G.R. No.

79167 May 7, 1992

THE HEIRS OF PROCESO BAUTISTA represented by PEDRO BAUTISTA, petitioners,
vs.
SPOUSES SEVERO BARZA and ESTER P. BARZA, and COURT OF APPEALS, respondents.
Miguel and Valenson Law Offices for petitioners.
Rogelio A. Barba and Aguinaldo, Barza & Associates for private respondents.

ROMERO, J.:
The facts of this case began as far back as 1946, when the Philippines was still a new
republic and frontier lands and bountiful natural resources down south beckoned the
adventurous-like Proceso Bautista and Ester Barza.
It was on October 25, 1946, to be exact, when Proceso Bautista applied for a fishpond permit
over a thirty-hectare parcel of marshy public land located in Sitio Central, Lupon, Davao
(Fishpond Application No. 1205). The application was acknowledge on December 12, 1946,
by the then Division of Fisheries. Said application was, however, rejected by the same office
on November 9, 1948 because the area applied for was needed for firewood production as
certified to by the Bureau of Forestry. The rejection covered an area of 49 hectares as against
the 30 hectares applied for by Proceso Bautista.
1
Between October 25, 1946 and November
9, 1948, Bautista occupied an area which extended beyond the boundary of the one he had
applied for and introduced improvements thereon.
2

On September 23, 1948, Ester Barza filed a fishpond application covering an area of
approximately 14.85 hectares at Sitio Bundas, Lupon, Davao (Fishpond Application. No.
2984). Subsequent investigation revealed that the portion applied for by Barza overlapped
the area originally applied for by Proceso Bautista.
3

Despite the rejection of his application, Proceso Bautista filed another fishpond application
on February 8, 1949 with the Bureau of Fisheries (Fishpond Application No. 3346). The 49
hectares applied for was in Sitio Bundas instead of Sitio Central.
4

The records of the Bureau of Fisheries further show that while the 14.85 hectares applied for
by Barza in Fishpond Application No. 2984 had been released by the Bureau of Forestry as
available for fishpond purposes, the 49 hectares applied for by Bautista in Fishpond
Application No. 3346 had not yet been similarly released by the said bureau. It must be
emphasized that the area, including the portion applied for by Barza had been greatly
improved by Proceso Bautista.
5
As expected, an administrative case involving the two
applicants arose.
On September 19, 1953, the Director of Fisheries ruled in favor of Ester Barza. The
dispositive portion
6
of his order reads:
IN VIEW OF THE FOREGOING, Fp. A. No. 2984 of Ester F. Barza should be,
as hereby it is, GIVEN DUE COURSE, subject however to the
reimbursement of the amounts of improvements in the area to Proceso
Bautista within a period of sixty days from the date hereof, the said
amounts to be appraised and determined by the District Fishery Officer at
Davao City; and Fp. A. No. 3346 of Proceso Bautista should be, as hereby it
is, REJECTED.
SO ORDERED.
Bautista appealed the said order to the Secretary of Agriculture and Natural Resources
(DANR Case No. 836). In a decision dated April 28, 1954, the Secretary, through
Undersecretary Jaime M. Ferrer, dismissed the appeal and affirmed in toto the order of the
Director of Fisheries giving due course to the fishpond application of Barza.
7
Bautista moved
for reconsideration but the same was denied on October 8, 1954. 8
It was not until February 2, 1955, that the Director of Fisheries, in pursuance of the order of
September 19, 1953, required Ester Barza to remit the amount of P3,391.34 which
represented the value of the improvements introduced by Bautista.
9
This figure was
protested by Mrs. Barza in her letter dated March 6, 1955 where she expressed her
willingness to pay the amount of P1,763.31 only. On April 18, 1955, the Director of Fisheries
advised her to remit a reappraised amount of P2,263.33. Subsequent reappraisals on the
value of the improvements became necessary in view of Bautista's claim that the
improvements were worth P14,000.
10

Meanwhile, since the parties could not agree on the amount of reimbursement, on October
13, 1956, Bautista moved for the rejection of the fishpond application of Barza in view of her
non-compliance with the order of the Director of Fisheries dated September 19, 1953
mandating Barza's deposit of the value of the improvements.
11
Bautista appealed to the then
Secretary of Agriculture and Natural Resources, who, in his decision dated May 5, 1959
denied Bautista's appeal thereby enforcing the Director of Fisheries order of September 19,
1953.
12

On October 19, 1960, Jose Montilla, Assistant Director of Fisheries, ordered Ester Barza by
letter to reimburse Bautista P1,789.18, the total value of the improvements pursuant to the
appraisal report of District Fishery Officer Crispin Mondragon dated October 31, 1958.
13
On
December 22, 1960, Barza, agreeing to said appraisal, consigned the sum of P1,789.18 with
the then Justice of the Peace of Lupon, Davao.
14
Bautista, however, refused to accept the
same. On July 11, 1961, another reappraisal of the improvements was made establishing the
value of the dikes, dams, trees and houses in the area involved to be P14,569.08.
15
On
December 12, 1962, this amount was reduced to P9,514.33 in view of the finding that certain
improvements were suitable for agricultural and not for fishpond purposes.
16
In the
meantime, the decision of the Secretary of Agriculture and Natural Resources dated May 5,
1959 became final.
17

More than seven years after the last reappraisal of the improvements or on December 12,
1968, Ester Barza and her husband, Engr. Severo M. Barza, filed in the then Court of First
Instance of Davao Oriental, an action against Bautista praying for recovery of possession
over the 14.85-hectare fishpond area she had applied for, a declaration of the validity of the
consignation made before the Justice of the Peace of Lupon, and damages and attorney's
fees.
On January 30, 1971, while the case was pending resolution, Proceso Bautista
died.
18
Consequently, his heirs were substituted as party defendants.
The lower court at first dismissed the case for lack of jurisdiction but later, it reconsidered
the dismissal.
19
After a protracted trial, on November 15, 1983, the Regional Trial Court of
Davao Oriental,
20
rendered a decision
21
in favor of defendant Bautista. While disagreeing
with the Bautistas that the priority rule in applications for permits was inapplicable because
Proceso Bautista's application was made before the area was declared available for fishpond
purposes, the lower court ruled that the Barzas had not acquired a vested right to possess
the areas concerned as they had not complied with the "condition precedent" to such
possession the reimbursement of the value of the improvements made by Bautista. Hence,
the court ruled, it was premature for the Barzas to demand possession of the area.
On whether the action for recovery of possession had prescribed,
22
the lower court said:
. . . Besides, a review of the established facts and circumstances would
show that Proceso Bautista started to possess the property adversely as
early as 1946. It was only on September 23, 1948 when Ester Barza filed
her application and protested Bautista's entry. Under Article 2253 of the
New Civil Code, "the Civil Code of 1899 and other previous laws shall
govern rights originating, under said laws, from acts done or events which
took place under their regime, even though this Code may regulate them
in a different manner or may not recognize them." Prescription therefore
which started prior to the effectivity of the New Civil Code on August 30,
1950 should be governed by the law prior to the effectivity of the New
Civil Code, which was the Code of Civil Procedure, under which the action
of recovery of (possession) prescribed within ten (10) years. In this case,
the adverse possession of Proceso Bautista which could be a basis for
prescription was interrupted with the filing of the application of Ester
Barza and her protest against the acts of the former which she lodged
with the Bureau of Fisheries in 1948. When the decision of the
Department of Agriculture and Natural Resources dated May 5, 1959
became final on July 4, 1959 as per Exhibit "D" and as in fact admitted by
the parties, the said prescription by adverse possession continued (sic).
This is clear from the provision of Art. 1123 of the New Civil Code which
provides that civil interruption of possession for the purpose of
prescription is produced by the judicial summons to the possessor which,
in the conflict between the parties, took the form of the fishpond
application and the protest filed by Ester Barza with the Bureau of
Fisheries in 1948. From July 4, 1959 to December 12, 1968, a period of
more than nine (9) years elapsed, and as the same should be tacked with
the period of almost two (2) years which elapsed from 1946 to 1948,
when Proceso Bautista started to adversely possess the area and when, on
September 23, 1948, Ester Barza filed her application, more than ten (10)
years had expired and therefore by reason of prescription, the recovery of
possession is also barred.
Emphasizing that Barza's failure to reimburse Bautista for the improvements introduced on
the area was inconsistent with good faith, the lower court held that the order of the Director
of Fisheries giving due course to her fishpond application and the decision of the Secretary
of Agriculture and Natural Resources "had all become stale." Moreover, the consignation of
the amount of P1,789.18 was illegal as it was not in accordance with Art. 1258 of the New
Civil Code and, the court added, Barza's failure to pay the sum required of her and to file the
necessary action within ten years was tantamount to a non-user of her rights under the
September 19, 1953 order of the Director of Fisheries. Citing by analogy Art. 506 of the Civil
Code providing that the right to make use of public waters is extinguished by the lapse of the
concession and by non-user for five (5) years, the lower court held that the cancellation of
Barza's application, as recommended by Fishery Product Examiner Abdul Bakir, was proper.
On the other hand, the lower court ruled that Bautista's right to retain possession over his
improvements was implied by the order of September 19, 1953 while Barza's failure to pay
the value of the improvements was "unfair and unsporting" and violative of Art. 19 of the
New Civil Code. The lower court believed that P9,514.33 was the "right amount" that Barza
should have properly consigned. The dispositive portion of the decision
23
reads:
WHEREFORE, judgment is hereby rendered in favor of the defendants and
against the plaintiffs, dismissing the complaint and the plaintiffs are
hereby directed to pay defendants the sum of P10,000 by way of litigation
expenses and P10,000 by way of attorney's fees and to pay the costs.
SO ORDERED.
The Barzas appealed to the Court of Appeals. On June 30, 1986 said court reversed the
decision of the lower court.
24
It interpreted the decision of the Secretary of Agriculture and
Natural Resources as an "official imprimatur" on the application of Barza and as an
implication that Bautista had no right to continue possession over the 49 hectares covered
by Fishpond Application No. 3346.
While stating that consignation in an action for recovery of possession of realty is not
required by law and that the reimbursement of the value of the improvements is not an
obligation, the appellate court nonetheless held that the consignation of P1,789.18 was
"proper and effective."
25
It found that Bautista was not a possessor in good faith nor a
planter in good faith because he filed Fishpond Application No. 3346 after Barza had filed
Fishpond Application No. 2984. It concluded that Bautista's claim to prescriptive rights,
acquired or vested, did not arise "because it infringe(d) on the rights of other(s) like Barza
whose Fishpond Application No. 2984 was given due course by the proper officials of the
government."
26
It disposed of the case as follows:
Wherefore, the decision a quo is hereby set aside and reversed and
another one is rendered ordering the heirs of Proceso Bautista to accept
or withdraw the sum of P1,789.18 from the Municipal Trial Court Lupon,
Davao Oriental (formerly Municipal Court of Lupon, Davao Oriental)
representing the value of the improvements introduced on the
controverted area and to surrender possession of the contested area to
the heirs of Ester Barza both within 10 days from receipt of the entry of
judgment. No damages and cost.
SO ORDERED. (Rollo, p. 55)
On July 29, 1986, petitioners filed a motion for reconsideration of the decision of the Court of
Appeals but the same was denied on June 18, 1987.
27

