the subject property was at the beginning property of public dominion, it was
subsequently converted into patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch as it
had never been used, red or utilized since it was reclaimed in 1905 for purpose other than this of an
ordinary real estate for sale or lease; that the subject property had never been intended for public use, is
further shown by the fact that it was neither included as a part of the Luneta Park under Plan No. 30 of
the National Planning Commission nor considered a part of the Luneta National Park (now Rizal Park) by
Proclamation No. 234 dated December 19, 1955 of President Ramon Magsaysay or by Proclamation
Order No. 274 dated October 4, 1967 of President Ferdinand E. Marcos;" 19 that, such being the case,
there is no reason why the subject property should -not be considered as having been converted into
patrimonial property, pursuant to the ruling in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of
Manila has considered it as its patrimonial property not only bringing it under the operation of the Land
Registration Act but also by disposing of it; 20 and that to consider now the subject property as a public
plaza or park would not only impair the obligations of the parties to the contract of sale (rated July 13,
1911, but also authorize deprivation of property without due process of law. 21

G.R. No. L-410112

In L-41012, the petitioner TDC stresses that the principal issue is the interpretation of Act No. 1360, as
amended by. Act No. 1657 of the Philippine Commission, 22 and avers that inasmuch as Section 6 of Act
No. 1360, as amended by Act 1657, provided that the reclamation of the Luneta extension was to be
paid for out of the funds of the City of Manila which was authorized to borrow P350,000 "to be
expended in the construction of Luneta Extension," the reclaimed area became "public land" belonging
to the City of Manila that spent for the reclamation, conformably to the holding in Cabangis,23 and
consequently, said land was subject to sale and other disposition; that the Insular Government itself
considered the reclaimed Luneta extension as patrimonial property subject to disposition as evidenced
by the fact that See. 3 of Act 1360 declared that "the land hereby reclaimed shall be the property of the
City of Manila;" that this property cannot be property for public use for according to Article 344 of the
Civil Code, the character of property for public use can only attach to roads and squares that have
already been constructed or at least laid out as such, which conditions did not obtain regarding the
subject land, that Sec. 5 of Act 1360 authorized the City of Manila to lease the northern part of the
reclaimed area for hotel purposes; that Act No. 1657 furthermore authorized the City of Manila to sell
the same; 24 that the express statutory authority to lease or sell the northern part of the reclaimed area
cannot be interpreted to mean that the remaining area could not be sold inasmuch as the purpose of the
statute was not merely to confer authority to sell the northern portion but rather to limit the city's
power of disposition thereof, to wit: to prevent disposition of the northern portion for any purpose other
than for a hotel site that the northern and southern ends of the reclaimed area cannot be considered as
extension of the Luneta for they lie beyond the sides of the original Luneta when extended in the
direction of the sea, and that is the reason why the law authorized the sale of the northern portion for
hotel purposes, and, for the same reason, it is implied that the southern portion could likewise be
disposed of.26

TDC argues likewise that there are several items of uncontradicted circumstantial evidence which may
serve as aids in construing the legislative intent and which demonstrate that the subject property is
patrimonial in nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the National Planning
Commission showing the Luneta and its vicinity, do not include the subject property as part of the
Luneta Park; (2) Exhibit "K", which is the plan of the subject property covered by TCT No. 67488 of BPOE,
prepared on November 11, 1963, indicates that said property is not a public park; (3) Exhibit "T", which
is a certified copy of Proclamation No. 234 issued on December 15, 1955 is President Magsaysay, and
Exhibit "U" which is Proclamation Order No. 273 issued on October 4, 1967 by President Marcos, do not
include the subject property in the Luneta Park-, (4) Exhibit "W", which is the location plan of the Luneta
National Park under Proclamations Nos. 234 and 273, further confirms that the subject property is not a
public park; and (5) Exhibit "Y", which is a copy of O.C.T. No. 7333 in the name of the United States of
America covering the land now occupied by the America covering the land now occupied by the
American Embassy, the boundaries of which were delineated by the Philippine Legislature, states that
the said land is bounded on the northwest by properties of the Army and Navy Club (Block No. 321) and
the Elks Club (Block No. 321), and this circumstance shows that even the Philippine Legislature
recognized the subject property as private property of the Elks Club. 27

TDC furthermore contends that the City of Manila is estopped from questioning the validity of the sale of
the subject property that it executed on July 13, 1911 to the Manila Lodge No. 761, BPOE, for several
reasons, namely: (1) the City's petition for the reannotation of Entry No. 4608/T-1635 was predicated on
the validity of said sale; (2) when the property was bought by the petitioner TDC it was not a public plaza
or park as testified to by both Pedro Cojuanco, treasurer of TDC, and the surveyor, Manuel Añoneuvo,
according to whom the subject property was from all appearances private property as it was enclosed by
fences; (3) the property in question was cadastrally surveyed and registered as property of the Elks Club,
according to Manuel Anonuevo; (4) the property was never used as a public park, for, since the issuance
of T.C.T. No. 2165 on July 17, 1911 in the name of the Manila Lodge NO. 761, the latter used it as private
property, and as early as January 16, 1909 the City of Manila had already executed a deed of sale over
the property in favor of the Manila Lodge No. 761; and (5) the City of Manila has not presented any
evidence to show that the subject property has ever been proclaimed or used as a public park. 28

TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply to the subject land, for Com. Act
No. 141 took efect on December 1, 1936 and at that time the subject land was no longer part of the
part of the public domain. 29

TDC also stresses that its rights as a purchaser in good faith cannot be disregarded, for the mere mention
in the certificate of title that the lot it purchased was "part of the Luneta extension" was not a sufficient
warning that tile title to the City of Manila was invalid; and that although the trial court, in its decision
affirmed by the Court of Appeals, found the TDC -to has been an innocent purchaser for value, the court
disregarded the petitioner's rights as such purchaser that relied on Torrens certificate of title. 30

The Court, continues the petitioner TDC erred in not holding that the latter is entitled to recover from
the City of Manila damages in the amount of P100,000 caused by the City's petition for- reannotation of
its right to repurchase.

DISCUSSION AND RESOLUTION OF FIRST ISSUE

It is a cardinal rule of statutory construction that courts must give efect to the general legislative intent
that can be discovered from or is unraveled by the four corners of the statute, 31 and in order to discover
said intent, the whole statute, and not only a particular provision thereof, should be considered. 32 It is,
therefore, necessary to analyze all the provisions of Act No. 1360, as amended, in order to unravel the
legislative intent.

Act No. 1360 which was enacted by the Philippine Commission on June 26, 1905, as amended by Act No.
1657 enacted on May 18, 1907, authorized the "construction of such rock and timber bulkheads or sea
walls as may be necessary for the making of an extension to the Luneta" (Sec. 1 [a]), and the placing of
the material dredged from the harbor of Manila "inside the bulkheads constructed to inclose the Luneta
extension above referred to" (Sec. 1 [a]). It likewise provided that the plan of Architect D. H. Burnham as
"a general outline for the extension and improvement of the Luneta in the City of Manila" be adopted;
that "the reclamation from the Bay of Manila of the land included in said projected Luneta extension... is
hereby authorized and the land thereby reclaimed shall be the property of the City of Manila" (Sec. 3);
that "the City of Manila is hereby authorized to set aside a tract of the reclaimed land formed by the
Luneta extension authorized by this Act at the worth end of said tract, not to exceed five hundred feet by
six hundred feet in size, for a hotel site, and to lease the same with the approval of the Governor
General, ... for a term not exceeding ninety-nine years; that "should the Municipal Board ... deem it
advisable it is hereby authorized to advertise for sale to sell said tract of land ... ;" "that said tract shall be
used for hotel purposes as herein prescribed, and shall not be devoted to any other purpose or object
whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x then the
title to said tract of land sold, conveyed, and transferred, and shall not be devoted to any other purpose
or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x
then the title to said tract of land sold, conveyed, and transferred to the grantee shall revert to the City
of Manila, and said City of Manila shall thereupon become entitled to immediate possession of said tract
of land" (Sec. 5); that the construction of the rock and timber bulkheads or sea wall "shall be paid for out
of the funds of the City of Manila, but the area to be reclaimed by said proposed Luneta extension shall
be filled, without cost to the City of Manila, with material dredged from Manila Bay at the expense of the
Insular Government" (Sec. 6); and that "the City of Manila is hereby authorized to borrow from the
Insular Government ... the sum of three hundred thousand pesos, to be expended in the construction of
Luneta extension provided for by paragraph (a) of section one hereof" (Sec.7).

The grant made by Act No. 1360 of the reclaimed land to the City of Manila is a grant of "public" nature,
the same having been made to a local political subdivision. Such grants have always
been strictly construed against the grantee. 33 One compelling reason given for the strict interpretation of
a public grant is that there is in such grant a gratuitous donation of, public money or resources which
results in an unfair advantage to the grantee and for that reason, the grant should be narrowly restricted
in favor of the public.34 This reason for strict interpretation obtains relative to the aforesaid grant, for,
although the City of Manila was to pay for the construction of such work and timber bulkheads or sea
walls as may be necessary for the making of the Luneta extension, the area to be reclaimed would be
filled at the expense of the Insular Government and without cost to the City of Manila, with material
dredged from Manila Bay. Hence, the letter of the statute should be narrowed to exclude maters which if
included would defeat the policy of the legislation.

The reclaimed area, an extension to the Luneta, is declared to be property of the City of Manila.
Property, however, is either of public ownership or of private ownership. 35 What kind of property of the
City is the reclaimed land? Is it of public ownership (dominion) or of private ownership?

We hold that it is of public dominion, intended for public use.

