LEGAL OPINION

This legal opinion seeks to answer the question of whether or not the sale of South Road
Project (SRP) lot, i.e., Lot 8-B-1 (a portion of Lot 8-B) containing an area of 263,384 square
meters by the City of Cebu to Ayala, Cebu Holdings, Inc. and SM Prime Holdings is valid?

To resolve the question at hand, it shall be imperative to address the underlying

controversies as presented through a series of questions before finally addressing the main
issue.

1. Can the State, through a presidential proclamation (and not through a law
passed by Congress) validly transfer a land/property reserved by the national
government to LGU (the City of Cebu)?

The State cannot transfer a land/property reserved by the National government to LGU by a
presidential proclamation. The authority of the President through a presidential
proclamation to reclassify the reclaimed lands as alienable or disposable and open to
disposition or concession does not include the power to convey or transfer to LGU’s without
a law passed by Congress.

Nowhere in Section 6 of Commonwealth Act No. 141 supports the claim that the President
may, after classification, convey the reclassified land. Section 6 of the Commonwealth Act No.
141 only mentions that the president, through a presidential proclamation, may transfer
such land from one classification to another, for the purpose of their administration and
disposition.1 Moreover, under the End-user government agency doctrine,2 a local
government unit is qualified under the Constitution, to hold alienable or even inalienable
lands of the public domain only through a Congressional fiat.3

Thus, Section 6 of the Commonwealth Act No. 141 authorizes only the issuance of
presidential proclamation for the purpose of reclassification of lands of public domain but it
did not, ipso facto, authorize the conveyance or transfer of ownership of the subject land
without an act of Congress.

2. Do LGUs have the power to reclaim lots? What are the requirements if any?

1 Commonwealth Act No. 141, Section 6. The President, upon the recommendation of the Secretary of
Agriculture and Commerce, shall from time to time classify the lands of the public domain into —
(a) Alienable or disposable;
(b) Timber, and
(c) Mineral lands,
and may at any time and in a like manner transfer such lands from one class to another, for the
purposes of their administration and disposition.
2 The Essentials of Local Government Law in the Philippines by Daryl Bretch Largo,1 st Edition, 2013
3 Id.,2
Local Government Units have the power to reclaim lots by virtue of a law passed by
Congress.

Unless the State, through Congress, grants this right, it is only the National Government that
can undertake reclamation work and assert title to reclaimed land.4 It was only with the
passage of R. A. No. 18995 in 1957 that Congress granted to chartered cities and
municipalities a general authority to reclaim foreshore land bordering their respective
territories. The Local Government Code of 1991 likewise empowers local government units
to undertake reclamation projects by themselves or through contractors.6

No reclamation projects shall be undertaken by Local Government Units covered under

Section 2 of A. O. No. 2007-27 without the prior permit an approval thereof by the PRA or the
President of the Philippines (President). Other than the PRA or the President, there is no
other government agency or a local government unit which is authorized to approve
reclamation projects. Section 4 hereof provides for the approval process and procedures.

3. What is the nature of a reclaimed lot? Is it public or patrimonial? More

specifically, what is the nature of a lot reclaimed by a local government unit? Is
the local government unit vested with the power to convert a public land into
patrimonial?

As a general rule and pursuant to the Regalian Doctrine, all lands of the public domain belong
to the State and are inalienable. As an exception to this rule, lands of the public domain
subsequently classified or declared as no longer intended for public use of for the
development of national wealth are removed from the sphere of public dominion and are
considered converted into patrimonial lands or lands of private ownership that may be
alienated or disposed through any of the modes of acquiring ownership under the Civil Code.

Whether reclaimed lands transferred to a public or municipal corporation are public in

nature or patrimonial depends upon the legislative intent.8 Since the city or municipality may
alienate lands it reclaimed pursuant to R.A. No. 18999 or it may pay a portion of the
reclaimed lands pursuant to Section 302 of the Local Government Code, it appears that the
lands reclaimed by the local government units pursuant to the aforesaid laws are patrimonial
in character unless said local government concerned reserves certain portions of the
reclaimed area for public use such as for plazas, schools or hospitals, in which case, the
reclaimed land is characterized as land of public dominion.