Hence, this recourse. Petitioners contend that the private respondents cannot be given the
right to possess the fishpond in question as they themselves did not comply with the
Director of Fisheries' order to reimburse Bautista for the improvements thereon. They assert
that whatever rights the Barzas had under their fishpond application had become stale by
non-user.
At the outset, it should be remembered that until timber or forest lands are released as
disposable or alienable, neither the Bureau of Lands nor the Bureau of Fisheries has
authority to lease, grant, sell, or otherwise dispose of these lands for homesteads, sales
patents, leases for grazing purposes, fishpond leases and other modes of utilization.
28
On
October 25, 1946 when Bautista filed Fishpond Application No. 1205, the area applied for
could not yet be granted to him as it was yet to be released for public utilization. The
situation, however, changed when Barza filed Fishpond Application No. 2984 for the area
had, by then, been opened for fishpond purposes.
Thus, even if Bautista were ahead of Barza by two years in terms of occupation, possession
and introduction of substantial improvements, he was not placed in a better position than
Barza. The priority rule under Fisheries Administrative Order No. 14 applies only to public
lands already released by the Bureau of Fisheries. Until such lands had been properly
declared available for fishpond purposes, any application is ineffective because there is no
disposable land to speak of.
29
Accordingly, Bautista's application was premature and the
ruling of the Director of Fisheries on this matter was, therefore, correct.
Although in administrative decision does not necessarily bind us, it is entitled to great
weight and respect. It should be stressed that the function of administering and disposing of
lands of the public domain in the manner prescribed by law is not entrusted to the courts but
to executive officials.
30
Matters involved in the grant, cancellation, reinstatement and
revision of fishpond licenses and permits are vested under the executive supervision of the
appropriate department head who in this case is the Secretary of Agriculture and Natural
Resources. As such, his discretion must be respected in the absence of a clear showing of
abuse.
31
This is in consonance with our well settled ruling that administrative decisions on
matters within the jurisdiction of the executive department can only be set aside on proof of
gross abuse of jurisdiction, fraud or error of law.
32
As earlier noted, and there being no
motion for its reconsideration, the decision of the Secretary of Agriculture and Natural
Resources become final on July 3, 1959, thirty (30) days from receipt by the parties of copies
of the decision.
33

Petitioners' contention that the action for recovery of possession had prescribed when the
Barzas filed it on December 12, 1968 is erroneous for it was filed within the ten-year period
for enforcing a judgment, which in this case is the May 5, 1959 decision of the Secretary of
Agriculture and Natural Resources, as provided for in Art. 1144 of the Civil Code. Hence, the
ultimate issue in this case is whether or not the Barzas may rightfully seek enforcement of
the decision of the Director of Fisheries and that of the Secretary of Agriculture and Natural
Resources, notwithstanding their refusal to reimburse the Bautistas for the improvements in
the area. We find that the peculiar circumstances of this case compel as to rule in the
affirmative.
Although Bautista was in possession of the area for quite a number of years, he ceased to
become a bona fidepossessor upon receipt of the decision of the Director of Fisheries
granting due course to Barza's fishpond application. Under Art. 528 of the Civil Code,
"(p)ossession acquired in good faith does not lose its character except in the case and from
the moment facts exist which show that the possessor is not unaware that he possesses the
thing improperly or wrongfully." Thus, Bautista should have desisted from introducing
improvements on the property when he learned that Barza's application had been approved.
However, Bautista may not be solely faulted for holding on to the area notwithstanding that
he had no right over it. The Barzas, after receiving the administrative decision in their favor,
should have complied with its directive to reimburse the Bautistas for the improvements
introduced thereon. This is not to say; however, that such failure to abide by the decision of
the Director of Fisheries rendered "stale" the said decision. There is also the established fact
that Bautista refused the payments tendered by the Barzas. However, the Barzas' failure to
question the last reappraisal of the improvements constituted inaction on their part, for
which they should bear its consequences.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED subject to the
modification that the petitioners shall be REIMBURSED the amount of P9,514.33 (inclusive
of the consigned amount of P1,789.18) with legal interest from December 12, 1962 until fully
paid. Upon payment of said reimbursement, the Bautistas shall SURRENDER possession of
the 14.85 hectares, including the improvements thereon, for which the Barzas had been
granted the right to operate as fishpond. This decision is immediately executory. No costs.
SO ORDERED.
Gutierrez, Jr., Feliciano and Davide, Jr., JJ., concur.
Bidin, J., took no part.

G.R. No. L-66575 September 30, 1986
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES, TEODORO
and MYRNA, all surnamed MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO CASTRO,
SALOME RODRIGUEZ, EDUCARDO CUISON, FERNANDO ZARCILLA, MARIANO GABRIEL,
NICOMEDES CORDERO, CLETO PEDROZO, FELIX SALARY and JOSE
PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.

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

The stipulations contained in the Compromise Agreement partake of the nature of an
adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which, as
clearly found by the lower and appellate courts, was originally a creek forming a tributary of
the Agno River. Considering that as held in the case of Mercado vs. Municipal President of
Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm extending from a river and
participating in the ebb and flow of the sea, is a property belonging to the public domain
which is not susceptible to private appropriation and acquisitive prescription, and as a
public water, it cannot be registered under the Torrens System in the name of any individual
[Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil. 4551; and
considering further that neither the mere construction of irrigation dikes by the National
Irrigation Administration which prevented the water from flowing in and out of the subject
fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a
property of the public domain, the Court finds the Compromise Agreement null and void and
of no legal effect, the same being contrary to law and public policy.
The finding that the subject body of water is a creek belonging to the public domain is a
factual determination binding upon this Court. The Municipality of Bugallon, acting thru its
duly-constituted municipal council is clothed with authority to pass, as it did the two
resolutions dealing with its municipal waters, and it cannot be said that petitioners were
deprived of their right to due process as mere publication of the notice of the public bidding
suffices as a constructive notice to the whole world.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise Agreement
and declare the same null and void for being contrary to law and public policy. The Court
further resolved to DISMISS the instant petition for lack of merit.
SO ORDERED.
Feria (Chairman), Alampay, Gutierrez, Jr. and Paras, JJ., concur.

G.R. No. L-28379 March 27, 1929
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-appellant,
vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General Jaranilla for appellant.
Abad Santos, Camus & Delgado for appellees.
VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this court from the judgment of the
Court of First Instance of Manila in cadastral proceeding No. 373 of the Court of First
Instance of Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the title and decreeing
the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of
Manila in favor of Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts,
and dismissing the claims presented by the Government of the Philippine Islands and the
City of Manila.
In support of its appeal, the appellant assigns the following alleged errors as committed by
the trial court in its judgment, to wit:
1. The lower court erred in not holding that the lots in question are of the public
domain, the same having been gained from the sea (Manila Bay) by accession, by
fillings made by the Bureau of Public Works and by the construction of the break-
water (built by the Bureau of Navigation) near the mouth of Vitas Estero.
2. The lower court erred in holding that the lots in question formed part of the big
parcel of land belonging to the spouses Maximo Cabangis and Tita Andres, and in
holding that these spouses and their successors in interest have been in
continuous, public, peaceful and uninterrupted possession of said lots up to the
time this case came up.
3. The lower court erred in holding that said lots existed before, but that due to the
current of the Pasig River and to the action of the big waves in Manila Bay during
the south-west monsoons, the same disappeared.
4. The lower court erred in adjudicating the registration of the lands in question in
the name of the appellees, and in denying the appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be taken into
consideration in deciding the case, proves the following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R. O.
Record No. 373, were formerly a part of a large parcel of land belonging to the predecessor
of the herein claimants and appellees. From the year 1896 said land began to wear away, due
to the action of the waves of Manila Bay, until the year 1901 when the said lots became
completely submerged in water in ordinary tides, and remained in such a state until 1912
when the Government undertook the dredging of Vitas Estuary in order to facilitate
navigation, depositing all the sand and silt taken from the bed of the estuary on the low lands
which were completely covered with water, surrounding that belonging to the Philippine
Manufacturing Company, thereby slowly and gradually forming the lots, the subject matter
of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation,
and it was only in the year 1926 that Dr. Pedro Gil, in behalf of the claimants and appellees,
declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a preponderance of the evidence, the question
arises: Who owns lots 36, 39 and 40 in question?
The claimants-appellees contend that inasmuch as the said lots once formed a part of a large
parcel of land belonging to their predecessors, whom they succeeded, and their immediate
predecessor in interest, Tomas Cabangis, having taken possession thereof as soon as they
were reclaimed, giving his permission to some fishermen to dry their fishing nets and
deposit their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, riverbanks, shorts, roadsteads, and that of a
similar character.
x x x x x x x x x
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:
ARTICLE 1. The following are part of the national domain open to public use:
x x x x x x x x x
3. The Shores. By the shore is understood that space covered and uncovered by the
movement of the tide. Its interior or terrestrial limit is the line reached by the
highest equinoctial tides. Where the tides are not appreciable, the shore begins on
the land side at the line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of
the Civil Code just quoted, this court said:
We should not be understood, by this decision, to hold that in a case of gradual
encroachment or erosion by the ebb and flow of the tide, private property may not become
'property of public ownership,' as defined in article 339 of the code, where it appears that
the owner has to all intents and purposes abandoned it and permitted it to be totally
destroyed, so as to become a part of the 'playa' (shore of the seas), 'rada' (roadstead), or the
like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances
and private properties are permanently invaded by the waves, and in this case they
become part of the shore or beach. They then pass to the public domain, but the
owner thus dispossessed does not retain any right to the natural products resulting
from their new nature; it is a de facto case of eminent domain, and not subject to
indemnity.
Now then , when said land was reclaimed, did the claimants-appellees or their predecessors
recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein claimants-appellees
began to wear way in 1896, owing to the gradual erosion caused by the ebb and flow of the
tide, until the year 1901, when the waters of Manila Bay completely submerged a portion of
it, included within lots 36, 39 and 40 here in question, remaining thus under water until
reclaimed as a result of certain work done by the Government in 1912. According to the
above-cited authorities said portion of land, that is, lots 36, 39 and 40, which was private
property, became a part of the public domain. The predecessors of the herein claimants-
appellees could have protected their land by building a retaining wall, with the consent of
competent authority, in 1896 when the waters of the sea began to wear it away, in
accordance with the provisions of Article 29 of the aforecited Law of Waters of August 3,
1866, and their failure to do so until 1901, when a portion of the same became completely
covered by said waters, remaining thus submerged until 1912, constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas as a result of
certain work done by the Government, to whom do they belong?
The answer to this question is found in article 5 of the aforementioned Law of Waters, which
is as follows:


ART. 5. Lands reclaimed from the sea in consequence of works constructed by the
State, or by the provinces, pueblos or private persons, with proper permission,
shall become the property of the party constructing such works, unless otherwise
provided by the terms of the grant of authority.
The fact that from 1912 some fishermen had been drying their fishing nets and depositing
their bancas on lots 36, 39 and 40, by permission of Tomas Cabangis, does not confer on the
latter or his successors the ownership of said lots, because, as they were converted into
public land, no private person could acquire title thereto except in the form and manner
established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by the
claimants-appellees, this court, admitting the findings and holdings of the lower court, said
the following:
If we heed the parol evidence, we find that the seashore was formerly about one
hundred brazas distant from the land in question; that, in the course of time, and by
the removal of a considerable quantity of sand from the shore at the back of the
land for the use of the street car company in filling in Calle Cervantes, the sea water
in ordinary tides now covers part of the land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is covered by sea
water during the period of ordinary high tide, is not a reason established by any
law to cause the loss thereof, especially when, as in the present case, it becomes
covered by water owing to circumstances entirely independent of the will of the
owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034),
1
also cited by the claimants-
appellees, wherein the Government adduced no evidence in support of its contention, the
lower court said in part:
The contention of the claimants Cabangis is to the effect that said lots are a part of
the adjoining land adjudicated to their deceased father, Don Tomas Cabangis,
which, for over fifty years had belonged to their deceased grandmother, Tita
Andres, and that, due to certain improvements made in Manila Bay, the waters of
the sea covered a large part of the lots herein claimed.
The Government of the Philippine Islands also claims the ownership of said lots,
because, at ordinary high tide, they are covered by the sea.
Upon petition of the parties, the lower court made an ocular inspection of said lots
on September 12, 1923, and on said inspection found some light material houses
built thereon, and that on that occasion the waters of the sea did not reach the
aforesaid lots.
From the evidence adduced at the trial of this cause, it may be inferred that Tita
Andres, during her lifetime was the owner of a rather large parcel of land which
was adjudicated by a decree to her son Tomas Cabangis; the lots now in question
are contiguous to that land and are covered by the waters of the sea at
extraordinary high tide; some 50 years before the sea did not reach said strip of
land, and on it were constructed, for the most part, light material houses, occupied
by the tenants of Tita Andres, to whom they paid rent. Upon her death, her son
Tomas Cabangis succeeded to the possession, and his children succeeded him, they
being the present claimants, Consuelo, Jesus, Tomas, and Consorcia Cabangis.
The Government of the Philippine Islands did not adduce any evidence in support
of its contention, with the exception of registry record No. 8147, to show that the
lots here in question were not excluded from the application presented in said
proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited
above, the rise of the waters of the sea that covered the lands there in dispute, was due not
to the action of the tide but to the fact that a large quantity of sand was taken from the sea at
the side of said land in order to fill in Cervantes Street, and this court properly held that
because of this act, entirely independent of the will of the owner of said land, the latter could
not lose the ownership thereof, and the mere fact that the waters of the sea covered it as a
result of said act, is not sufficient to convert it into public land, especially, as the land was
high and appropriate for building purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the
Insular Government did not present any evidence in support of its contention, thus leaving
uncontradicted the evidence adduced by the claimants Aguilar et al., as to the ownership,
possession and occupation of said lots.
In the instant case the evidence shows that from 1896, the waves of Manila Bay had been
gradually and constantly washing away the sand that formed the lots here in question, until
1901, when the sea water completely covered them, and thus they remained until the year
1912. In the latter year they were reclaimed from the sea by filling in with sand and silt
extracted from the bed of Vitas Estuary when the Government dredged said estuary in order
to facilitate navigation. Neither the herein claimants-appellees nor their predecessors did
anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared on account of the
gradual erosion due to the ebb and flow of the tide, and having remained in such a state until
they were reclaimed from the sea by the filling in done by the Government, they are public
land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs. Government of the
Philippine Islands, 28 Phil., 505).
By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of
cadastral proceeding No. 373 of the City of Manila are held to be public land belonging to the
Government of the United States under the administration and control of the Government of
the Philippine Islands. So ordered.
Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.

G.R. No. L-69002 June 30, 1988
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
AMANDA LAT VDA. DE CASTILLO, FLORENCIO T. CASTILLO, SOLEDAD LOTA CASTILLO,
CARLOS L. CASTILLO, NIEVES KATIGBAK CASTILLO, MARIANO L. CASTILLO, HIPOLITA
DYTIAPCO CASTILLO, AIDA CASTILLO HERRERA, HERMITO HERRERA, JOSE L.
CASTILLO, LILIA MACEDA CASTILLO, TERESITA L. CASTILLO, REGISTER OF DEEDS OF
BATANGAS and THE INTERMEDIATE APPELLATE COURT, respondents.
Castro, Nardo, Quintanilla, Gonzales & Macatangay Law Office for respondents.