Firstly, if the reclaimed area was granted to the City of Manila as its patrimonial property, the City could,
by virtue of its ownership, dispose of the whole reclaimed area without need of authorization to do so
from the lawmaking body. Thus Article 348 of the Civil Code of Spain provides that "ownership is the
right to enjoy and dispose of a thing without further limitations than those established by law." 36 The
right to dispose (jus disponendi) of one's property is an attribute of ownership. Act No. 1360, as
amended, however, provides by necessary implication, that the City of Manila could not dispose of the
reclaimed area without being authorized by the lawmaking body. Thus the statute provides that "the City
of Manila is hereby authorized to set aside a tract ... at the north end, for a hotel site, and to lease the
same ... should the municipal board ... deem it advisable, it is hereby authorized ...to sell said tract of
land ... " (Sec. 5). If the reclaimed area were patrimonial property of the City, the latter could dispose of
it without need of the authorization provided by the statute, and the authorization to set aside ...
lease ... or sell ... given by the statute would indeed be superfluous. To so construe the statute s to
render the term "authorize," which is repeatedly used by the statute, superfluous would violate the
elementary rule of legal hermeneutics that efect must be given to every word, clause, and sentence of
the statute and that a statute should be so interpreted that no part thereof becomes inoperative or
superfluous. 37 To authorize means to empower, to give a right to act. 38 Act No. 1360 furthermore
qualifies the verb it authorize" with the adverb "hereby," which means "by means of this statue or
section," Hence without the authorization expressly given by Act No. 1360, the City of Manila could not
lease or sell even the northern portion; much less could it dispose of the whole reclaimed area.
Consequently, the reclaimed area was granted to the City of Manila, not as its patrimonial property. At
most, only the northern portion reserved as a hotel site could be said to be patrimonial property for, by
express statutory provision it could be disposed of, and the title thereto would revert to the City should
the grantee fail to comply with the terms provided by the statute.

TDC however, contends that the purpose of the authorization provided in Act No. 1360 to lease or sell
was really to limit the City's power of disposition. To sustain such contention is to beg the question. If the
purpose of the law was to limit the City's power of disposition then it is necessarily assumed that the
City had already the power to dispose, for if such power did not exist, how could it be limited? It was
precisely Act 1360 that gave the City the power to dispose for it was hereby authorized by lease of sale.
Hence, the City of Manila had no power to dispose of the reclaimed land had such power not been
granted by Act No. 1360, and the purpose of the authorization was to empower the city to sell or lease
the northern part and not, as TDC claims, to limit only the power to dispose. Moreover, it is presumed
that when the lawmaking body enacted the statute, it had full knowledge of prior and existing laws and
legislation on the subject of the statute and acted in accordance or with respect thereto. 39 If by another
previous law, the City of Manila could already dispose of the reclaimed area, which it could do if such
area were given to it as its patrimonial property, would it then not be a superfluity for Act No. 1360
to authorize the City to dispose of the reclaimed land? Neither has petitioner TDC pointed to any other
law that authorized the City to do so, nor have we come across any. What we do know is that if the
reclaimed land were patrimonial property, there would be no need of giving special authorization to the
City to dispose of it. Said authorization was given because the reclaimed land was not intended to be
patrimonial property of the City of Manila, and without the express authorization to dispose of the
northern portion, the City could not dispose of even that part.

Secondly, the reclaimed area is an "extension to the Luneta in the City of Manila." 40 If the reclaimed area
is an extension of the Luneta, then it is of the same nature or character as the old Luneta. Anent this
matter, it has been said that a power to extend (or continue an act or business) cannot authorize a
transaction that is totally distinct. 41 It is not disputed that the old Luneta is a public park or plaza and it is
so considered by Section 859 of the Revised Ordinances of the City of Manila. 42 Hence the "extension to
the Luneta" must be also a public park or plaza and for public use.

TDC, however, contends that the subject property cannot be considered an extension of the old Luneta
because it is outside of the limits of the old Luneta when extended to the sea. This is a strained
interpretation of the term "extension," for an "extension," it has been held, "signifies enlargement in any
direction — in length, breadth, or circumstance." 43

Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is nothing more than an inlet of
the sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores
are parts of the national domain open to public use. These are also property of public ownership
devoted to public use, according to Article 339 of the Civil Code of Spain.

When the shore or part of the bay is reclaimed, it does not lose its character of being property for public
use, according to Government of the Philippine Islands vs. Cabangis.44 The predecessor of the claimants
in this case was the owner of a big tract of land including the lots in question. From 1896 said land began
to wear away due to the action of the waters of Manila Bay. In 1901 the lots in question became
completely submerged in water in ordinary tides. It remained in such a state until 1912 when the
Government undertook the dredging of the Vitas estuary and dumped the Sand and - silt from estuary
on the low lands completely Submerged in water thereby gradually forming the lots in question. Tomas
Cabangis took possession thereof as soon as they were reclaimed hence, the claimants, his successors in
interest, claimed that the lots belonged to them. The trial court found for the claimants and the
Government appealed. This Court held that when the lots became a part of the shore. As they remained
in that condition until reclaimed by the filling done by the Government, they belonged to the public
domain. for public use .4' Hence, a part of the shore, and for that purpose a part of the bay, did not lose
its character of being for public use after it was reclaimed.

Fourthly, Act 1360, as amended, authorized the lease or sale of the northern portion of the reclaimed
area as a hotel sites. The subject property is not that northern portion authorized to be leased or sold;
the subject property is the southern portion. Hence, applying the rule of expresio unius est exlusio
alterius, the City of Manila was not authorized to sell the subject property. The application of this
principle of statutory construction becomes the more imperative in the case at bar inasmuch as not only
must the public grant of the reclaimed area to the City of Manila be, as above stated, strictly construed
against the City of Manila, but also because a grant of power to a municipal corporation, as happens in
this case where the city is author ized to lease or sell the northern portion of the Luneta extension, is
strictly limited to such as are expressly or impliedly authorized or necessarily incidental to the objectives
of the corporation.

Fifthly, Article 344 of the Civil Code of Spain provides that to property of public use, in provinces and in
towns, comprises the provincial and town roads, the squares streets fountains, and public waters the
promenades, and public works of general service paid for by such towns or provinces." A park or plaza,
such as the extension to the Luneta, is undoubtedly comprised in said article.

The petitioners, however, argue that, according to said Article 344, in order that the character of
property for public use may be so attached to a plaza, the latter must be actually constructed or at least
laid out as such, and since the subject property was not yet constructed as a plaza or at least laid out as a
plaza when it was sold by the City, it could not be property for public use. It should be noted, however,
that properties of provinces and towns for public use are governed by the same principles as properties
of the same character belonging to the public domain. 46 In order to be property of public domain an
intention to devote it to public use is sufficient. 47 The, petitioners' contention is refuted by Manresa
himself who said, in his comments", on Article 344, that: ñé+.£ªwph!1

Las plazas, calles y paseos publicos correspondent sin duda aiguna aldominio publico municipal ), porque
se hallan establecidos sobre suelo municipal y estan destinadas al uso de todos Laurent presenta
tratando de las plazas, una question relativa a si deben conceptuarse como de dominio publico los
lugares vacios libres, que se encuenttan en los Municipios rurales ... Laurent opina contra Pioudhon que
toda vez que estan al servicio de todos pesos lugares, deben considerable publicos y de dominion
publico. Realmente, pala decidir el punto, bastara siempre fijarse en el destino real y efectivo de los
citados lugares, y si este destino entraña un uso comun de todos, no hay duda que son de dominio
publico municipal si no patrimoniales.

It is not necessary, therefore, that a plaza be already constructed of- laid out as a plaza in order that it be
considered property for public use. It is sufficient that it be intended to be such In the case at bar, it has
been shown that the intention of the lawmaking body in giving to the City of Manila the extension to the
Luneta was not a grant to it of patrimonial property but a grant for public use as a plaza.

We have demonstrated ad satietatem that the Luneta extension as intended to be property of the City of
Manila for public use. But, could not said property-later on be converted, as the petitioners contend, to
patrimonial property? It could be. But this Court has already said, in Ignacio vs. The Director of
Lands, 49 the executive and possibly the legislation department that has the authority and the power to
make the declaration that said property, is no longer required for public use, and until such declaration i
made the property must continue to form paint of the public domain. In the case at bar, there has been
no such explicit or unequivocal declaration It should be noted, furthermore, anent this matter, that
courts are undoubted v not. primarily called upon, and are not in a position, to determine whether any
public land is still needed for the purposes specified in Article 4 of the Law of Waters . 50

Having disposed of the petitioners' principal arguments relative to the main issue, we now pass to the
items of circumstantial evidence which TDC claims may serve as aids in construing the legislative intent
in the enactment of Act No. 1360, as amended. It is noteworthy that all these items of alleged
circumstantial evidence are acts far removed in time from the date of the enactment of Act No.1360
such that they cannot be considered contemporaneous with its enactment. Moreover, it is not
farfetched that this mass of circumstantial evidence might have been influenced by the antecedent
series of invalid acts, to wit: the City's having obtained over the reclaimed area OCT No. 1909 on January
20,1911; the sale made by the City of the subject property to Manila Lodge No. 761; and the issuance to
the latter of T.C.T. No. 2195. It cannot gainsaid that if the subsequent acts constituting the circumstantial
evidence have been base on, or at least influenced, by those antecedent invalid acts and Torrens titles S
they can hardly be indicative of the intent of the lawmaking body in enacting Act No. 1360 and its
amendatory act.

TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the subject property is not a park.

Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed development" dated May 14, 1949,
were prepared by the National Urban Planning Commission of the Office of the President. It cannot be
reasonably expected that this plan for development of the Luneta should show that the subject property
occupied by the ElksClub is a public park, for it was made 38 years after the sale to the Elks, and after
T.C.T. No. 2195 had been issued to Elks. It is to be assumed that the Office of the President was cognizant
of the Torrens title of BPOE. That the subject property was not included as a part of the Luneta only
indicated that the National Urban Planning Commission that made the plan knew that the subject
property was occupied by Elks and that Elks had a Torrens title thereto. But this in no way proves that
the subject property was originally intended to be patrimonial property of the City of Manila or that the
sale to Elks or that the Torrens-title of the latter is valid.

Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared for Tarlac Development Company."
It was made on November 11, 1963 by Felipe F. Cruz, private land surveyor. This surveyor is admittedly a
surveyor for TDC. 51 This plan cannot be expected to show that the subject property is a part of the
Luneta Park, for he plan was made to show the lot that "was to be sold to petitioner." This plan must
have also assumed the existence of a valid title to the land in favor of Elks.

Exhibits "T" and "U" are copies of Presidential Proclamations No. 234 issued on November 15, 1955 and
No. 273 issued on October 4, 1967, respectively. The purpose of the said Proclamations was to reserve
certain parcels of land situated in the District of Ermita, City of Manila, for park site purposes. Assuming
that the subject property is not within the boundaries of the reservation, this cannot be interpreted to
mean that the subject property was not originally intended to be for public use or that it has ceased to
be such. Conversely, had the subject property been included in the reservation, it would mean, if it really
were private property, that the rights of the owners thereof would be extinguished, for the reservations
was "subject to private rights, if any there be." That the subject property was not included in the
reservation only indicates that the President knew of the existence of the Torrens titles mentioned
above. The failure of the Proclamations to include the subject property in the reservation for park site
could not change the character of the subject property as originally for public use and to form part of the
Luneta Park. What has been said here applies to Exhibits "V", "V-1" to "V-3," and "W" which also refer to
the area and location of the reservation for the Luneta Park.

Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935, covering the lot where now stands the
American Embassy [Chancery]. It states that the property is "bounded ... on the Northwest by properties
of Army and Navy Club (Block No.321) and Elks Club (Block No. 321)." Inasmuch as the said bounderies
delineated by the Philippine Legislature in Act No. 4269, the petitioners contend that the Legislature
recognized and conceded the existence of the Elks Club property as a primate property (the property in
question) and not as a public park or plaza. This argument is non sequitur plain and simple Said Original
Certificate of Title cannot be considered as an incontrovertible declaration that the Elks Club was in truth
and in fact the owner of such boundary lot. Such mention as boundary owner is not a means of acquiring
title nor can it validate a title that is null and void.

TDC finally claims that the City of Manila is estopped from questioning the validity of the sale it executed
on July 13,'1911 conconveying the subject property to the Manila Lodge No. 761, BPOE. This contention
cannot be seriously defended in the light of the doctrine repeatedly enunciated by this Court that the
Government is never estopped by mistakes or errors on the pan of its agents, and estoppel does not
apply to a municipal corporation to validate a contract that is prohibited by law or its against Republic
policy, and the sale of July 13, 1911 executed by the City of Manila to Manila Lodge was certainly a
contract prohibited by law. Moreover, estoppel cannot be urged even if the City of Manila accepted the
benefits of such contract of sale and the Manila Lodge No. 761 had performed its part of the agreement,
for to apply the doctrine of estoppel against the City of Manila in this case would be tantamount to
enabling it to do indirectly what it could not do directly. 52

The sale of the subject property executed by the City of Manila to the Manila Lodge No. 761, BPOE, was
void and inexistent for lack of subject matter. 53 It sufered from an incurable defect that could not be
ratified either by lapse of time or by express ratification. The Manila Lodge No. 761 therefore acquired
no right by virtue of the said sale. Hence to consider now the contract inexistent as it always has seen,
cannot be, as claimed by the Manila Lodge No. 761, an impairment of the obligations of contracts, for
there was it, contemplation of law, no contract at all.

The inexistence of said sale can be set up against anyone who asserts a right arising from it, not only
against the first vendee, the Manila Lodge No. 761, BPOE, but also against all its suceessors, including
the TDC which are not protected the doctrine of bona fide ii purchaser without notice, being claimed by
the TDC does not apply where there is a total absence of title in the vendor, and the good faith of the
purchaser TDC cannot create title where none exists. 55

The so-called sale of the subject property having been executed, the restoration or restitution of what
has been given is order 56

SECOND ISSUE

The second ground alleged in support of the instant petitions for review on certiorari is that the Court of
Appeals has departed from the accepted and usual course of judicial proceedings as to call for an
exercise of the power of supervision. TDC in L-41012, argues that the respondent Court did not make its
own findings but simply recited those of the lower court and made a general affirmance, contrary to the
requirements of the Constitution; that the respondent Court made glaring and patent mistakes in
recounting even the copied findings, palpably showing lack of deliberate consideration of the matters
involved, as, for example, when said court said that Act No. 1657 authorized the City of Manila to set
aside a portion of the reclaimed land "formed by the Luneta Extension of- to lease or sell the same for
park purposes;" and that respondent Court. further more, did not resolve or dispose of any of the
assigned errors contrary to the mandate of the Judiciary Act.. 57

The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the reasons warranting review, that the
Court of Appeals departed from the accepted and usual course of Judicial proceedings by simply making
a general affirmance of the court a quo findings without bothering to resolve several vital points
mentioned by the BPOE in its assigned errors. 58

COMMENTS ON SECOND ISSUE

We have shown in our discussion of the first issue that the decision of the trial court is fully in
accordance with law. To follows that when such decision was affirmed by the Court of Appeals, the
affirmance was likewise in accordance with law. Hence, no useful purpose will be served in further
discussing the second issue.

CONCLUSION

ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are denied for lack of merit, and the
decision of the Court of Appeals of June 30, 1975, is hereby affirmed, at petitioner's cost.

Makasiar, Munoz Palma and Martin, JJ., concur.1äwphï1.ñët

Teehankee, concurs in the result which is wholly consistent with the basic rulings and jugdment of this
Court in its decision of July 31, 1968.

G.R. No. 192896 July 24, 2013

DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC., represented by its Incumbent President, GREG
SERIEGO, Petitioner,
vs.
BASES DEVELOPMENT AUTHORITY, Respondent.

DECISION

REYES, J.:

Before us on Petition for Review1 under Rule 45 of the Rules of Court is the Decision 2 dated September
10, 2009 and Resolution3 dated July 13, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 85228
nullifying and setting aside for lack of jurisdiction the Resolution 4 dated April 28, 2004 of the Commission
on the Settlement of Land Problems (COSLAP) in COS LAP Case No. 99-500. The fallo of the assailed COS
LAP Resolution reads, as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring the subject property, covering an area of 78,466 square meters, now being occupied by the
members of the Dream Village Neighborhood Association, Inc. to be outside of Swo-00-0001302 BCDA
property.

2. In accordance with the tenets of social justice, members of said association are advised to apply for
sales patent on their respective occupied lots with the Land Management Bureau, DENR-NCR, pursuant
to R.A. Nos. 274 and 730.

3. Directing the Land Management Bureau-DENR-NCR to process the sales patent application of
complainants pursuant to existing laws and regulation.

4. The peaceful possession of actual occupants be respected by the respondents.

SO ORDERED.5

Antecedent Facts

Petitioner Dream Village Neighborhood Association, Inc. (Dream Village) claims to represent more than
2,000 families who have been occupying a 78,466-square meter lot in Western Bicutan, Taguig City since
1985 "in the concept of owners continuously, exclusively and notoriously." 6 The lot used to be part of the
Hacienda de Maricaban (Maricaban), owned by Dolores Casal y Ochoa and registered under a Torrens
title,7 Original Certificate of Title (OCT) No. 291, issued on October 17, 1906 by the Registry of Deeds of
Rizal.8 Maricaban covered several parcels of land with a total area of over 2,544 hectares spread out over
Makati, Pasig, Taguig, Pasay, and Parañaque.9

Following the purchase of Maricaban by the government of the United States of America (USA) early in
the American colonial period, to be converted into the military reservation known as Fort William
Mckinley, Transfer Certificate of Title (TCT) No. 192 was issued in the name of the USA to cancel OCT No.
291.10 The US government later transferred 30 has. of Maricaban to the Manila Railroad Company, for
which TCT No. 192 was cancelled by TCT Nos. 1218 and 1219, the first in the name of the Manila
Railroad Company for 30 has., and the second in the name of the USA for the rest of the Maricaban
property.11

On January 29, 1914, TCT No. 1219 was cancelled and replaced by TCT No. 1688, and later that year, on
September 15, 1914, TCT No. 1688 was cancelled and replaced by TCT No. 2288, both times in the name
of the USA.12 On December 6, 1956, the USA formally ceded Fort William Mckinley to the Republic of the
Philippines (Republic), and on September 11, 1958, TCT No. 2288 was cancelled and replaced by TCT No.
61524, this time in the name of the Republic. 13 On July 12, 1957, President Carlos P. Garcia issued
Proclamation No. 423 withdrawing from sale or settlement the tracts of land within Fort William
Mckinley, now renamed Fort Bonifacio, and reserving them for military purposes. 14

On January 7, 1986, President Ferdinand E. Marcos issued Proclamation No. 2476 declaring certain
portions of Fort Bonifacio alienable and disposable 15 in the manner provided under Republic Act (R.A.)
Nos. 274 and 730, in relation to the Public Land Act, 16 thus allowing the sale to the settlers of home lots
in Upper Bicutan, Lower Bicutan, Signal Village, and Western Bicutan. 17

On October 16, 1987, President Corazon C. Aquino issued Proclamation No. 172 amending Proclamation
No. 2476 by limiting to Lots 1 and 2 of the survey Swo-13-000298 the areas in Western Bicutan open for
disposition.18
On March 13, 1992, R.A. No. 7227 was passed 19 creating the Bases Conversion and Development
Authority (BCDA) to oversee and accelerate the conversion of Clark and Subic military reservations and
their extension camps (John Hay Station, Wallace Air Station, O’Donnell Transmitter Station, San Miguel
Naval Communications Station and Capas Relay Station) to productive civilian uses. Section 8 20 of the
said law provides that the capital of the BCDA will be provided from sales proceeds or transfers of lots in
nine (9) military camps in Metro Manila, including 723 has. of Fort Bonifacio. The law, thus, expressly
authorized the President of the Philippines "to sell the above lands, in whole or in part, which are hereby
declared alienable and disposable pursuant to the provisions of existing laws and regulations governing
sales of government properties,"21 specifically to raise capital for the BCDA. Titles to the camps were
transferred to the BCDA for this purpose, 22 and TCT No. 61524 was cancelled on January 3, 1995 by TCT
Nos. 23888, 23887, 23886, 22460, 23889, 23890, and 23891, now in the name of the BCDA. 23