4 Concurring Opinion of J. Puno In Republic vs. CA, 299 SCRA 199, 301 (1998)
5 REPUBLIC ACT NO. 1899 AN ACT AUTHORIZE THE RECLAMATION OF FORESHORE LANDS BY
CHARTERED CITIES AND MUNICIPALITIES
6 Section 302 of R. A. No. 7160 or The Local Government Code of 1991
7 Section 3 of A. O. No. 2007-2 IRR OF EXECUTIVE ORDER NO. 543 (EO 543) DATED JUNE 24, 2006

DELEGATING TO THE PHILIPPINE RECLAMATION AUTHORITY (PRA) THE POWER TO APPROVE

RECLAMATION PROJECTS
8 Manila Lodge No. 761 v CA 73 SCRA 162 (1976)
9 Ponce v. Gomez, L-21870, February 3, 1965
 4. (a) Is there a prohibition on private corporations acquiring public lands?

Under the 1973 Constitution, private corporations could hold alienable lands of the public
domain only through lease.10 Only individuals could now acquire alienable lands of the public
domain, and private corporations became absolutely barred from acquiring any kind of
alienable land of the public domain. The constitutional ban extended to all kinds of alienable
lands of the public domain, while the statutory ban under CA No. 141 applied only to
government reclaimed, foreshore and marshy alienable lands of the public domain.

The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations from acquiring any kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the
public domain only through lease. As in the 1935 and 1973 Constitutions, the general law
governing the lease to private corporations of reclaimed, foreshore and marshy alienable
lands of the public domain is still CA No. 141.11

Hence, private corporations are constitutionally and statutorily banned from acquiring any
kind of alienable land of the public domain.

(b) Are Ayala, Cebu Holdings, Inc. and SM Prime Holdings considered private
corporations subject to such disqualification?

Ayala, Cebu Holdings, Inc. and SM Prime Holdings are private corporations and are
constitutionally and statutorily disqualified from acquiring any kind of alienable land of the
public domain.

A private corporation is one that is formed for some private purpose, benefit, aim or end,
such as a business corporation formed and organized under a general law on corporation
and it is created for private objects.12

As can be gleaned from the primary purpose stated in the Articles of Incorporation of Ayala,
Cebu Holdings, Inc. and SM Prime Holdings, these two entities are undoubtedly private
corporations formed and created for some private purpose, benefit, aim or end.

Hence, these aforementioned entities are constitutionally and statutorily disqualified from
acquiring any kind of alienable land of the public domain.

5. Is SRP public or patrimonial?

South Road Properties is part of public domain.

In the case Republic Real Estate Corporation v. Court of Appeals,13 citing the concurring
opinion of Justice Reynato S. Puno, he said that foreshore lands are lands of public dominion

10 Section 11, Article XIV of the 1973 Constitution

11 Francisco Chavez vs. PEA et al, G.R. No. 133250, November 11, 2003
12 Daryl Bretch Largo The Essentials of Local Government Law in the Philippines (2013), p 10, citing

Cooley, Handbook of Law of Municipal Corporations

13 299 SCRA 199 (1998)
intended for public use. In order to convert property of public dominion into patrimonial
property, there must be an affirmative act, either on the part of the executive of the
legislative to reclassify the property of the public dominion into patrimonial.

Under Proclamation No. 843, s. 2005,14 it did not clearly and unequivocally removed the
subject lots for public use or for the development of national wealth are removed from the
sphere of public dominion and are considered converted into patrimonial lands. Moreover,
CA No. 141 does not authorize the President through a presidential proclamation to
reclassify government reclaimed and marshy lands into other non-agricultural lands under
Section 59 (d).15

Thus, SRP remains part of the disposable lands of public dominion until a valid law passed by
Congress converting it into patrimonial property.

6. What were the requirements for Cebu City to dispose of SRP lots? Had these
requirements been met?

The only way the government can sell to private parties’ government reclaimed and marshy
disposable lands of the public domain is for the legislature to pass a law authorizing such
sale.16 To reiterate, CA No. 141 does not authorize the President to reclassify government
reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands
classified under Section 59 (d) are the only alienable or disposable lands for non-agricultural
purposes that the government could sell to private parties.

Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands
under Section 59 that the government previously transferred to government units or entities
could be sold to private parties. Once Congressional grant is obtained for the sale or lease of
disposable lands of the public domain, there must be a public bidding.17

In the case of Garganera vs. Tomas R. Osmeña18 and Torres vs. Sangguniang Panglungsod ng
Cebu,19 the local government unit of Cebu City invoked the Presidential Proclamation20 as
their sole authority and basis to dispose the subject lot. The said Presidential Proclamation is
insufficient to dispense the requirement under C. A. No. 141 for a Congressional authority.