PARAS, J.:
This is a petition for review on certiorari of the April 26, 1984 Decision of the then
Intermediate Appellate Court *reversing the February 6, 1976 Decision of the then Court of
First Instance of Batangas, Branch VI, in Civil Case No. 2044.
The antecedental facts of this case, as found by the then Intermediate Appellate Court, are as
follows:
Sometime in 1951, the late Modesto Castillo applied for the registration of
two parcels of land, Lots 1 and 2, located in Banadero, Tanauan, Batangas,
described in Plan Psu-119166, with a total area of 39,755 square meters.
In a decision dated August 31, 1951, the said Modesto Castillo, married to
Amanda Lat, was declared the true and absolute owner of the land with
the improvements thereon, for which Original Certificate of Title No. 0-
665 was, issued to him by the Register of Deeds at Batangas, Batangas, on
February 7, 1952. By virtue of an instrument dated March 18, 1960, the
said Lots 1 and 2 covered by Original Certificate of Title No. 0-665,
together with Lot No. 12374 covered by Transfer Certificate of Title No.
3254-A and Lot No. 12377 covered by Transfer Certificate of Title No.
3251-A, were consolidated and sub-divided into Lots 1 to 9 under Pcs-
1046. After the death of Modesto Castillo, or on August 31, 1960, Amanda
Lat Vda. de Castillo, et al., executed a deed of partition and assumption of
mortgage in favor of Florencio L. Castillo, et al., as a result of which
Original Certificate of Title No. D-665 was cancelled, and in lieu thereof,
new transfer cerfificates of title were issued to Florencio Castillo, et al., to
wit: Transfer Certificate of Title No. 21703 (Lot 4) (and) Transfer
Certificate of Title No. 21704 to Florencio Castillo (Lot 5); Transfer
Certificate of Title No. T-21708 to Carlos L. Castillo (Lot 7); Transfer
Certificate of Title No. T-21712 to Mariano L. Castillo (Lot 6); Transfer
Certificate of Title No. T-21713 to Jose L. Castillo (Lot 9); Transfer
Certificate of Title No. T-21718 to Aida C. Herrera (Lot 2); and Transfer
Certificate of Title No. T-21727 to Teresita L. Castillo (Lot 8).
The Republic of the Philippines filed Civil Case No. 2044 with the lower
court for the annulment of the certificates of title issued to defendants
Amanda Lat Vda. de Castillo, et al., as heirs/successors of Modesto
Castillo, and for the reversion of the lands covered thereby (Lots 1 and 2,
Psu-119166) to the State. It was alleged that said lands had always
formed part of the Taal Lake, washed and inundated by the waters
thereof, and being of public ownership, it could not be the subject of
registration as private property. Appellants herein, defendants below,
alleged in their answer that the Government's action was already barred
by the decision of the registration court; that the action has prescribed;
and that the government was estopped from questioning the ownership
and possession of appellants.
After trial, the then Court of First Instance of Batangas, Branch VI, presided over by
Honorable Benjamin Relova, in a Decision dated February 6, 1976 (Record on Appeal, pp. 62-
69), ruled in favor of herein petitioner Republic of the Philippines. The decretal portion of
the said decision, reads:
WHEREFORE, the Register of Deeds of Batangas is hereby ordered to
cancel Original Certificate of Title No. 0-665 in the name of Modesto
Castillo and the subsequent Transfer of Certificates of Title issued over
the property in the names of the defendants. Lots Nos. 1 and 2 of Plan
Psu-19166 are hereby declared public lands belonging to the state.
Without pronouncement as to costs.
The Court of Appeals, on appeal, in a Decision promulgated on April 26,1984, reversed and
set aside the appealed decision, and dismissed the complaint (Record, pp. 31-41). Herein
petitioner filed a Motion for Reconsideration (Record, pp. 42-51), but the same was denied
in a Resolution promulgated on October 12,1984 (Record, p. 52). Hence, the instant petition.
The sole issue raised in this case is whether or not the decision of the Land Registration
Court involving shore lands constitutes res adjudicata.
There is no question that one of the requisites of res judicata is that the court rendering the
final judgment must have jurisdiction over the subject matter (Ramos v. Pablo, 146 SCRA 24
[1986]; that shores are properties of the public domain intended for public use (Article 420,
Civil Code) and, therefore, not registrable. Thus, it has long been settled that portions of the
foreshore or of the territorial waters and beaches cannot be registered. Their inclusion in a
certificate of title does not convert the same into properties of private ownership or confer
title upon the registrant (Republic v. Ayala y Cia, 14 SCRA, 259 [1965], citing the cases of
Dizon, et al. v. Bayona, et al., 98 Phil. 943; and Dizon, et al. v. Rodriguez, et al., 13 SCRA 704).
But an important bone of contention is the nature of the lands involved in this case.
Petitioner contends "that "Lots 1 and 2, PSU-119166 had always formed part of the Taal
Lake, washed and inundated by the waters thereof. Consequently, the same were not subject
to registration, being outside the commerce of men; and that since the lots in litigation are of
public domain (Art. 502), par. 4 Civil Code) the registration court (of 1951) did not have
jurisdiction to adjudicate said lands as private property, hence, res judicata does not apply.
(Rollo, pp. 37-38).
The Government presented both oral and documentary evidence.
As summarized by the Intermediate Appelate Court (now Court of Appeals), the testimonies
of the witnesses for the petitioner are as follows:
1. Rosendo Arcenas, a Geodetic Engineer connected with the Bureau of
Lands since 1961, testified to the effect that Lots 1 and 2, Psu-119166,
which are the lots in question, adjoin the cadastral survey of Tanauan,
Batangas (Cad. 168); that the original boundary of the original cadastral
survey was foreshore land as indicated on the plan; that the cadastral
survey of Tanauan was executed sometime in 1923; that the first survey
executed of the land after 1923 was the one executed in 1948 under Plan
Psu-119166 that in the relocation survey of the disputed lots in 1962
under SWO-40601, said lots were annotated on the plan as claimed by the
Republic of the Philippines in the same manner that it was so annotated in
Plan Psu-119166; thus showing that the Government was the only
claimant of the land during the survey in 1948; that during the relocation
survey made in 1962, old points cannot be Identified or located because
they were under water by about forty centimeters; that during the ocular
inspection of the premises on November 23, 1970, he found that 2
monuments of the lots in question were washed out by the waters of the
Baloyboy Creek; that he also found duck pens along the lots in question;
that there are houses in the premises as well as some camotes and
bananas; and that he found also some shells ('suso') along the banks of
the Taal lake (Tsn, Nov. 16, 1970, pp. 13-21; Feb. 16, 1971, pp. 4-36).
2. Braulio Almendral testified to the effect that he is a resident of
Tanauan, Batangas, near the Taal lake; that like himself there are other
occupants of the land among whom are Atanacio Tironas, Gavino
Mendoza, Juliano Tirones, Agapito Llarena, etc.; that it was they who filled
up the area to make it habitable; that they filled up the area with shells
and sand; that their occupation is duck raising; and that the Castillos
never stayed in or occupied the premises (Tsn, Nov. 16, 1970, pp. 32-50).
3. Arsenio Ibay, a Geodetic Engineer connected with the Bureau of Lands
since 1968, also testified to the effect that in accordance with the
cadastral plan of Tanauan, the only private claim of Sixto Castillo referred
to Lots 1006 to 1008; that the Castillos never asserted any private claim
to the lots in question during the cadastral survey;' that in the preparation
of plan Psu-119166, Lots 12374 and 12377 were made as reference to
conform to previously approved plans; that lot 12374 is a portion of
cadastral lot 10107, SWO-86738 while Lot 22377 is a portion of Lot
10108 of the same plan (Tsn, Nov. 25, 1970, pp. 115-137).
4. Jose Isidro, a Land Investigator of the Bureau of Lands, testified to the
effect that pursuant to the order of the Director of Lands, he, together
with Engineer Rufino Santiago and the barrio captain of Tanauan,
Batangas, conducted an investigation of the land in question; that he
submitted a report of investigation, dated October 19, 1970 (Exh. H-1);
that portions of the lot in question were covered by public land
applications filed by the occupants thereof; that Engineer Santiago also
submitted a report (Exh. H-8); that he had notified Dr. Mariano Castillo
before conducting the investigation (Tsn, Nov. 25,1970, pp. 137-162).
5. Rufino Santiago, another Geodetic Engineer connected with the Bureau
of Lands, testified to the effect that on October 19,1970, he submitted a
report of investigation regarding the land in question; that he noted on
the plan Exhibit H-9 the areas on which the houses of Severo Alcantara
and others were built; that he found that the land was planted to coconuts
which are about 15 years old; that the land is likewise improved with rice
paddies; that the occupants thereof are duck raisers; that the area had
been elevated because of the waste matters and duck feeds that have
accumulated on the ground through the years (Tsn, Nov. 26,1970, pp.
163-196).
6. Pablo Tapia, Barrio Captain of Tanauan, Batangas, since 1957, testified
to the effect that the actual occupants of Lots I and 2 are Atanacio
Tirones,tc.; that during the war the water line reached up to a point
marked Exhibit A-9 and at present the water has receded to a point up to
Exhibit A-12; that the reasons why the waters of Taal lake have receded to
the present level is because of the fillings made by the people living in
Lots 1 and 2; that there are several duck pens all over the place; that the
composition of the soil is a mixture of mud and duck feeds; that
improvements consist of bananas, bamboos and palay; that the shoreline
is not even in shape because of the Baloyboy Creek; that the people in the
area never came to know about the registration case in which the lots in
question were registered; that the people living in the area, even without
any government aid, helped one another in the construction of irrigated
rice paddies; that he helped them file their public land applications for the
portions occupied by them; that the Castillos have never been in
possession of the premises; that the people depend upon duck raising as
their means of their livelihood; that Lots 1 and 2 were yet inexistent
during the Japanese occupation; and that the people started improving
the area only during liberation and began to build their houses thereon.
(Tsn, Nov. 26,1970, pp. 197-234).
Among the exhibits formally offered by the Government are: the Original Plan of Tanauan,
Batangas, particularly the Banader Estate, the Original Plan of PSU-119166, Relocation
Verification Survey Plan, maps, and reports of Geodetic Engineers, all showing the original
shoreline of the disputed areas and the fact that the properties in question were under water
at the time and are still under water especially during the rainy season (Hearing, March
17,1971, TSN, pp. 46-47).
On the other hand, private respondents maintain that Lots 1 and 2 have always been in the
possession of the Castillo family for more than 76 years and that their possession was public,
peaceful, continuous, and adverse against the whole world and that said lots were not titled
during the cadastral survey of Tanauan, because they were still under water as a result of the
eruption of Taal Volcano on May 5, 1911 and that the inundation of the land in question by
the waters of Taal Lake was merely accidental and does not affect private respondents'
ownership and possession thereof pursuant to Article 778 of the Law of Waters. They finally
insisted that this issue of facts had been squarely raised at the hearing of the land
registration case and, therefore, res judicata (Record on Appeal, pp. 63-64). They submitted
oral and documentary evidence in support of their claim.
Also summarized by respondent Appellate Court, the testimonies of the witnesses of private
respondents are as follows:
1. Silvano Reano, testified to the effect that he was the overseer of the
property of the late Modesto Castillo located at Banadero,Tanauan,
Batangas since 1944 to 1965; that he also knows Lots 1 and 2, the parcels
of land in question, since he was managing said property; that the
occupants of said Lots 1 and 2 were engaged in duck raising; that those
occupants were paying the Castillos certain amount of money because
their animals used to get inside the lots in question; that he was present
during the survey of the land in 1948; and that aside from the duck pens
which are built in the premises, the land is planted to rice (Tsn, April 14,
1971, pp. 62-88).
2. Dr. Mariano Castillo, testified to the effect that the late Modesto Castillo
was a government official who held high positions in the Government;
and that upon his death the land was subdivided among his legal heirs.
(Appellee's Brief, pp. 4-9).
As above-stated, the trial court decided the case in favor of the government but the decision
was reversed on appeal by the Court of Appeals.
A careful study of the merits of their varied contentions readily shows that the evidence for
the government has far outweighed the evidence for the private respondents. Otherwise
stated, it has been satisfactorily established as found by the trial court, that the properties in
question were the shorelands of Taal Lake during the cadastral survey of 1923.
Explaining the first survey of 1923, which showed that Lots 1 and 2 are parts of the Taal
Lake, Engineer Rosendo Arcenas testified as follows:
ATTY. AGCAOILI:
Q Now, you mentioned Engineer that a subject matter
of that plan which appears to be Lots 1 and 2 are
adjoining cadastral lots of the Tanauan Cadastre, now,
will you please state to the Court what is the basis of
that statement of yours?
A The basis of that statement is the plan itself, because
there is here an annotation that the boundary on the
northeastern side is Tanauan Cadastre 168 which
indicates that the boundary of the original cadastral
survey of Tanauan Cadastre way back in the year 1923
adjoins a foreshore land which is also indicated in this
plan as foreshore lands of Taal lake, sir.
xxx xxx xxx
Q Now, on this plan Exhibit "A-2", there are two lots
indicated namely, Lots 12374 and 12377, what do
these lots represent?
A This is the cadastral lot executed in favor of a certain
Modesto Castillo that corresponds to Lots 12374 and
another Lot 12377, sir.
Q At the time this survey plan Psu-119166 and marked
as Exhibit "A-2" was executed in 1948, were these lots
1 and 2 already in existence as part of the cadastral
survey?
A No, sir, because there is already a foreshore
boundary.
Q Do I understand from you Mr. Witness at the time of
the survey of this land these two lots form part of this
portion?
A Yes, sir.
Q When again was the cadastral survey of Tanauan,
Batangas, executed if you know?
A In the year 1923, sir. (Hearing of Nov. 16, 1970, TSN
pp. 15-17).
Such fact was further verified in the Verification-Relocation Survey of 1948 by Engineer
Arcenas who conducted said survey himself and reported the following:
That as per original plan Psu-119166, it appears that Lot 1 and Lot 2, Psu-
119166 surveyed and approved in the name of Modesto Castillo is a
portion of Taal Lake and as such it appears to be under water during the
survey of cadastral Lot No. 12374 and Lot No. 12377, which was surveyed
and approved in the name of Modesto Castillo under Cad. 168. To support
this theory is the annotation appearing and printed along lines 2-3-4-5 of
Lot 1, Psu-119166 and along lines 4-5-6 of Lot 2, Psu-119166 which
notations clearly indicates that such boundary of property was a former
shorelines of Taal Lake, in other words, it was the extent of cultivation
being the shorelines and the rest of the area going to the southwestern
direction are already covered by water level.
Another theory to bolster and support this Idea is the actual location now
in the verification-relocation survey of a known geographic point were
Barrio Boundary Monument (BBM N. 22) is under water level quite for
sometimes as evidence by earthworks (collection of mud) that amount
over its surface by eighty (80) centimeters below the ground, see notation
appearing on verification-relocation plan previously submitted. (Re-
Verification-Relocation Survey Exhibits, pp. 64-65).
Said surveys were further confirmed by the testimonies of witnesses to the effect that from
1950 to 1969, during rainy season, the water of Taal lake even went beyond the questioned
lots; and that the water, which was about one (1) foot, stayed up to more or less two (2) to
three (3) months (Testimonies of Braulio Almendral and Anastacio Tirones both residents of
Banadero, Tanauan, Batangas (Hearing of Nov. 16, 1970, TSN, pp. 41-42 and Hearing of Nov.
23, 1970, TSN, pp. 93, 98-99, respectively). In the Relocation Survey of 1962, there were no
definite boundary or area of Lots 1 and 2 because a certain point is existing which was under
water by 40 centimeters (Testimony of Engineer Arcena, Hearing of Nov. 16,1970, TSN, p.
20).
Lakeshore land or lands adjacent to the lake, like the lands in question must be differentiated
from foreshore land or that part of the land adjacent to the sea which is alternately covered
and left dry by the ordinary flow of the tides (Castillo, Law on Natural Resources, Fifth
Edition, 1954, p. 67).
Such distinction draws importance from the fact that accretions on the bank of a lake, like
Laguna de Bay, belong to the owners of the estate to which they have been added (Gov't. v.
Colegio de San Jose, 53 Phil. 423) while accretion on a sea bank still belongs to the public
domain, and is not available for private ownership until formally declared by the
government to be no longer needed for public use (Ignacio v. Director of Lands, 108 Phil. 335
[1960]).
But said distinction will not help private respondents because there is no accretion shown to
exist in the case at bar. On the contrary, it was established that the occupants of the lots who
were engaged in duck raising filled up the area with shells and sand to make it habitable.
The defense of long possession is likewise not available in this case because, as already ruled
by this Court, mere possession of land does not by itself automatically divest the land of its
public character (Cuevas v. Pineda, 143 SCRA 674 [1968]).
PREMISES CONSIDERED, the April 26,1984 Decision of the then Intermediate Appellate
Court is hereby SET ASIDE and REVERSED and the February 6,1976 Decision of the then
Court of First Instance of Batangas is hereby AFFIRMED and REINSTATED.
SO ORDERED.
Yap, C.J., Padilla and Sarmiento, JJ., concur.