Excepted from disposition by the BCDA are: a) approximately 148.80 has. reserved for the National
Capital Region (NCR) Security Brigade, Philippine Army officers’ housing area, and Philippine National
Police jails and support services (presently known as Camp Bagong Diwa); b) approximately 99.91 has. in
Villamor Air Base for the Presidential Airlift Wing, one squadron of helicopters for the NCR and
respective security units; c) twenty one (21) areas segregated by various presidential proclamations; and
d) a proposed 30.15 has. as relocation site for families to be afected by the construction of
Circumferential Road 5 and Radial Road 4, provided that the boundaries and technical description of
these exempt areas shall be determined by an actual ground survey. 24

Now charging the BCDA of wrongfully asserting title to Dream Village and unlawfully subjecting its
members to summary demolition, resulting in unrest and tensions among the residents, 25 on November
22, 1999, the latter filed a letter-complaint with the COSLAP to seek its assistance in the verification
survey of the subject 78,466-sq m property, which they claimed is within Lot 1 of Swo-13-000298 and
thus is covered by Proclamation No. 172. They claim that they have been occupying the area for thirty
(30) years "in the concept of owners continuously, exclusively and notoriously for several years," and
have built their houses of sturdy materials thereon and introduced paved roads, drainage and
recreational and religious facilities. Dream Village, thus, asserts that the lot is not among those
transferred to the BCDA under R.A. No. 7227, and therefore patent applications by the occupants should
be processed by the Land Management Bureau (LMB).

On August 15, 2000, Dream Village formalized its complaint by filing an Amended Petition 26 in the
COSLAP. Among the reliefs it sought were:

d. DECLARING the subject property as alienable and disposable by virtue of applicable laws;

e. Declaring the portion of Lot 1 of subdivision Plan SWO-13-000298, situated in the barrio of Western
Bicutan, Taguig, Metro Manila, which is presently being occupied by herein petitioner as within the
coverage of Proclamation Nos. 2476 and 172 and outside the claim of AFP-RSBS INDUSTRIAL PARK
COMPLEX and/or BASES CONVESION DEVELOPMENT AUTHORITY.

f. ORDERING the Land Management Bureau to process the application of the ASSOCIATION members for
the purchase of their respective lots under the provisions of Acts Nos. 274 and 730. (Underscoring
supplied)

Respondent BCDA in its Answer28 dated November 23, 2000 questioned the jurisdiction of the COSLAP to
hear Dream Village’s complaint, while asserting its title to the subject property pursuant to R.A. No.
7227. It argued that under Executive Order (E.O.) No. 561 which created the COSLAP, its task is merely to
coordinate the various government offices and agencies involved in the settlement of land problems or
disputes, adding that BCDA does not fall in the enumeration in Section 3 of E.O. No. 561, it being neither
a pastureland-lease holder, a timber concessionaire, or a government reservation grantee, but the
holder of patrimonial government property which cannot be the subject of a petition for classification,
release or subdivision by the occupants of Dream Village.

In its Resolution29 dated April 28, 2004, the COSLAP narrated that it called a mediation conference on
March 22, 2001, during which the parties agreed to have a relocation/verification survey conducted of
the subject lot. On April 4, 2001, the COSLAP wrote to the Department of Environment and Natural
Resources (DENR)-Community Environment and Natural Resources Office-NCR requesting the survey,
which would also include Swo-00-0001302, covering the adjacent AFP-RSBS Industrial Park established
by Proclamation No. 1218 on May 8, 1998 as well as the abandoned Circumferential Road 5 (C-5 Road). 30

On April 1, 2004, the COSLAP received the final report of the verification survey and a blueprint copy of
the survey plan from Atty. Rizaldy Barcelo, Regional Technical Director for Lands of DENR. Specifically,
Item No. 3 of the DENR report states:

3. Lot-1, Swo-000298 is inside Proclamation 172. Dream Village Neighborhood Association, Inc. is outside
Lot-1, Swo-13-000298 and inside Lot-10, 11 & Portion of Lot 13, Swo-00-0001302 with an actual area of
78,466 square meters. Likewise, the area actually is outside Swo-00-0001302 of BCDA. 31 (Emphasis ours
and underscoring supplied)

COSLAP Ruling

On the basis of the DENR’s verification survey report, the COSLAP resolved that Dream Village lies
outside of BCDA, and particularly, outside of Swo-00-0001302, and thus directed the LMB of the DENR to
process the applications of Dream Village’s members for sales patent, noting that in view of the length of
time that they "have been openly, continuously and notoriously occupying the subject property in the
concept of an owner, x x x they are qualified to apply for sales patent on their respective occupied lots
pursuant to R.A. Nos. 274 and 730 in relation to the provisions of the Public Land Act." 32

On the question of its jurisdiction over the complaint, the COSLAP cited the likelihood that the summary
eviction by the BCDA of more than 2,000 families in Dream Village could stir up serious social unrest, and
maintained that Section 3(2) of E.O. No. 561 authorizes it to "assume jurisdiction and resolve land
problems or disputes which are critical and explosive in nature considering, for instance, the large
number of parties involved, the presence or emergence of social tension or unrest, or other similar
critical situations requiring immediate action," even as Section 3(2)(d) of E.O. No. 561 also allows it to
take cognizance of "petitions for classification, release and/or subdivision of lands of the public domain,"
exactly the ultimate relief sought by Dream Village. Rationalizing that it was created precisely to provide
a more efective mechanism for the expeditious settlement of land problems "in general," the COSLAP
invoked as its authority the 1990 case of Bañaga v. COSLAP, 33 where this Court said:

It is true that Executive Order No. 561 provides that the COSLAP may take cognizance of cases which are
"critical and explosive in nature considering, for instance, the large number of parties involved, the
presence or emergence of social tension or unrest, or other similar critical situations requiring
immediate action." However, the use of the word "may" does not mean that the COSLAP’s jurisdiction is
merely confined to the above mentioned cases. The provisions of the said Executive Order are clear that
the COSLAP was created as a means of providing a more efective mechanism for the expeditious
settlement of land problems in general, which are frequently the source of conflicts among settlers,
landowners and cultural minorities. Besides, the COSLAP merely took over from the abolished PACLAP
whose functions, including its jurisdiction, power and authority to act on, decide and resolve land
disputes (Sec. 2, P.D. No. 832) were all assumed by it. The said Executive Order No. 561 containing said
provision, being enacted only on September 21, 1979, cannot afect the exercise of jurisdiction of the
PACLAP Provincial Committee of Koronadal on September 20, 1978. Neither can it afect the decision of
the COSLAP which merely affirmed said exercise of jurisdiction. 34

In its Motion for Reconsideration35 filed on May 20, 2004, the BCDA questioned the validity of the survey
results since it was conducted without its representatives present, at the same time denying that it
received a notification of the DENR verification survey. 36 It maintained that there is no basis for the
COSLAP’s finding that the members of Dream Village were in open, continuous, and adverse possession
in the concept of owner, because not only is the property not among those declared alienable and
disposable, but it is a titled patrimonial property of the State. 37

In the Order38 dated June 17, 2004, the COSLAP denied BCDA’s Motion for Reconsideration, insisting that
it had due notice of the verification survey, while also noting that although the BCDA wanted to
postpone the verification survey due to its tight schedule, it actually stalled the survey when it failed to
suggest an alternative survey date to ensure its presence.

CA Ruling

On Petition for Review39 to the CA, the BCDA argued that the dispute is outside the jurisdiction of the
COSLAP because of the land’s history of private ownership and because it is registered under an
indefeasible Torrens title40; that Proclamation No. 172 covers only Lots 1 and 2 of Swo-13-000298 in
Western Bicutan, whereas Dream Village occupies Lots 10, 11 and part of 13 of Swo-00-0001302, which
also belongs to the BCDA 41; that the COSLAP resolution is based on an erroneous DENR report stating
that Dream Village is outside of BCDA, because Lots 10, 11, and portion of Lot 13 of Swo-00-0001302 are
within the DA42; that the COSLAP was not justified in ignoring BCDA’s request to postpone the survey to
the succeeding year because the presence of its representatives in such an important verification survey
was indispensable for the impartiality of the survey aimed at resolving a highly volatile situation 43; that
the COSLAP is a mere coordinating administrative agency with limited jurisdiction 44; and, that the
present case is not among those enumerated in Section 3 of E.O. No. 561 45.

The COSLAP, on the other hand, maintained that Section 3(2)(e) of E.O. No. 561 provides that it may
assume jurisdiction and resolve land problems or disputes in "other similar land problems of grave
urgency and magnitude,"46 and the present case is one such problem.

The CA in its Decision47 dated September 10, 2009 ruled that the COSLAP has no jurisdiction over the
complaint because the question of whether Dream Village is within the areas declared as available for
disposition in Proclamation No. 172 is beyond its competence to determine, even as the land in dispute
has been under a private title since 1906, and presently its title is held by a government agency, the
BCDA, in contrast to the case of Bañaga relied upon by Dream Village, where the disputed land was part
of the public domain and the disputants were applicants for sales patent thereto.

Dream Village’s motion for reconsideration was denied in the appellate court’s Order 48 of July 13, 2010.
Petition for Review in the Supreme Court

On petition for review on certiorari to this Court, Dream Village interposes the following issues:

IN ANNULLING THE RESOLUTION OF COSLAP IN COSLAP CASE NO. 99-500, THE HONORABLE CA DECIDED
THE CASE IN A MANNER NOT CONSISTENT WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE
COURT;

THE HONORABLE CA ERRED IN RULING THAT COSLAP HAD NO JURISDICTION OVER THE CONTROVERSY
BETWEEN THE PARTIES HEREIN.49

The Court’s Ruling

We find no merit in the petition.

The BCDA holds title to Fort Bonifacio.