14 Proclamation No. 843, s. 2005 AMENDING PROCLAMATION NO. 200-A, DATED MAY 22, 1967
15 Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes
or rivers;
(d) Lands not included in any of the foregoing classes.
16 Id., 11
17 Sections 63 and 67 of CA No. 141
18 CA-G.R. SP No. 03902, April 26, 2011
19 CA-G.R. CV No. 06568, April 30, 2019
20 Id., 17
 7. Was there a valid sale of SRP lots by the City of Cebu to Ayala, Cebu Holdings, Inc.
and SM Prime Holdings?

There was no valid sale of SRP lots by the City of Cebu to Ayala, Cebu Holdings, Inc. and SM
prime Holdings.

First, Section 61 of CA No. 141 in relation to Section 59 of the same Act prohibits the sale of
government reclaimed, foreshore and marshy disposable lands of public domain. It only
allowed the lease of such lands to private parties. The only way the government can sell to
private parties government reclaimed and marshy disposable lands of the public domain is
for the legislature to pass a law authorizing such sale.

Section 40 of R. A. No. 385721 expressly authorize the City of Cebu to undertake and carry out
the reclamation of submerged land from the sea adjoining the city limits at the expense of the
city, the area thus reclaimed to belong exclusively to the city. In comparison, the PEA’s
charter22 expressly tasks PEA among others, to dispose, lease and sell any and all kinds of
lands, buildings, estates and other forms of real property, owned, managed, controlled
and/or operated by the government. There is, therefore, legislative authority granted to PEA
to sell its lands, whether patrimonial or alienable lands of the public domain. Such legislative
grant in the charter PEA is not available in the Charter of the City of Cebu allowing it to do
the same.

Thus, the statutory prohibition in CA No. 141 is still applicable for the City of Cebu since
there is no law authorizing such sale.

Second. Granting arguendo that a law was passed authorizing the City of Cebu to sell its
reclaimed lots, the constitutional prohibition in Section 3, Article XII of the 1987 Constitution
will apply insofar as the sale to Private Corporation is concerned. The constitutional ban is
absolute and clear that private corporation cannot acquire reclaimed alienable lands of the
public domain.

CONCLUSIONS

1. Settled is the rule that the president has the authority to reclassify lands of public
dominion into patrimonial property of the state. However, such presidential
proclamation which would reclassify lands from public domain into a patrimonial
property does not, ipso facto, authorize the conveyance or transfer of ownership of
the subject land without an act of Congress.

Thus, the National Government cannot validly transfer the ownership of SRP to the
LGU of Cebu City by a mere presidential proclamation since this is not part of the
function of a presidential proclamation in Section 6, CA. 141. There must be a law
authorizing the transfer to the City of Cebu.

21 REPUBLIC ACT No. 3857 AN ACT TO REVISE THE CHARTER OF THE CITY OF CEBU
22 Section 4 (b) of PRESIDENTIAL DECREE No. 1084
2. SRP is a foreshore land which was reclaimed. As exhaustively discussed in the Amari
Case, among the lands under the public domain, government reclaimed, foreshore
and marshy lands remained sui generis, as the only alienable or disposable lands of
the public domain that the government could not sell to private parties. It is not
capable of private appropriation unless the legislature passed a law allowing their
sale. CA No. 141 does not authorize the President to reclassify government reclaimed
and marshy lands into other non-agricultural lands for purposes of selling it to
private parties.

3. Granting arguendo that the transfer of SRP from the National Government to the City
of Cebu is valid, the later would now have to satisfy both the constitutional and
statutory requirements before it can alienate or dispose the subject lots.

Under the 1987 Constitution, private corporations are banned from acquiring any
kind of alienable land of the public domain. It only allows private corporations to
hold alienable lands of the public domain only through lease as provided in CA 141.
In addition, before the lease of the subject disposable land of public domain can be
awarded, the City of Cebu must also observe the provisions of Sections 63 and 67 of
CA No. 141 requiring public auction. Such was never met by the City of Cebu.

In sum, the sale of the City of Cebu of the SRP to private corporations fails to satisfy
both the constitutional and statutory requirements when disposing and alienating
disposable lands of public domain.