G.R. No. L-15829 December 4, 1967
ROMAN R. SANTOS, petitioner-appellee,
vs.
HON. FLORENCIO MORENO, as Secretary of Public Works and Communications and
JULIAN C. CARGULLO, respondents-appellants.
Gil R. Carlos and Associates for petitioner-appellee.
Office of the Solicitor General for respondents-appellants.
BENGZON, J.P., J.:
THE APPEAL
The Honorable Secretary of Public Works & Communications appeals from the decision of
the Court of First Instance of Manila declaring of private ownership certain creeks situated
in barrio San Esteban, Macabebe, Pampanga.
THE BACKGROUND
The Zobel family of Spain formerly owned vast track of marshland in the municipality of
Macabebe, Pampanga province. Called Hacienda San Esteban, it was administered and
managed by the Ayala y Cia. From the year 1860 to about the year 1924 Ayala y Cia., devoted
the hacienda to the planting and cultivation of nipa palms from which it gathered nipa sap or
"tuba." It operated a distillery plant in barrio San Esteban to turn nipa tuba into potable
alcohol which was in turn manufactured into liquor.
Accessibility through the nipa palms deep into the hacienda posed as a problem. Ayala y Cia.,
therefore dug canals leading towards the hacienda's interior where most of them interlinked
with each other. The canals facilitated the gathering of tuba and the guarding and patrolling
of the hacienda by security guards called "arundines." By the gradual process of erosion
these canals acquired the characteristics and dimensions of rivers.
In 1924 Ayala y Cia shifted from the business of alcohol production to bangus culture. It
converted Hacienda San Esteban from a forest of nipa groves to a web of fishponds. To do so,
it cut down the nipa palm, constructed dikes and closed the canals criss-crossing the
hacienda.
Sometime in 1925 or 1926 Ayala y Cia., sold a portion of Hacienda San Esteban to Roman
Santos who also transformed the swamp land into a fishpond. In so doing, he closed and built
dikes across Sapang Malauling Maragul, Quiorang Silab, Pepangebunan, Bulacus, Nigui and
Nasi.
The closing of the man-made canals in Hacienda San Esteban drew complaints from
residents of the surrounding communities. Claiming that the closing of the canals caused
floods during the rainy season, and that it deprived them of their means of transportation
and fishing grounds, said residents demanded re-opening of those canals. Subsequently,
Mayor Lazaro Yambao of Macabebe, accompanied by policemen and some residents went to
Hacienda San Esteban and opened the closure dikes at Sapang Malauling Maragul Nigui and
Quiorang Silab. Whereupon, Roman Santos filed Civil Case No. 4488 in the Court of First
Instance of Pampanga which preliminarily enjoined Mayor Yambao and others from
demolishing the dikes across the canals. The municipal officials of Macabebe countered by
filing a complaint (docketed as Civil Case No. 4527) in the same court. The Pampanga Court
of First Instance rendered judgment in both cases against Roman Santos who immediately
elevated the case to the Supreme Court.
In the meantime, the Secretary of Commerce and Communications
1
conducted his own
investigation and found that the aforementioned six streams closed by Roman Santos were
natural, floatable and navigable and were utilized by the public for transportation since time
immemorial. He consequently ordered Roman Santos on November 3, 1930 to demolish the
dikes across said six streams. However, on May 8, 1931 the said official revoked his decision
of November 3, 1930 and declared the streams in question privately owned because they
were artificially constructed. Subsequently, upon authority granted under Act 3982 the
Secretary of Commerce and Communications entered into a contract with Roman Santos
whereby the former recognized the private ownership of Sapang Malauling Maragul,
Quiorang Silab, Pepangebunan, Bulacus, Nigui and Nasi and the latter turned over for public
use two artificial canals and bound himself to maintain them in navigable state. The
Provincial Board of Pampanga and the municipal councils of Macabebe and Masantol
objected to the contract. However, the Secretary of Justice, in his opinion dated March 6,
1934, upheld its legality. Roman Santos withdraw his appeals in the Supreme Court.
With respect to the portion of Hacienda San Esteban still owned by the Zobel family, the
municipal authorities of Macabebe filed in 1930 an administrative complaint, in the Bureau
of Public Works praying for the opening of the dikes and dams across certain streams in
Hacienda San Esteban. Whereupon, the district engineer of Pampanga and a representative
of the Bureau of Public Works conducted investigations. In the meantime, the Attorney
General, upon a query from the Secretary of Commerce and Communications, rendered an
opinion dated October 11, 1930 sustaining the latter's power to declare streams as publicly
owned under Sec. 4 of Act 2152, as amended by Act 3208.
On September 29, 1930 the investigator of the Bureau of Public Works, Eliseo Panopio,
submitted his report recommending the removal of the dikes and dams in question. And on
the basis of said report, the Secretary of Commerce and Communications rendered his
decision on November 3, 1930 ordering Ayala y Cia., to demolish the dikes and dams across
the streams named therein situated in Hacienda San Esteban. Ayala y Cia., moved for
reconsideration, questioning the power of the Secretary of Commerce and Communications
to order the demolition of said dikes.
Days before the Secretary of Commerce and Communications rendered his aforementioned
decision, Ayala y Cia., thru counsel, made representations with the Director of Public Works
for a compromise agreement. In its letter dated October 11, 1930, Ayala y Cia., offered to
admit public ownership of the following creeks:
Antipolo, Batasan Teracan, Biuas or Batasan, Capiz, Carbon, Cutut, Dalayap,
Enrique, Iba, Inaun, Margarita, Malauli or Budbud, Matalaba Palapat, Palipit Maisao,
Panlovenas, Panquitan, Quinapati, Quiorang, Bubong or Malauli Malati, Salop,
Sinubli and Vitas.
provided the rest of the streams were declared private. Acting on said offer, the Director of
Public Works instructed the surveyor in his office, Eliseo Panopio, to proceed to Pampanga
and conduct another investigation.
On January 23, 1931 Panopio submitted his report to the Director of Public Works
recommending that some streams enumerated therein be declared public and some private
on the ground that they were originally dug by the hacienda owners. The private streams
were:
Agape, Atlong, Cruz, Balanga, Batasan, Batasan Matlaue, Balibago, Baliti, Bato,
Buengco Malati, Bungalin, Bungo Malati, Bungo Maragui, Buta-buta, Camastiles,
Catlu, Cauayan or Biabas, Cela, Dampalit, Danlimpu, Dilinquente, Fabian, Laguzan,
Lalap Maburac, Mabutol, Macabacle, Maragul or Macanduli, Macabacle or Mababo,
Maisac, Malande, Malati, Magasawa, Maniup, Manulit, Mapanlao, Maisac, Maragul
Mariablus Malate, Masamaral, Mitulid, Nasi, Nigui or Bulacus, Palipit, Maragul,
Pangebonan, Paumbong, Pasco or Culali, Pilapil, Pinac Malati, Pinac, Maragul or
Macabacle, Quiorang Silab or Malauli Maragul, Raymundo, Salamin, Salop Maisac,
Salop Maragul, Sermon and Sinca or Mabulog.
He therefore recommended revocation of the decision already mentioned above, dated
November 3, 1930 of the Secretary of Commerce and Communications ordering the
demolition of the dikes closing Malauling Maragul, Quiorang, Silab, Pepangebonan, Nigui,
Bulacus, Nasi, and Pinac. On February 13, 1931 the Director of Public Works concurred in
Panopio's report and forwarded the same the Secretary of Commerce and Communications.
On February 25, 1935 the municipality of Macabebe and the Zobel family executed an
agreement whereby they recognized the nature of the streams mentioned in Panopio's
report as public or private, depending on the findings in said report. This agreement was
approved by the Secretary of Public Works and Communications on February 27, 1935 and
confirmed the next day by the municipal council of Macabebe under Resolution No. 36.
A few months later, that is, on June 12, 1935, the then Secretary of Justice issued an opinion
holding that the contract executed by the Zobel family and the municipality of Macabebe has
no validity for two reasons, namely, (1) the streams although originally dug by Ayala y Cia.,
lost their private nature by prescription inasmuch as the public was allowed to use them for
navigation and fishing, citing Mercado vs. Municipality of Macabebe, 59 Phil. 592; and (2) at
the time the Secretary of Commerce and Communications approved the said contract, he had
no more power so to do, because such power under Sec. 2 of Act 2152 was revoked by the
amending Act 4175 which took effect on December 7, 1934.
Despite the above ruling of the Secretary of Justice, the streams in question remained closed.
In 1939 administrative investigations were again conducted by various agencies of the
Executive branch of our government culminating in an order of President Manuel Quezon
immediately before the national elections in 1941 requiring the opening of Sapang
Macanduling, Maragul Macabacle, Balbaro and Cansusu. Said streams were again closed in
1942 allegedly upon order of President Quezon.
THE CASE
Roman Santos acquired in 1940 from the Zobel family a larger portion of Hacienda San
Esteban wherein are located 25 streams which were closed by Ayala y Cia., and are now the
subject matter in the instant controversy.
Eighteen years later, that is in 1958, Congress enacted Republic Act No. 2056
2
following a
congressional inquiry which was kindled by a speech delivered by Senator Rogelio de la
Rosa in the Senate. On August 15, 1958 Senator de la Rosa requested in writing the Secretary
of Public Works and communications to proceed in pursuance of Republic Act No. 2056
against fishpond owners in the province of Pampanga who have closed rivers and
appropriated them as fishponds without color of title. On the same day, Benigno Musni and
other residents in the vicinity of Hacienda San Esteban petitioned the Secretary of Public
Works and Communications to open the following streams:
Balbaro, Batasan Matua, Bunga, Cansusu, Macabacle, Macanduling, Maragul,
Mariablus, Malate, Matalabang, Maisac, Nigui, Quiorang Silab, Sapang Maragul and
Sepung Bato.
Thereupon, the Secretary of Public Works and Communications instructed Julian C. Cargullo
to conduct an investigation on the above named streams.
On October 20, 1958 Musni and his co-petitioners amended their petition to include other
streams. The amended petition therefore covered the following streams:
Balbaro, Balili, Banawa, Batasan Matua Bato, Bengco, Bunga, Buta-buta, Camastiles,
Cansusu, Cela, Don Timpo, Mabalanga, Mabutol, Macabacle, Macabacle qng. Iba,
Macanduling, Maragul, Malauli, Magasawa, Mariablus Malate Masamaral,
Matalabang Maisa, Mariablus,
3
Nigui, Pita, Quiorang, Silab, Sapang Maragul,
Sepung Bato, Sinag and Tumbong.
On March 2, 4, 10, 30 and 31, and April 1, 1959, the Secretary of Public Works and
Communications rendered his decisions ordering the opening and restoration of the channel
of all the streams in controversy except Sapang Malauling, Maragul, Quiorang, Silab, Nigui
Pepangebonan, Nasi and Bulacus, within 30 days on the ground that said streams belong to
the public domain.
On April 29, 1959, that is, after receipt of the Secretary's decision dated March 4, 1959,
Roman Santos filed a motion with the Court of First Instance of Man for junction against the
Secretary of Public Works and Communications and Julian C. Cargullo. As prayed for
preliminary injunction was granted on May 8, 1959. The Secretary of Public Work and
Communications answered and alleged as defense that venue was improperly laid; that
Roman Santos failed to exhaust administrative remedies; that the contract between Ayala y
Cia., and the Municipality of Macabebe is null and void; and, that Section 39 of Act 496
excludes public streams from the operation of the Torrens System.
On April 29 and June 12, 1969, Roman Santos received the decision of the Secretary of Public
Works and Communications dated March 10 and March 30, March 31, and April 1, 1959.
Consequently, on June 24, 1959 he asked the court to cite in contempt Secretary Florendo
Moreno, Undersecretary M.D. Bautista and Julian Cargullo for issuing and serving upon him
the said decisions despite the existence of the preliminary injunction. The Solicitor General
opposed the motion alleging that the decisions in question had long been issued when the
petition for injunction was filed, that they were received after preliminary injunction issued
because they were transmitted through the District Engineer of Pampanga to Roman Santos;
that their issuance was for Roman Santos' information and guidance; and, that the motion
did not allege that respondents took steps to enforce the decision. Acting upon said motion,
on July 17, 1959, the trial court considered unsatisfactory the explanation of the Solicitor
General but ruled that Secretary Florencio Moreno, Undersecretary M.D. Bautista and Julian
Cargullo acted in good faith. Hence, they were merely "admonished to desist from any and
further action in this case, observe the preliminary injunction issued by this Court, with the
stern warning, however, that a repetition of the acts complained of shall be dealt with
severely."
On July 18, 1959 the trial court declared all the streams under litigation private, and
rendered the following judgment:
The Writ of preliminary injunction restraining the respondent Secretary of Public
Works & Communications from enforcing the decisions of March 2 And 4, 1959 and
all other similar decisions is hereby made permanent.
The Secretary of Public Works and Communication and Julian Cargullo appealed to this
Court from the order of July 17, 1959 issued in connection with Roman Santos' motion for
contempt and from the decision of the lower court on the merits of the case.
ISSUES
The issues are: (1) Did Roman Santos exhaust administrative remedies? (2) Was venue
properly laid? (3) Did the lower court err in conducting a trial de novo of the case and in
admitting evidence not presented during the administrative proceeding? (4) Do the streams
involved in this case belong to the public domain or to the owner of Hacienda San Esteban
according to law and the evidence submitted to the Department of Public Works and
Communications?
DISCUSSION OF THE ISSUES
1. Respondents maintain that Roman Santos resorted to the courts without first exhausting
administrative remedies available to him, namely, (a) motion for reconsideration of the
decisions of the Secretary of Public Works and Communications; and, (b) appeal to the
President of the Philippines.
Whether a litigant, in exhausting available administrative remedies, need move for the
reconsideration of an administrative decision before he can turn to the courts for relief,
would largely depend upon the pertinent law,
4
the rules of procedure and the usual practice
followed in a particular office.
5