That the BCDA has title to Fort Bonifacio has long been decided with finality. In Samahan ng Masang
Pilipino sa Makati, Inc. v. BCDA,50 it was categorically ruled as follows:

First, it is unequivocal that the Philippine Government, and now the BCDA, has title and ownership over
Fort Bonifacio. The case of Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati is
final and conclusive on the ownership of the then Hacienda de Maricaban estate by the Republic of the
Philippines. Clearly, the issue on the ownership of the subject lands in Fort Bonifacio is laid to rest. Other
than their view that the USA is still the owner of the subject lots, petitioner has not put forward any
claim of ownership or interest in them.51

The facts in Samahan ng Masang Pilipino sa Makati are essentially not much diferent from the
controversy below. There, 20,000 families were long-time residents occupying 98 has. of Fort Bonifacio in
Makati City, who vainly sought to avert their eviction and the demolition of their houses by the BCDA
upon a claim that the land was owned by the USA under TCT No. 2288. The Supreme Court found that
TCT No. 2288 had in fact been cancelled by TCT No. 61524 in the name of the Republic, which title was in
turn cancelled on January 3, 1995 by TCT Nos. 23888, 23887, 23886, 22460, 23889, 23890, and 23891,
all in the name of the BCDA. The Court ruled that the BCDA’s aforesaid titles over Fort Bonifacio are valid,
indefeasible and beyond question, since TCT No. 61524 was cancelled in favor of BCDA pursuant to an
explicit authority under R.A. No. 7227, the legal basis for BCDA’s takeover and management of the
subject lots.52

Dream Village sits on the

abandoned C-5 Road, which lies
outside the area declared in
Proclamation Nos. 2476 and 172 as
alienable and disposable.

Pursuant to Proclamation No. 2476, the following surveys were conducted by the Bureau of Lands to
delimit the boundaries of the areas excluded from the coverage of Proclamation No. 423:
Barangay Survey Plan Date Approved

1. Lower Bicutan SWO-13-000253 October 21, 1986

2. Signal Village SWO-13-000258 May 13, 1986

3. Upper Bicutan SWO-13-000258 May 13, 1986

4. Western Bicutan SWO-13-000298 January 15, 1987 53

However, the survey plan for Western Bicutan, Swo-13-000298, shows that Lots 3, 4, 5 and 6 thereof are
inside the area segregated for the Libingan ng mga Bayani under Proclamation No. 208, which then
leaves only Lots 1 and 2 of Swo-13-000298 as available for disposition. For this reason, it was necessary
to amend Proclamation No. 2476. Thus, in Proclamation No. 172 only Lots 1 and 2 of Swo-13-000298 are
declared alienable and disposable.54

The DENR verification survey report states that Dream Village is not situated in Lot 1 of Swo-13-000298
but actually occupies Lots 10, 11 and part of 13 of Swo-00-0001302: "x x x Dream Village is outside Lot1,
SWO-13-000298 and inside Lot 10, 11 & portion of Lot 13, SWO-00-0001302 with an actual area of
78466 square meters. The area is actually is [sic] outside SWO-00-0001302 of BCDA." 55 Inexplicably and
gratuitously, the DENR also states that the area is outside of BCDA, completely oblivious that the BCDA
holds title over the entire Fort Bonifacio, even as the BCDA asserts that Lots 10, 11 and 13 of SWO-00-
0001302 are part of the abandoned right-of-way of C-5 Road. This area is described as lying north of Lot
1 of Swo-13-000298 and of Lots 3, 4, 5 and 6 of Swo-13-000298 (Western Bicutan) inside the Libingan ng
mga Bayani, and the boundary line of Lot 1 mentioned as C-5 Road is really the proposed alignment of C-
5 Road, which was abandoned when, as constructed, it was made to traverse northward into the
Libingan ng mga Bayani. Dream Village has not disputed this assertion.

The mere fact that the original plan for C-5 Road to cross Swo-00-0001302 was abandoned by deviating
it northward to traverse the southern part of Libingan ng mga Bayani does not signify abandonment by
the government of the bypassed lots, nor that these lots would then become alienable and disposable.
They remain under the title of the BCDA, even as it is significant that under Section 8(d) of R.A. No. 7227,
a relocation site of 30.5 has. was to be reserved for families afected by the construction of C-5 Road. It is
nowhere claimed that Lots 10, 11 and 13 of Swo-00-0001302 are part of the said relocation site. These
lots border C-5 Road in the south,56making them commercially valuable to BCDA, a farther argument
against a claim that the government has abandoned them to Dream Village.

While property of the State or any

of its subdivisions patrimonial in
character may be the object of
prescription, those "intended for
some public service or for the
development of the national
wealth" are considered property of
public dominion and therefore not
susceptible to acquisition by
prescription.
Article 1113 of the Civil Code provides that "property of the State or any of its subdivisions not
patrimonial in character shall not be the object of prescription." Articles 420 and 421 identify what is
property of public dominion and what is patrimonial property:

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

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

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

Art. 421. All other property of the State, which is not of the character stated in the preceding article, is
patrimonial property.

One question laid before us is whether the area occupied by Dream Village is susceptible of acquisition
by prescription. In Heirs of Mario Malabanan v. Republic, 57 it was pointed out that from the moment R.A.
No. 7227 was enacted, the subject military lands in Metro Manila

became alienable and disposable. However, it was also clarified that the said lands did not thereby
become patrimonial, since the BCDA law makes the express reservation that they are to be sold in order
to raise funds for the conversion of the former American bases in Clark and Subic. The Court noted that
the purpose of the law can be tied to either "public service" or "the development of national wealth"
under Article 420(2) of the Civil Code, such that the lands remain property of the public dominion, albeit
their status is now alienable and disposable. The Court then explained that it is only upon their sale to a
private person or entity as authorized by the BCDA law that they become private property and cease to
be property of the public dominion: 58

For as long as the property belongs to the State, although already classified as alienable or disposable, it
remains property of the public dominion if when it is "intended for some public service or for the
development of the national wealth."59

Thus, under Article 422 of the Civil Code, public domain lands become patrimonial property only if there
is a declaration that these are alienable or disposable, together with an express government
manifestation that the property is already patrimonial or no longer retained for public service or the
development of national wealth. Only when the property has become patrimonial can the prescriptive
period for the acquisition of property of the public dominion begin to run. Also under Section 14(2) of
Presidential Decree (P.D.) No. 1529, it is provided that before acquisitive prescription can commence, the
property sought to be registered must not only be classified as alienable and disposable, it must also be
expressly declared by the State that it is no longer intended for public service or the development of the
national wealth, or that the property has been converted into patrimonial. Absent such an express
declaration by the State, the land remains to be property of public dominion. 60

Since the issuance of Proclamation No. 423 in 1957, vast portions of the former Maricaban have been
legally disposed to settlers, besides those segregated for public or government use. Proclamation No.
1217 (1973) established the Maharlika Village in Bicutan, Taguig to serve the needs of resident Muslims
of Metro Manila; Proclamation No. 2476 (1986), as amended by Proclamation No. 172 (1987), declared
more than 400 has. of Maricaban in Upper and Lower Bicutan, Signal Village, and Western Bicutan as
alienable and disposable; Proclamation No. 518 (1990) formally exempted from Proclamation No. 423
the Barangays of Cembo, South Cembo, West Rembo, East Rembo, Comembo, Pembo and Pitogo,
comprising 314 has., and declared them open for disposition.

The above proclamations notwithstanding, Fort Bonifacio remains property of public dominion of the
State, because although declared alienable and disposable, it is reserved for some public service or for
the development of the national wealth, in this case, for the conversion of military reservations in the
country to productive civilian uses.61Needless to say, the acquisitive prescription asserted by Dream
Village has not even begun to run.

Ownership of a land registered

under a Torrens title cannot be lost
by prescription or adverse
possession.

Dream Village has been unable to dispute BCDA’s claim that Lots 10, 11 and part of 13 of Swo-00-
0001302 are the abandoned right-of-way of C-5 Road, which is within the vast titled territory of Fort
Bonifacio. We have already established that these lots have not been declared alienable and disposable
under Proclamation Nos. 2476 or 172.

Moreover, it is a settled rule that lands under a Torrens title cannot be acquired by prescription or
adverse possession.62 Section 47 of P.D. No. 1529, the Property Registration Decree, expressly provides
that no title to registered land in derogation of the title of the registered owner shall be acquired by
prescription or adverse possession. And, although the registered landowner may still lose his right to
recover the possession of his registered property by reason of laches, 63 nowhere has Dream Village
alleged or proved laches, which has been defined as such neglect or omission to assert a right, taken in
conjunction with lapse of time and other circumstances causing prejudice to an adverse party, as will
operate as a bar in equity. Put any way, it is a delay in the assertion of a right which works disadvantage
to another because of the inequity founded on some change in the condition or relations of the property
or parties. It is based on public policy which, for the peace of society, ordains that relief will be denied to
a stale demand which otherwise could be a valid claim. 64

The subject property having been

expressly reserved for a specific
public purpose, the COSLAP
cannot exercise jurisdiction over the
complaint of the Dream Village
settlers.