Republic Act No. 2056 does not require the filing of a motion for reconsideration as a
condition precedent to judicial relief. From the context of the law, the intention of the
legislators to forego a motion for reconsideration manifests itself
clearly.1awphil.net Republic Act No. 2056 underscores the urgency and summary nature of
the proceedings authorized thereunder. Thus in Section 2 thereof the Secretary of Public
Works and Communications under pain of criminal liability is duty bound to terminate the
proceedings and render his decision within a period not exceeding 90 days from the filing of
the complaint. Under the same section, the party respondent concerned is given not than 30
days within which to comply with the decision of the Secretary of Public Works and
Communications, otherwise the removal of the dams would be done by the Government at
the expense of said party. Congress has precisely provided for a speedy and a most
expeditious proceeding for the removal of illegal obstructions to rivers and on the basis of
such a provision it would be preposterous to conclude that it had in mind to require a party
to file a motion for reconsideration an additional proceeding which would certainly
lengthen the time towards the final settlement of existing controversies. The logical
conclusion is that Congress intended the decision of the Secretary of Public Works and
Communications to be final and executory subject to a timely review by the courts without
going through formal and time consuming preliminaries.
Moreover, the issues raised during the administrative proceedings of this case are the same
ones submitted to court for resolution. No new matter was introduced during the proceeding
in the court below which the Secretary of Public Works and Communications had no
opportunity to correct under his authority.
Furthermore, Roman Santos assailed the constitutionality of Republic Act No. 2056 and the
jurisdiction of the Secretary of Public Works and Communications to order the demolition of
dams across rivers or streams. Those questions are not within the competence of said
Secretary to decide upon a motion for reconsideration.itc-alf They are purely legal questions,
not administrative in nature, and should properly be aired before a competent court as was
rightly done by petitioner Roman Santos .
At any rate, there is no showing in the records of this case that the Secretary of Public Works
and Communications adopted rule of procedure in investigations authorized under Republic
Act No. 2056 which require a party litigant to file a motion for the reconsideration of the
Secretary's decision before he can appeal to the courts. Roman Santos however stated in his
brief that the practice is not to entertain motions for reconsideration for the reason that
Republic Act No. 2056 does not expressly or impliedly allow the Secretary to grant the same.
Roman Santos' statement is supported by Opinion No. 61, Series of 1959, dated April 14,
1959 of the Secretary of Justice.
As to the failure of Roman Santos to appeal from the decision of the Secretary of Public
Works and Communications to the President of the Philippines, suffice it to state that such
appeal could be dispensed with because said Secretary is the alter ego of the President.itc-
alf The actions of the former are presumed to have the implied sanction of the latter.
6

2. It is contended that if this case were considered as an ordinary civil action, venue was
improperly laid when the same was instituted in the Court of First Instance of Manila for the
reason that the case affects the title of a real property. In fine, the proposition is that since
the controversy dwells on the ownership of or title to the streams located in Hacienda San
Esteban, the case is real action which, pursuant to Sec. 3 of Rule 5 of the Rules of Court
should have been filed in the Court of First Instance of Pampanga.
The mere fact that the resolution of the controversy in this case would wholly rest on the
ownership of the streams involved herein would not necessarily classify it as a real action.
The purpose of this suit is to review the decision of the Secretary of Public Works and
Communications to enjoin him from enforcing them and to prevent him from making and
issuing similar decisions concerning the stream in Hacienda San Esteban. The acts of the
Secretary of Public Works and Communications are the object of the litigation, that is,
petitioner Roman Santos seeks to control them, hence, the suit ought to be filed in the Court
of First Instance whose territorial jurisdiction encompasses the place where the respondent
Secretary is found or is holding office. For the rule is that outside its territorial limits, the
court has no power to enforce its order.
7

Section 3 of Rule 5 of the Rules of Court does not apply to determine venue of this action.
Applicable is Sec. 1 the same rule, which states:
Sec. 1. General rule. Civil actions in Courts of First Instance may be commenced
and tried where the defendant any of the defendants residents or may be found or
where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff.
Accordingly, the Petition for injunction who correctly filed in the Court of First Instance of
Manila. Respondents Secretary of Public Works and Communications and Julian Cargullo are
found and hold office in the City of Manila.
3. The lower court tried this case de novo. Against this procedure respondents objected and
maintained that the action, although captioned as an injunction is really a petition
for certiorari to review the decision of the Secretary of Public Works and Communications.
Therefore they now contend that the court should have confined itself to reviewing the
decisions of the respondent Secretary of Public Works and Communications only on the
basis of the evidence presented in the administrative proceedings. On the other hand, Roman
Santos now, submits that the action is a proceeding independent and distinct from the
administrative investigation; that, accordingly, the lower court correctly acted in trying the
case anew and rendering judgment upon evidence adduced during the trial.
Whether the action instituted in the Court of First Instance be for mandamus, injunction
or certiorari is not very material. In reviewing the decision of the Secretary of Public Works
and Communications, the Court of First Instance shall confine its inquiry to the evidence
presented during, the administrative proceedings. Evidence not presented therein shall not
be admitted, and considered by the trial court. As aptly by this Court speaking through Mr.
Justice J.B.L. Reyes, in a similar case:
The findings of the Secretary can not be enervated by new evidence not laid before
him, for that would be tantamount to holding a new investigation, and to substitute
for the discretion and judgment of the Secretary the discretion and judgment of the
court, to whom the statute had not entrusted the case. It is immaterial that the
present action should be one for prohibition or injunction and not one
for certiorari; in either event the case must be resolved upon the evidence
submitted to the Secretary, since a judicial review of executive decisions does not
import a trial de novo, but only an ascertainment of whether the "executive findings
are not in violation of the Constitution or of the laws, and are free from fraud or
imposition, and whether they find reasonable support in the evidence. . . .
8