BCDA has repeatedly asserted that the COSLAP has no jurisdiction to hear Dream Village’s complaint.
Concurring, the CA has ruled that questions as to the physical identity of Dream Village and whether it
lies in Lots 10, 11 and 13 of Swo-00-0001302, or whether Proclamation No. 172 has released the
disputed area for disposition are issues which are "manifestly beyond the scope of the COSLAP’s
jurisdiction vis-á-vis Paragraph 2, Section 3 of E.O. No. 561," 65 rendering its Resolution a patent nullity
and its pronouncements void. Thus, the CA said, under Section 3 of E.O. No. 561, the COSLAP’s duty
would have been to refer the conflict to another tribunal or agency of government in view of the serious
ramifications of the disputed claims:
In fine, it is apparent that the COSLAP acted outside its jurisdiction in taking cognizance of the case. It
would have been more prudent if the COSLAP has [sic] just referred the controversy to the proper forum
in order to fully thresh out the ramifications of the dispute at bar. As it is, the impugned Resolution is a
patent nullity since the tribunal which rendered it lacks jurisdiction. Thus, the pronouncements
contained therein are void. "We have consistently ruled that a judgment for want of jurisdiction is no
judgment at all. It cannot be the source of any right or the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal efect." 66 (Citation omitted)

We add that Fort Bonifacio has been reserved for a declared specific public purpose under R.A. No. 7227,
which unfortunately for Dream Village does not encompass the present demands of its members.
Indeed, this purpose was the very reason why title to Fort Bonifacio has been transferred to the BCDA,
and it is this very purpose which takes the dispute out of the direct jurisdiction of the COSLAP. A review
of the history of the COSLAP will readily clarify that its jurisdiction is limited to disputes over public lands
not reserved or declared for a public use or purpose.

On July 31, 1970, President Marcos issued E.O. No. 251 creating the Presidential Action Committee on
Land Problems (PACLAP) to expedite and coordinate the investigation and resolution of all kinds of land
disputes between settlers, streamline and shorten administrative procedures, adopt bold and decisive
measures to solve land problems, or recommend other solutions. 67 E.O. No. 305, issued on March 19,
1971, reconstituted the PACLAP and gave it exclusive jurisdiction over all cases involving public lands and
other lands of the public domain,68 as well as adjudicatory powers phrased in broad terms: "To
investigate, coordinate, and resolve expeditiously land disputes, streamline administrative proceedings,
and, in general, to adopt bold and decisive measures to solve problems involving public lands and lands
of the public domain."69

On November 27, 1975, P.D. No. 832 reorganized the PACLAP and enlarged its functions and duties.
Section 2 thereof even granted it quasi judicial functions, to wit:

Sec. 2. Functions and duties of the PACLAP. – The PACLAP shall have the following functions and duties:

1. Direct and coordinate the activities, particularly the investigation work, of the various government
agencies and agencies involved in land problems or disputes, and streamline administrative procedures
to relieve small settlers and landholders and members of cultural minorities of the expense and time-
consuming delay attendant to the solution of such problems or disputes;

2. Refer for immediate action any land problem or dispute brought to the attention of the PACLAP, to any
member agency having jurisdiction thereof: Provided, That when the Executive Committee decides to act
on a case, its resolution, order or decision thereon shall have the force and efect of a regular
administrative resolution, order or decision, and shall be binding upon the parties therein involved and
upon the member agency having jurisdiction thereof;

xxxx

4. Evolve and implement a system of procedure for the speedy investigation and resolution of land
disputes or problems at provincial level, if possible. (Underscoring supplied)

On September 21, 1979, E.O. No. 561 abolished the PACLAP and created the COSLAP to be a more
efective administrative body to provide a mechanism for the expeditious settlement of land problems
among small settlers, landowners and members of the cultural minorities to avoid social
unrest.70 Paragraph 2, Section 3 of E.O No. 561 now specifically enumerates the instances when the
COSLAP can exercise its adjudicatory functions:

Sec. 3. Powers and Functions. — The Commission shall have the following powers and functions:

1. Coordinate the activities, particularly the investigation work, of the various government offices and
agencies involved in the settlement of land problems or disputes, and streamline administrative
procedures to relieve small settlers and landholders and members of cultural minorities of the expense
and time consuming delay attendant to the solution of such problems or disputes;

2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any land
problem or dispute referred to the Commission: Provided, That the Commission may, in the following
cases, assume jurisdiction and resolve land problems or disputes which are critical and explosive in
nature considering, for instance, the large number of the parties involved, the presence or emergence of
social tension or unrest, or other similar critical situations requiring immediate action:

(a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires;

(b) Between occupants/squatters and government reservation grantees;

(c) Between occupants/squatters and public land claimants or applicants;

(d) Petitions for classification, release and/or subdivision of lands of the public domain; and

(e) Other similar land problems of grave urgency and magnitude.

xxxx

Citing the constant threat of summary eviction and demolition by the BCDA and the seriousness and
urgency of the reliefs sought in its Amended Petition, Dream Village insists that the COSLAP was justified
in assuming jurisdiction of COSLAP Case No. 99-500. But in Longino v. Atty. General, 71 it was held that as
an administrative agency, COSLAP’s jurisdiction is limited to cases specifically mentioned in its enabling
statute, E.O. No. 561. The Supreme Court said:

Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction and, as such, could wield
only such as are specifically granted to them by the enabling statutes. x x x.

xxxx

Under the law, E.O. No. 561, the COSLAP has two options in acting on a land dispute or problem lodged
before it, namely, (a) refer the matter to the agency having appropriate jurisdiction for
settlement/resolution; or (b) assume jurisdiction if the matter is one of those enumerated in paragraph
2(a) to (e) of the law, if such case is critical and explosive in nature, taking into account the large number
of the parties involved, the presence or emergence of social tension or unrest, or other similar critical
situations requiring immediate action. In resolving whether to assume jurisdiction over a case or to refer
the same to the particular agency concerned, the COSLAP has to consider the nature or classification of
the land involved, the parties to the case, the nature of the questions raised, and the need for
immediate and urgent action thereon to prevent injuries to persons and damage or destruction to
property. The law does not vest jurisdiction on the COSLAP over any land dispute or problem. 72 (Citation
omitted)
The Longino ruling has been consistently cited in subsequent COSLAP cases, among them Davao New
Town Development Corp. v. COSLAP,73 Barranco v. COSLAP,74 NHA v. COSLAP,75 Cayabyab v. de
Aquino,76 Ga, Jr. v. Tubungan,77 Machado v. Gatdula,78 and Vda. de Herrera v. Bernardo. 79

Thus, in Machado, it was held that the COSLAP cannot invoke Section 3(2)(e) of E.O. No. 561 to assume
jurisdiction over "other similar land problems of grave urgency," since the statutory construction
principle of ejusdem generis prescribes that where general words follow an enumeration of persons or
things, by words of a particular and specific meaning, such general words are not to be construed in their
widest extent but are to be held as applying only to persons or things of the same kind as those
specifically mentioned.80 Following this rule, COSLAP’s jurisdiction is limited to disputes involving lands in
which the government has a proprietary or regulatory interest, 81 or public lands covered with a specific
license from the government such as a pasture lease agreements, a timber concessions, or a reservation
grants,82 and where moreover, the dispute is between occupants/squatters and pasture lease agreement
holders or timber concessionaires; between occupants/squatters and government reservation grantees;
and between occupants/squatters and public land claimants or applicants.

In Longino, the parties competed to lease a property of the Philippine National Railways. The high court
rejected COSLAP’s jurisdiction, noting that the disputed lot is not public land, and neither party was a
squatter, patent lease agreement holder, government reservation grantee, public land claimant or
occupant, or a member of any cultural minority, nor was the dispute critical and explosive in nature so as
to generate social tension or unrest, or a critical situation which required immediate action. 83

In Davao New Town Development Corp., it was held that the COSLAP has no concurrent jurisdiction with
the Department of Agrarian Reform (DAR) in respect of disputes concerning the implementation of
agrarian reform laws, since "the grant of exclusive and primary jurisdiction over agrarian reform matters
on the DAR implies that no other court, tribunal, or agency is authorized to resolve disputes properly
cognizable by the DAR."84 Thus, instead of hearing and resolving the case, COSLAP should have simply
referred private respondents’ complaint to the DAR or DARAB. According to the Court:

The abovementioned proviso Section (3)(2) of E.O. No. 561, which vests COSLAP the power to resolve
land disputes, does not confer upon COSLAP blanket authority to assume every matter referred to it. Its
jurisdiction is confined only to disputes over lands in which the government has proprietary or
regulatory interest. Moreover, the land dispute in Bañaga involved parties with conflicting free patent
applications which was within the authority of PACLAP to resolve, unlike that of the instant case which is
exclusively cognizable by the DAR.85

In Barranco, COSLAP issued a writ to demolish structures encroaching into private property.1âwphi1 The
Supreme court ruled that COSLAP may resolve only land disputes "involving public lands or lands of the
public domain or those covered with a specific license from the government such as a pasture lease
agreement, a timber concession, or a reservation grant." 86

In NHA, it was held that COSLAP has no jurisdiction over a boundary dispute between two local
government units, that its decision is an utter nullity correctible by certiorari, that it can never become
final and any writ of execution based on it is void, and all acts performed pursuant to it and all claims
emanating from it have no legal efect.87
In Cayabyab, it was held that "the jurisdiction of COSLAP does not extend to disputes involving the
ownership of private lands, or those already covered by a certificate of title, as these fall exactly within
the jurisdiction of the courts and other administrative agencies." 88

In Ga, Jr., it was reiterated that the COSLAP has no jurisdiction over controversies relating to ownership
and possession of private lands, and thus, the failure of respondents to properly appeal from the COSLAP
decision before the appropriate court was held not fatal to the petition for certiorari that they eventually
filed with the CA. The latter remedy remained available despite the lapse of the period to appeal from
the void COSLAP decision.89

In Machado, the high court ruled that COSLAP has no jurisdiction in disputes over private lands between
private parties, reiterating the essential rules contained in Section 3 of E.O. No. 561 governing the
exercise by COSLAP of its jurisdiction, to wit:

Under these terms, the COSLAP has two diferent rules in acting on a land dispute or problem lodged
before it, e.g., COSLAP can assume jurisdiction only if the matter is one of those enumerated in
paragraph 2(a) to (e) of the law. Otherwise, it should refer the case to the agency having appropriate
jurisdiction for settlement or resolution. In resolving whether to assume jurisdiction over a case or to
refer it to the particular agency concerned, the COSLAP considers: (a) the nature or classification of the
land involved; (b) the parties to the case; (c) the nature of the questions raised; and (d) the need for
immediate and urgent action thereon to prevent injury to persons and damage or destruction to
property. The terms of the law clearly do not vest on the COSLAP the general power to assume
jurisdiction over any land dispute or problem. Thus, under EO 561, the instances when the COSLAP may
resolve land disputes are limited only to those involving public lands or those covered by a specific
license from the government, such as pasture lease agreements, timber concessions, or reservation
grants.90 (Citations omitted)