The case at bar, no matter what the parties call it, is in reality a review of several
administrative decisions of the Secretary of Public Works and Communications. Being so, it
was error for the lower court to conduct a trial de novo. Accordingly, for purposes of this
review, only the evidence presented and admitted in the administrative investigation will be
considered in our determination of whether on the basis thereof the decisions of the
Secretary of Public Works and Communications were correct.
4. We come to the question whether the streams involved in this case belong to the public
domain or to the owner of Hacienda San Esteban. If said streams are public, then Republic
Act 2056 applies, if private, then the Secretary of Public Works and Communications cannot
order demolition of the dikes and dams across them pursuant to his authority granted by
said law.
First, we come to the question of the constitutionality of Republic Act No. 2056. The lower
court held Republic Act No. 2056 constitutional but ruled that it was applied by respondents
unconstitutionally. That is, it held that Roman Santos was being deprived of his property
without due process of law, for the dikes of his fishponds were ordered demolished through
an administrative, instead of a judicial, proceeding. This conclusion and rationalization of the
lower court amount in effect to declaring the law unconstitutional, stated inversely. Note
that the law provides for an expeditious administrative process to determine whether or not
a dam or dike should be declare a public nuisance and ordered demolished. And to say that
such an administrative process, when put to operation, is unconstitutional is tantamount to
saying that the law itself violates the Constitution. In Lovina vs. Moreno, supra, We held said
law constitutional. We see no reason here to hold otherwise.
Discussing now the applicability of Republic Act 2056, the same applies to two types of
bodies of water, namely (1)public navigable rivers, streams, coastal waters, or waterways
and (b) areas declared as communal fishing grounds, as provided for in Section 1 thereof:
Sec. 1. . . . the construction or building of dams, dikes or any other works which
encroaches into any public navigable river, stream, coastal waters and any other
navigable public waters or waterways as well as the construction or building of
dams, dikes or any other works in areas declared as communal fishing grounds,
shall be ordered removed as public nuisances or as prohibited constructions as
herein provided: . . .
We are not concerned with communal fishing grounds because the streams here involved
have not been so declared, but with public navigable streams. The question therefore is: Are
the streams in Hacienda San Esteban which are mentioned in the petition of Benigno Musni
and others, public and navigable?
Respondents contend that said streams are public on the following grounds:
(1) Hacienda San Esteban was formerly a marshland and being so, it is not susceptible to
appropriation. It therefore belongs to the State. Respondents rely on Montano vs. Insular
Government, 12 Phil. 572.
(2) The streams in question are natural streams. They are tributaries of public streams. Cited
are the cases ofSamson vs. Dionisio, et al., 11 Phil. 538 and Bautista vs. Alarcon, 23 Phil. 636.
(3) The streams have for their source public rivers, therefore they cannot be classified as
canals.
(4) Assuming the streams were artificially made by Ayala y Cia., said titleholder lost
ownership over them by prescription when it allowed the public to use them for navigation
for a long time. Respondents cite Mercado vs. Municipal President of Macabebe, 59 Phil. 592.
(5) Assuming the streams in question are not mentioned as public in the certificates of title
held by Ayala y Cia., over Hacienda San Esteban, still they cannot be considered as privately
owned for Section 39 of Act 496 expressly excepts public streams from private ownership.
(6) The Panopio Report, which found the streams in question of private ownership was
nullified by the Secretary of Justice in his opinion dated June 12, 1935.1awphil.net And, the
contract between Ayala y Cia., and the Secretary of Commerce and Communications agreeing
on the ownership of the streams in question is ultra vires.
The doctrine in Montano vs. Insular Government, supra, that a marshland which is inundated
by the rise of the tides belongs to the State and is not susceptible to appropriation by
occupation has no application here inasmuch as in said case the land subject matter of the
litigation was not yet titled and precisely Isabelo Montano sought title thereon on the
strength of ten years' occupation pursuant to paragraph 6, section 54 of Act 926 of the
Philippine Commission. Whereas, the subject matter in this case Hacienda San Esteban
is titled land and private ownership thereof by Ayala y Cia., has been recognized by the King
of Spain and later by the Philippine Government when the same was registered under Act
496.
Respondents further cite Bautista vs. Alarcon, 23 Phil. 631, where the plaintiff sought
injunction against the defendants who allegedly constructed a dam across a public canal
which conveyed water from the Obando River to fishponds belonging to several persons. The
canal was situated within a public land. In sustaining the injunction granted by the Court of
First Instance, this Court said:
No private persons has right to usurp possession of a watercourse, branch of a
river, or lake of the public domain and use, unless it shall have been proved that he
constructed the same within in property of his exclusive ownership, and such
usurpation constitutes a violation of the legal provisions which explicity exclude
such waterways from the exclusive use or possession of a private party. (Emphasis
supplied)
As indicated in the above-cited case, a private person may take possession of a watercourse
if he constructed the same within his property.itc-alf This puts Us into inquiry whether the
streams in question are natural or artificial. In so doing, We shall examine only the evidence
presented before the Department of Public Works and Communications and disregard that
which was presented for the first time before the lower court, following our ruling in Lovina vs.
Moreno, supra.
(1) Sapang Macanduling Maragul or Macanduli is presently enclosed in Fishpond No. 12 of
Roman Santos. Its banks cannot anymore be seen but some traces of them could be noted by
a row of isolated nipa palms. Its water is subject to the rise and fall of the tides coming from
Guagua and Antipolo Rivers and it is navigable by light watercrafts. Its inlet is Antipolo
River; another dike at its outlet along the Palapat River.
9
It is closed by four dikes: One dike
at its inlet along the Antipolo River; another dike at its cutlet along the Palatpat River; and,
two dikes in between. Then exist channel at the Palapat River where the fishpond gate lies
has been filled up with dredge spoils from the Pampanga River Control Project.
(2) Sapang Macabacle is found in Fishpond No. 13. Its banks are still evident. This stream is
about 30 meters wide, two meters deep and one and one-half to two kilometers long. Its
source is Rio Cansusu. Like Macanduli, its channel is obstructed by four dikes. One of them
was constructed by the engineers of the Pampanga River Control Project.
(3) Sapang Balbaro which is found in Fishpond No. 13, runs from Canal Enrique near Rio
Cansusu to Sapang Macabacle, a distance of about one-half kilometer. It is passable by banca.
The closures of this stream consist of two dikes located at each ends on Canal Enrique and
Sapang Macabacle.
(4) Sapang Cansusu is a continuation of the Cansusu River. The Cansusu River opens at the
Guagua River and allegedly ends at the Palanas River in front of Barrio San Esteban. At a
point near the mouth of Sapang Balbaro, the owners of Hacienda San Esteban built a canal
leading straight to one end of Barrio San Esteban. They called this canal "Canal Enrique." And
at the point where Canal Enrique joins Cansusu they built a dike across Cansusu, thus closing
this very portion of the river which extends up to Palanas River where they built another
closure dike. This closed portion, called "Sapang Cansusu," is now part of Fishpond No. 1.
Sapang Cansusu is half a kilometer long and navigable by banca.
Appellant's witnesses, Beligno Musni, 41, Macario Quiambao, 96, Roman Manansala, 55 and
Castor Quiambao, 76, all residents of Barrio San Esteban, testified that prior to their closure,
Sapang Macaduli, Macabacle, Balbaro and Cansusu were used as passageway and as fishing
grounds; that people transported through them tuba,
10
wood and sasa,
11
and that the tuba
was brought to the distillery in Barrio San Esteban. Macario Quiambao testified also that said
four streams "were created by God for the town people"; and that if any digging was done it
was only to deepen the shallow parts to make passage easier. According to witness
Anastacio Quiambao said streams were navigable, even Yangco's ship "Cababayan" could
pass through. Simplicio Quiambao, 36, and Marcelino Ocampo, 55, stated on direct
examination that before closure of the above named four streams, people from the
surrounding towns of Guagua, Bacolor, Macabebe, Masantol and Sexmoan fished and
navigated in them.
Against the aforementioned, testimonial evidence Roman Santos presented the testimony of
Nicanor Donarber, 80, Mariano Guinto, 71, and his own. Donarber, who started working as
an arundin
12
testified that Ayala y Cia., dug Sapang Macanduli, Balbaro and Macabacle; that
he worked also in the construction together with other workers; and, that as an overseer he
inspected their work. Mariano Guinto testified that he worked for Ayala y Cia., as a tuba
gatherer; that in order to reach remote nipa groves by banca, they made canals; and, that he
was one of the who worked in the construction of those canals. Roman Santos also testified
that Sapang Macanduli, Macabacle, Balbaro and Cansusu are artificial canals excavated as far
back as 1850 and due to erosion coupled with the spongy nature of the land, they acquired
the proportion of rivers; that he joined Sapang Balbaro to Sapang Macabacle because the
former was a dying canal; and that Cansusu River is different from Sapang Cansusu Witness
Domingo Yumang likewise testified that Sapang Balbaro man-made.
We observe that witnesses positively stated that Sapang Macanduli, Macabacle and Balbaro
were made by the owners of Hacienda San Esteban. With respect to Sapang Cansusu none,
except Roman Santos himself, testified that Sapang Cansusu is an artificial canal. It is not one
of the streams found and recommended to be declared private in the Panopio Report.
Sapang Cansusu follows a winding course different and, distinct from that of a canal such as
that of Canal Enrique which is straight. Moreover, Sapang Cansusu is a part of Cansusu River,
admittedly a public stream.
(5) Sapang Maragul, Mabalanga and Don Timpo are all part of Fishpond No. 1. Maragul is 600
meters long and 30 to 35 meters wide. Mabalanga is 250 meters in length and 50 meters in
width. Don Timpo is 220 meters long and 20 meters wide. All of them are navigable by
banca. Maragul and Mabalanga open at Guagua River and join each other inside the hacienda
to form one single stream, Sapang Don Timpo, which leads to the Matalaba River. Maragul,
Mabalanga and Don Timpo, formerly ended inside the hacienda but later Mabalanga was
connected to Don Timpo. Maragul was connected to Mabalanga and Sapang Cela was
extended to join Maragul.
Witnesses Nicanor Donarber, Mariano Ocampo and Mariano Guinto testified that Maragul,
Mabalanga and Don Timpo are artificial canals dug by Ayala y Cia., and that they (Donarber
and Mariano Guinto) worked in said excavations.
13
Witness Mariano Guinto clarified that
Don Timpo was originally dug but Mabalanga and Maragul were formerly small non-
navigable streams which were deepened into artificial navigable canals by Ayala y Cia.
14

Exhibit F, which is a map showing the streams and rivers in Hacienda San Esteban, shows
that Maragul, Mabalanga and Don Timpo are more or less straight. From the big rivers
(Guagua and Matalaba Rivers) they lead deep into the interior of the hacienda, thus
confirming the testimony that they were built precisely as a means of reaching the interior of
the estate by banca. The weight of evidence, therefore, indicate that said streams are
manmade.
(6) Sapang Bunga, now part of Bunga fishpond, gets its water from Sapanga Iba and empties
at Sta. Cruz River. It is about 300-400 meters long, 5-6 meters wide and 1-1.60 meters deep.
(7) Sapang Batu is found in Capiz Fishpond. About 300-400 meters long, 4-5 meters wide
and 1.50-2.20 meters deep, it starts at Capiz River and ends at Malauling Maragul. From
Capiz River until it intersects Sapang Nigui the stream is called Sapang Batu Commencing
from Sapang Nigui and up to its end at Sapang Malauling Maragul, the stream is called
Sapang Batu. Commencing from Sapang Nigui and up to its end at Sapang Malauling Maragul,
the stream is called Sepong Batu. Sepong Batu is not among those streams declared in the
Panopio Report as private.
(8) Sapang Banawa has one end at Palanas River and the other at Sapang Macabacle. It is
about 300 meters long, 3-4 meters wide and 1.30-1.40 meters deep. Its whole length is
within Fishpond No. 13 of Roman Santos.
(9) Sapang Mabutol is a dead-end stream, that is, it ends inside the hacienda. It opens along
Guagua river. Since its closure, it has become part of Fishpond No. 1.
(10) Sapang Buta-buta, like Mabutol, dies inside the hacienda. It connects with Cansusu
River and is about 100 meters long, 3-4 meters wide and 1.2-1.5 meters deep. It is now a
part of Fishpond No. 13.
(11) Sapang Masamaral, another stream which opens at Cansusu River And ends inside the
hacienda., is 100-200 meters long, 3-4 meters wide and 1.50-2 meters deep. It now forms
part of Fishpond No. 13.
The uncontradicted testimony of Marcos Guinto is that Sapang Bunga, Batu, Sepong Batu,
Banawa, Mabutol, Buta-Buta and Masamaral were constructed by Ayala y Cia., to gain access
to the nipa the, interior of the hacienda. This testimony tallies with the findings in the
Panopio Report which will be discussed herein later. The evidence adduced in the
administrative proceeding conducted before a representative of the Secretary of Public
Works and Communications supports the contention that said streams are merely canals
built by Ayala y Cia., for easy passage into the hinterland of its hacienda.
(12) Sapang Magasawa consists of two streams running parallel to each other commencing
from Matalaba River and terminating at Mariablus Rivers. About 600-700 meters long, 4-5
meters wide and 1.5-2 meters deep, these two streams are navigable by banca. They are
enclosed within Fishpond No. 1.
(13) Sapang Mariablus Malate, about 3-4 meters wide and 250 meters long, is another
stream that ends inside the hacienda and gets its water from Guagua River. It is no part of
Fishpond No. 1.
(14) Sapang Matalabang Malate or Maisac opens at Guagua River and ends at Sapang Cela
and Matalabang Maragul. This stream, which is about 800 meters long and 18 meters wide,
forms part of Fishpond No. 1 of Roman Santos.
(15) Sapang Batasan Matua about 600 meters long, three meters wide and .80 meters deep
at low tide and 1.90 meters deep at high tide crosses the hacienda from Mariablus River to
Cansusu River. It is at present a part of Fishpond No. 1-A.
(16) Sapang Camastiles, a dead end stream of about 200 to 300 meters in length, gets its
water from Biuas River. It is within Fishpond No. 1.
(17) Sapang Cela is within Fishpond No. 1. Its whole length situated inside the hacienda, it
opens at Sapang Matalabang Malate or Maisac and ends at Sapang Malungkot. Latter Cela
was extended to connect with Sapang Maragul. It is about 200 meters long and four meters
wide.
Mariano Guinto, 71, testified without contradiction that Sapang Mariablus Malate and
Matalabang Malate were formerly small and non-navigable streams which were dug by
Ayala y Cia.,
15
while Batasan Matua Camastiles, Magasawa and Cela are original canals made
by Ayala y Cia.,
16
that he was one of those who worked in the construction of said canals; and
that it took years to construct them. All these streams were recommended in the Panopio
Report for declaration as private streams.
(18) Sapang Sinag, 200 meters long, four to five meters wide, one meter and one and one-
half meters deep at low and high tides, respectively, gets its water from Cutod River and
leads inside the hacienda to connect with Sapang Atlong Cruz, a stream declared private in
the Panopio Report. It is now inside Fishpond No. 14.
(19) Sapang Balili, also found inside Fishpond No. 14, is about 200 meters long, three to four
meters wide and one meter deep at low tide. From its mouth at Cutod River it drifts into the
interior of the hacienda and joins Sapang Bengco.
17