In Vda. de Herrera, the COSLAP assumed jurisdiction over a complaint for "interference, disturbance,
unlawful claim, harassment and trespassing" over a private parcel of land. The CA ruled that the parties
were estopped to question COSLAP’s jurisdiction since they participated actively in the proceedings. The
Supreme Court, noting from the complaint that the case actually involved a claim of title and possession
of private land, ruled that the RTC or the MTC has jurisdiction since the dispute did not fall under Section
3, paragraph 2 (a) to (e) of E.O. No. 561, was not critical and explosive in nature, did not involve a large
number of parties, nor was there social tension or unrest present or emergent. 91

In the case at bar, COSLAP has invoked Bañaga to assert its jurisdiction. There, Guillermo Bañaga had
filed a free patent application with the Bureau of Lands over a public land with an area of 30 has.
Gregorio Daproza (Daproza) also filed a patent application for the same property. The opposing claims
and protests of the claimants remained unresolved by the Bureau of Lands, and neither did it conduct an
investigation. Daproza wrote to the COSLAP, which then opted to exercise jurisdiction over the
controversy. The high court sustained COSLAP, declaring that its jurisdiction is not confined to the cases
mentioned in paragraph 2(a) to (e) of E.O. No. 561, but includes land problems in general, which are
frequently the source of conflicts among settlers, landowners and cultural minorities.

But as the Court has since clarified in Longino and in the other cases aforecited, the land dispute in
Bañaga was between private individuals who were free patent applicants over unregistered public lands.
In contrast, the present petition involves land titled to and managed by a government agency which has
been expressly reserved by law for a specific public purpose other than for settlement. Thus, as we have
advised in Longino, the law does not vest jurisdiction on the COSLAP over any land dispute or problem,
but it has to consider the nature or classification of the land involved, the parties to the case, the nature
of the questions raised, and the need for immediate and urgent action thereon to prevent injuries to
persons and damage or destruction to property.

WHEREFORE, premises considered, the petition is DENIED.

G.R. No. 186639 February 5, 2014

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
EMMANUEL C. CORTEZ, Respondent.

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari 1 under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision2 dated February 17, 2009 of the Court of Appeals (CA) in CA-G.R. CV No.
87505. The CA affirmed the Decision 3 dated February 7, 2006 of the Regional Trial Court (RTC) of Pasig
City, Branch 68, in LRC Case No. N-11496.

The Facts

On February 28, 2003, respondent Emmanuel C. Cortez (Cortez) filed with the RTC an application 4 for
judicial confirmation of title over a parcel of land located at Barangay (Poblacion) Aguho, P. Herrera
Street, Pateros, Metro Manila. The said parcel of land has an area of 110 square meters and more
particularly described as Lot No. 2697-B of the Pateros Cadastre. In support of his application, Cortez
submitted, inter alia, the following documents: (1) tax declarations for various years from 1966 until
2005; (2) survey plan of the property, with the annotation that the property is classified as alienable and
disposable; (3) technical description of the property, with a certification issued by a geodetic engineer;
(4) tax clearance certificate; (5) extrajudicial settlement of estate dated March 21, 1998, conveying the
subject property to Cortez; and (6) escritura de particion extrajudicial dated July 19, 1946, allocating the
subject property to Felicisima Cotas – Cortez’ mother.

As there was no opposition, the RTC issued an Order of General Default and Cortez was allowed to
present his evidence ex-parte.

Cortez claimed that the subject parcel of land is a portion of Lot No. 2697, which was declared for
taxation purposes in the name of his mother. He alleged that Lot No. 2697 was inherited by his mother
from her parents in 1946; that, on March 21, 1998, after his parents died, he and his siblings executed an
Extra-Judicial Settlement of Estate over the properties of their deceased parents and one of the
properties allocated to him was the subject property. He alleged that the subject property had been in
the possession of his family since time immemorial; that the subject parcel of land is not part of the
reservation of the Department of Environment and Natural Resources (DENR) and is, in fact, classified as
alienable and disposable by the Bureau of Forest Development (BFD).

Cortez likewise adduced in evidence the testimony of Ernesto Santos, who testified that he has known
the family of Cortez for over sixty (60) years and that Cortez and his predecessors-in-interest have been
in possession of the subject property since he came to know them.

On February 7, 2006, the RTC rendered a Decision, 5 which granted Cortez’ application for registration,
viz:

WHEREFORE, finding the application meritorious, the Court DECLARES, CONFIRMS, and ORDERS the
registration of the applicant’s title thereto.

As soon as this Decision shall have become final and after payment of the required fees, let the
corresponding Decrees be issued in the name of the applicant, Emmanuel C. Cortez.

Let copies of this Decision be furnished the Office of the Solicitor General, Land Registration Authority,
Land Management Bureau, and the Registry of Deeds of Rizal.

SO ORDERED.6

In granting Cortez’ application for registration of title to the subject property, the RTC made the following
ratiocinations:

From the foregoing, the Court finds that there is sufficient basis to grant the relief prayed for. It having
been established by competent evidence that the possession of the land being applied for by the
applicant and his predecessor-in-interest have been in open, actual, uninterrupted, and adverse
possession, under claim of title and in the concept of owners, all within the time prescribed by law, the
title of the applicant should be and must be AFFIRMED and CONFIRMED. 7

The Republic of the Philippines (petitioner), represented by the Office of the Solicitor General, appealed
to the CA, alleging that the RTC erred in granting the application for registration despite the failure of
Cortez to comply with the requirements for original registration of title. The petitioner pointed out that,
although Cortez declared that he and his predecessors-in-interest were in possession of the subject
parcel of land since time immemorial, no document was ever presented that would establish his
predecessors-in-interest’s possession of the same during the period required by law. That petitioner
claimed that Cortez’ assertion that he and his predecessors-in-interest had been in open, adverse, and
continuous possession of the subject property for more than thirty (30) years does not constitute well-
neigh incontrovertible evidence required in land registration cases; that it is a mere claim, which should
not have been given weight by the RTC.

Further, the petitioner alleged that there was no certification from any government agency that the
subject property had already been declared alienable and disposable. As such, the petitioner claims,
Cortez’ possession of the subject property, no matter how long, cannot confer ownership or possessory
rights.

On February 17, 2009, the CA, by way of the assailed Decision, 8 dismissed the petitioner’s appeal and
affirmed the RTC Decision dated February 7, 2006. The CA ruled that Cortez was able to prove that the
subject property was indeed alienable and disposable, as evidenced by the declaration/notation from
the BFD.

Further, the CA found that Cortez and his predecessors-in-interest had been in open, continuous, and
exclusive possession of the subject property for more than 30 years, which, under Section 14(2) of
Presidential Decree (P.D.) No. 15299, sufficed to convert it to private property. Thus:

It has been settled that properties classified as alienable and disposable land may be converted into
private property by reason of open, continuous and exclusive possession of at least 30 years. Such
property now falls within the contemplation of "private lands" under Section 14(2) of PD 1529, over
which title by prescription can be acquired. Thus, under the second paragraph of Section 14 of PD 1529,
those who are in possession of alienable and disposable land, and whose possession has been
characterized as open, continuous and exclusive for 30 years or more, may have the right to register their
title to such land despite the fact that their possession of the land commenced only after 12 June 1945. x
xx

xxxx

While it is significant to note that applicant-appellee’s possession of the subject property can be traced
from his mother’s possession of the same, the records, indeed, show that his possession of the subject
property, following Section 14(2) [of PD 1529], is to be reckoned from January 3, 1968, when the subject
property was declared alienable and disposable and not way back in 1946, the year when he inherited
the same from his mother. At any rate, at the time the application for registration was filed in 2003,
there was already sufficient compliance with the requirement of possession. His possession of the
subject property has been characterized as open, continuous, exclusive and notorious possession and
occupation in the concept of an owner. 10 (Citations omitted)

Hence, the instant petition.

The Issue

The sole issue to be resolved by the Court is whether the CA erred in affirming the RTC Decision dated
February 7, 2006, which granted the application for registration filed by Cortez.

The Court’s Ruling

The petition is meritorious.

At the outset, the Court notes that the RTC did not cite any specific provision of law under which
authority Cortez’ application for registration of title to the subject property was granted. In granting the
application for registration, the RTC merely stated that "the possession of the land being applied for by
[Cortez] and his predecessor-in-interest have been in open, actual, uninterrupted, and adverse
possession, under claim of title and in the concept of owners, all within the time prescribed by
law[.]"11 On the other hand, the CA assumed that Cortez’ application for registration was based on
Section 14(2) of P.D. No. 1529. Nevertheless, Cortez, in the application for registration he filed with the
RTC, profered that should the subject property not be registrable under Section 14(2) of P.D. No. 1529, it
could still be registered under Section 48(b) of Commonwealth Act No. 141 (C.A. No. 141), or the Public
Land Act, as amended by P.D. No. 107312 in relation to Section 14(1) of P.D. No. 1529. Thus, the Court
deems it proper to discuss Cortez’ application for registration of title to the subject property vis-à-vis the
provisions of Section 14(1) and (2) of P.D. No. 1529.

Applicants for original registration of title to land must establish compliance with the provisions of
Section 14 of P.D. No. 1529, which pertinently provides that:

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

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

(2) Those who have acquired ownership of private lands by prescription under the provision of existing
laws.

xxxx

After a careful scrutiny of the records of this case, the Court finds that Cortez failed to comply with the
legal requirements for the registration of the subject property under Section 14(1) and (2) of P.D. No.
1529.

Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or incomplete titles to
public land acquired under Section 48(b) of C.A. No. 141, as amended by P.D. No. 1073. "Under Section
14(1) [of P.D. No. 1529], applicants for registration of title must sufficiently establish first, that the
subject land forms part of the disposable and alienable lands of the public domain; second, that the
applicant and his predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and third, that it is under a bona fide claim of ownership since
June 12, 1945, or earlier."13

The first requirement was not satisfied in this case. To prove that the subject property forms part of the
alienable and disposable lands of the public domain, Cortez adduced in evidence a survey plan Csd-00-
00063314 (conversion-subdivision plan of Lot 2697, MCadm 594-D, Pateros Cadastral Mapping) prepared
by Geodetic Engineer Oscar B. Fernandez and certified by the Lands Management Bureau of the DENR.
The said survey plan contained the following annotation:

This survey is inside L.C. Map No. 2623, Project No. 29, classified as alienable & disposable by the Bureau
of Forest Development on Jan. 3, 1968.
However, Cortez’ reliance on the foregoing annotation in the survey plan is amiss; it does not constitute
incontrovertible evidence to overcome the presumption that the subject property remains part of the
inalienable public domain. In Republic of the Philippines v. Tri-Plus Corporation, 15 the Court clarified that,
the applicant must at the very least submit a certification from the proper government agency stating
that the parcel of land subject of the application for registration is indeed alienable and disposable, viz:

It must be stressed that incontrovertible evidence must be presented to establish that the land subject
of the application is alienable or disposable.

In the present case, the only evidence to prove the character of the subject lands as required by law is
the notation appearing in the Advance Plan stating in efect that the said properties are alienable and
disposable. However, this is hardly the kind of proof required by law. 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 statute. The applicant may
also secure a certification from the Government that the lands applied for are alienable and disposable.
In the case at bar, while the Advance Plan bearing the notation was certified by the Lands Management
Services of the DENR, the certification refers only to the technical correctness of the survey plotted in
the said plan and has nothing to do whatsoever with the nature and character of the property surveyed.
Respondents failed to submit a certification from the proper government agency to prove that the lands
subject for registration are indeed alienable and disposable. 16 (Citations omitted and emphasis ours)

Similarly, in Republic v. Roche,17 the Court declared that:

Respecting the third requirement, the applicant bears the burden of proving the status of the land. In
this connection, the Court has held that he must present a certificate of land classification status issued
by the Community Environment and Natural Resources Office (CENRO) or the Provincial Environment
and Natural Resources Office (PENRO) of the DENR. He must also prove that the DENR Secretary had
approved the land classification and released the land as alienable and disposable, and that it is within
the approved area per verification through survey by the CENRO or PENRO. Further, the applicant must
present a copy of the original classification approved by the DENR Secretary and certified as true copy by
the legal custodian of the official records. These facts must be established by the applicant to prove that
the land is alienable and disposable.

Here, Roche did not present evidence that the land she applied for has been classified as alienable or
disposable land of the public domain. She submitted only the survey map and technical description of
the land which bears no information regarding the land’s classification. She did not bother to establish
the status of the land by any certification from the appropriate government agency. Thus, it cannot be
said that she complied with all requisites for registration of title under Section 14(1) of P.D.
1529.18 (Citations omitted and emphasis ours)

The annotation in the survey plan presented by Cortez is not the kind of evidence required by law as
proof that the subject property forms part of the alienable and disposable land of the public domain.
Cortez failed to present a certification from the proper government agency as to the classification of the
subject property. Cortez likewise failed to present any evidence showing that the DENR Secretary had
indeed classified the subject property as alienable and disposable. Having failed to present any
incontrovertible evidence, Cortez’ claim that the subject property forms part of the alienable and
disposable lands of the public domain must fail.

Anent the second and third requirements, the Court finds that Cortez likewise failed to establish the
same.1âwphi1 Cortez failed to present any evidence to prove that he and his predecessors-in-interest
have been in open, continuous, exclusive, and notorious possession and occupation of the subject
property since June 12, 1945, or earlier. Cortez was only able to present oral and documentary evidence
of his and his mother’s ownership and possession of the subject property since 1946, the year in which
his mother supposedly inherited the same.

Other than his bare claim that his family possessed the subject property since time immemorial, Cortez
failed to present any evidence to show that he and his predecessors-in-interest indeed possessed the
subject property prior to 1946; it is a mere claim and not factual proof of possession. "It is a rule that
general statements that are mere conclusions of law and not factual proof of possession are unavailing
and cannot suffice. An applicant in a land registration case cannot just harp on mere conclusions of law
to embellish the application but must impress thereto the facts and circumstances evidencing the
alleged ownership and possession of the land."19

Further, the earliest tax declaration presented by Cortez was only in 1966. Cortez failed to explain why,
despite his claim that he and his predecessors-in-interest have been in possession of the subject
property since time immemorial, it was only in 1966 that his predecessors-in-interest started to declare
the same for purposes of taxation.

That Cortez and his predecessors-in-interest have been in possession of the subject property for fifty-
seven (57) years at the time he filed his application for registration in 2003 would likewise not entitle him
to registration thereof under Section 14(2) of P.D. No. 1529.

Section 14(2) of P.D. No. 1529 sanctions the original registration of lands acquired by prescription under
the provisions of existing laws. "As Section 14(2) [of P.D. No. 1529] categorically provides, only private
properties may be acquired thru prescription and under Articles 420 and 421 of the Civil Code, only
those properties, which are not for public use, public service or intended for the development of
national wealth, are considered private." 20

In Heirs of Mario Malabanan v. Republic,21 the Court however clarified that lands of the public domain
that are patrimonial in character are susceptible to acquisitive prescription and, accordingly, eligible for
registration under Section 14(2) of P.D. No. 1529, viz:

The Civil Code makes it clear that patrimonial property of the State may be acquired by private persons
through prescription. This is brought about by Article 1113, which states that "[a]ll things which are
within the commerce of man are susceptible to prescription," and that property of the State or any of its
subdivisions not patrimonial in character shall not be the object of prescription."

There are two modes of prescription through which immovables may be acquired under the Civil
Code.1âwphi1 The first is ordinary acquisitive prescription, which, under Article 1117, requires
possession in good faith and with just title; and, under Article 1134, is completed through possession of
ten (10) years. There is nothing in the Civil Code that bars a person from acquiring patrimonial property
of the State through ordinary acquisitive prescription, nor is there any apparent reason to impose such a
rule. At the same time, there are indispensable requisites–good faith and just title. The ascertainment of
good faith involves the application of Articles 526, 527, and 528, as well as Article 1127 of the Civil Code,
provisions that more or less speak for themselves. 22 (Citation omitted and emphasis ours)

The Court nevertheless emphasized that there must be an official declaration by the State that the public
dominion property is no longer intended for public use, public service, or for the development of
national wealth before it can be acquired by prescription; that a mere declaration by government
officials that a land of the public domain is already alienable and disposable would not suffice for
purposes of registration under Section 14(2) of P.D. No. 1529. The Court further stressed that the period
of acquisitive prescription would only begin to run from the time that the State officially declares that
the public dominion property is no longer intended for public use, public service, or for the development
of national wealth. Thus:

Let us now explore the efects under the Civil Code of a declaration by the President or any duly
authorized government officer of alienability and disposability of lands of the public domain. Would such
lands so declared alienable and disposable be converted, under the Civil Code, from property of the
public dominion into patrimonial property? After all, by connotative definition, alienable and disposable
lands may be the object of the commerce of man; Article 1113 provides that all things within the
commerce of man are susceptible to prescription; and the same provision further provides that
patrimonial property of the State may be acquired by prescription.

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

Accordingly, there must be an express declaration by the State that the public dominion property is no
longer intended for public service or the development of the national wealth or that the property has
been converted into patrimonial. Without such express declaration, the property, even if classified as
alienable or disposable, remains property of the public dominion, pursuant to Article 420(2), and thus
incapable of acquisition by prescription. It is only when such alienable and disposable lands are expressly
declared by the State to be no longer intended for public service or for the development of the national
wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form
of a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly
authorized by law.23 (Emphasis supplied)

In Republic v. Rizalvo,24 the Court deemed it appropriate to reiterate the ruling in Malabanan, viz:

On this basis, respondent would have been eligible for application for registration because his claim of
ownership and possession over the subject property even exceeds thirty (30) years. However, it is
jurisprudentially clear that the thirty (30)-year period of prescription for purposes of acquiring
ownership and registration of public land under Section 14 (2) of P.D. No. 1529 only begins from the
moment the State expressly declares that the public dominion property is no longer intended for public
service or the development of the national wealth or that the property has been converted into
patrimonial. x x x.25 (Citation omitted and emphasis ours)

Accordingly, although lands of the public domain that are considered patrimonial may be acquired by
prescription under Section 14(2) of P.D. No. 1529, before acquisitive prescription could commence, the
property sought to be registered must not only be classified as alienable and disposable; it must also be
declared by the State that it is no longer intended for public use, public service or the development of
the national wealth. Thus, absent an express declaration by the State, the land remains to be property of
public dominion.26

The Court finds no evidence of any official declaration from the state attesting to the patrimonial
character of the subject property. Cortez failed to prove that acquisitive prescription has begun to run
against the State, much less that he has acquired title to the subject property by virtue thereof. It is of no
moment that Cortez and his predecessors-in-interest have been in possession of the subject property for
57 years at the time he applied for the registration of title thereto. "[l]t is not the notorious, exclusive
and uninterrupted possession and occupation of an alienable and disposable public land for the
mandated periods that converts it to patrimonial. The indispensability of an official declaration that the
property is now held by the State in its private capacity or placed within the commerce of man for
prescription to have any efect against the State cannot be overemphasized. " 27

WHEREFORE, in consideration of the foregoing disquisitions, the instant petition is GRANTED. The
Decision dated February 17, 2009 of the Court of Appeals in CA-G.R. CV No. 87505, which affirmed the
Decision dated February 7, 2006 of the Regional Trial Court of Pasig City, Branch 68, in LRC Case No. N-
11496, is hereby REVERSED and SET ASIDE. The Application for Registration of Emmanuel C. Cortez in
LRC Case No. N-11496 is DENIED for lack of merit.

SO ORDERED.