(20) Sapang Pita is within Fishpond Capiz. It takes water from Capiz River but dies 250
meters inside the hacienda. It is about four to five meters wide, and one meter deep at low
tide and 1.50 meters deep at high tide.
(21) Sapang Tumbong, situated inside Capiz Fishpond, derives its water from Sapang
Quiorang Silab, a stream declared private by the Secretary of Public Works and
Communications, and ends inside the hacienda.
18

(22) Sapang Bengco is found within Fishpond No. 14.1awphil.net Two hundred meters long,
five meters wide, and one meter deep at low tide and 1.50 meters deep at high tide it gets
water from Sapang Biabas and connects with Baliling Maisac.
19

According to Marcos Guinto, a witness for Roman Santos, Sapang Sinag, Balili, Pita Tumbong
and Bengco were excavated a long time ago by Ayala y Cia.; and that they have a winding
course because when they were made the workers followed the location of the nipa
palms.
20
On the other hand, Marcelo Quiambao, testified that Sapang Tumbong is a natural
stream and that the reason he said so is because the stream was already there as far back as
1910 when he reached the age of ten. No other oral evidence was presented to contradict the
testimony of Marcos Guinto that the said five streams were artificially made by Ayala y Cia.
To show that the streams involved in this case were used exclusively by the hacienda
personnel and occasionally by members of their families, Roman Santos introduced the
testimony of Eliseo Panopio, Nicanor Donarber, Blas Gaddi, Mariano Ocampo, Mariano
Guinto, Alejandro Manansala and himself. The witnesses categorically testified that the
public was prohibited from using the streams as a means of navigation and that the
prohibition was enforced by guards called arundines.
One and all, the evidence, oral and documentary, presented by Roman Santos in the
administrative proceedings supports the conclusion of the lower court that the streams
involved in this case were originally man-made canals constructed by the former owners of
Hacienda San Esteban and that said streams were not held open for public use. This same
conclusion was reached 27 years earlier by an investigator of the Bureau of Public Works
whose report and recommendations were approved by the Director of Public Works and
submitted to the Secretary of Commerce and Communications.
As stated, pursuant to Act 2152, as amended by Act 3208, the Bureau of Public Works and
the Department of Commerce and Communications locked into and settled the question of
whether or not the streams situated within Hacienda San Esteban are publicly or privately
owned. We refer to the so-called Panopio Report which contains the findings and
recommendations of Eliseo Panopio, a surveyor in the Bureau of Public Works, who was
designated to conduct formal hearings and investigation. Said report found the following
streams, among others, of private ownership:
Camastiles, Cela Balanga, Bato, Batasan, Bengco, Buta-buta, Don Timpo, Mabutol,
Macabacle, Macanduli, Malande Malate (Bunga), Magasawa, Masamaral, Maragul,
Mariablus Malate, Matalaba Malate, Nasi, Nigui, Pangebonan and Quiorang Silab
on the ground that
The preponderance of the probatory facts, . . ., shows that the rivers, creeks, esteros
and canals listed in (1) have originally been constructed, deepened, widened, and
lengthened by the owners of the Hacienda San Esteban. That they have been used
as means of communication from one place to another and to the inner most of the
nipales, exclusively for the employees, colonos and laborers of the said Hacienda
San Esteban. That they have never been used by the public for navigation without
the express consent of the owners of the said Hacienda.
21

Bases for the above-quoted conclusion were "the reliable informations gathered from old
residents of the locality, from outsiders, the sworn statements obtained from different
persons not interested in this case and the comparison of the three plans prepared in 1880,
1906 and 1930.
22
The persons referred to are Martin Isip, Hilarion Lobo, Emigdio Ignacio,
Castor Quiambao, Matias Sunga facio Cruz, Inocencio Dayrit, Gabriel Manansala, Lope
Quiambao, Marcelino Bustos and Juan Lara .
On February 13, 1931 the Director of Public Works transmitted the Panopio Report to the
Secretary of Commerce and Communications recommending approval thereof. Later, on
February 27, 1935, Secretary of Public Works and Communications De las Alas approved the
agreement of Ayala y Cia., and the Municipality of Macabebe, concerning the ownership of
the streams in Hacienda San Esteban, for being in conformity with said Panopio Report.
This agreement of Ayala y Cia and the Municipality of Macabebe which was approved by the
Secretary of Public Works and Communications only on February 27, 1935, could not
however bind the Government because the power of the Secretary of Public Works and
Communication to enter thereto had been suppressed by the Philppine Legislature when it
enacted Act 4175 which effect on December 7, 1934.
Nullity of the aforesaid contract would not of course affect the findings of fact contained in
the Panopio Report.
In weighing the evidence presented before the administrative investigation which
culminated in this appeal, respondent Secretary seemed to have ignored the Panopio Report
and other documentary evidence as well as the testimony of witnesses presented by
petitioner but instead gave credence only to the witnesses of Benigno Musni, et al. Upon
review, however, the lower court, taking into account all the evidence adduced in the
administrative hearing, including the Panopio Report, as well as those presented for the first
time before it, sustained petitioner's averment that the streams in question were artificially
made, hence of private ownership. As stated, this conclusion of the lower court which is in
accord with the findings of Panopio as contained in his report, finds ample support from the
evidence presented and admitted in the administrative investigation. Accordingly, we see no
merit in disturbing the lower court's findings fact.
We next consider the issue of whether under pertinent laws, the streams in question are
public or private.
We quote Articles 339, 407 and 408 of the Spanish Civil Code of 1889:
Art. 339. Property of public ownerships is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, river banks, shores, roadsteads, and that of a
similar character;
Art. 407. The following are of public ownership:
1. Rivers and their natural channels;
2. Continuous or intermittent waters from springs or brooks running in their
natural channels and the channels themselves.
3. Waters rising continuously or intermittently on lands of public ownership;
4. Lakes and ponds formed by nature, on public lands, and their beds;
5. Rain waters running through ravines or sand beds, the channels of which are of
public ownership;
6. Subterranean waters on public lands;
7. Waters found within the zone of operation of public works, even though
constructed under contract;
8. Waters which flow continuously or intermittently from lands belonging to
private persons, to the State, to provinces, or to towns, from the moment they leave
such lands;
9. The waste waters of fountains, sewers, and public institutions.
Art. 408. The following are of private ownership:
1. Waters, either continuous or intermittent rising on private etates, while they run
through them;
2. Lakes and ponds and their beds when formed by nature on such estates;
3. Subterranean waters found therein;
4. Rain water falling thereon as long as their bounderies.
5. The channels of flowing streams, continuous or intermittent, formed by rain
water, and those of brooks crossing estates which are not of public ownership.
The water, bed, banks, and floodgates of a ditch or aqueduct are deemed to be an
integral part of the estate or building for which the waters are intended. The
owners of estates through or along the boundaries of which the aqueduct passes
can assert no ownership over it, nor any right to make use. of it beds or banks,
unless they base their claims on title deed which specify the right or the ownership
claimed.
Articles 71 and 72 of the Spanish Law of Waters of August 3, 1866 state:
Art. 71. The water-beds of all creeks belong to the owners of the estates or lands
over which they flow.
Art. 72. The water-beds on public land, of creeks through which spring waters run,
are a part of the public domain.
The natural water-beds or channels of rivers are also part of the public domain.
Pursuant to Article 71 of the Spanish Law of Waters of August 3, 1866, and Article 408(5) of
the Spanish Civil Code, channels of creeks and brooks belong to the owners of estates over
which they flow. The channels, therefore, of the streams in question which may be classified
creeks, belong to the owners of Hacienda San Esteban.
The said streams, considered as canals, of which they originally were, are of private
ownership in contemplation of Article 339(l) of the Spanish Civil Code. Under Article 339,
canals constructed by the State and devoted to public use are of public ownership.
Conversely, canals constructed by private persons within private lands and devoted
exclusively for private use must be of private ownership.
Our attention has been called to the case of Mercado v. Municipal President of Macabebe, 59
Phil. 592. There the creek (Batasan-Limasan) involved was originally dug by the estate's
owner who, subsequently allowed said creek to be used by the public for navigation and
fishing purposes for a period of 22 years. Said this Court through Mr. Justice Diaz:
And even granting that the Batasan-Limasan creek acquired the proportions which
it had, before it was closed, as a result of excavations made by laborers of the
appellant's predecesor in interest, it being a fact that, since the time it was opened
as a water route between the Nasi River and Limasan creek, the owners thereof as
well as strangers, that is, both the residents of the hacienda and those of other
nearby barrios and municipalities, had been using it not only for their bancas to
pass through but also for fishing purposes, and it being also a fact that such was the
condition of the creek at least since 1906 until it was closed in 1928, if the
appellant and her predecessors in interest had acquired any right to the creek in
question by virtue of excavations which they had made thereon, they had such
right through prescription, inasmuch as they failed to obtain, and in fact they have
not obtained, the necessary authorization to devote it to their own use to the
exclusion of all others. The use and enjoyment of a creek, as any other property
simceptible of appropriation, may be acquired or lost through prescription, and the
appellant and her predecessors in interest certainly lost such right through the said
cause, and they cannot now claim it exclusively for themselves after the general
public had been openly using the same from 1906 to 1928. . . .
In the cited case, the creek could have been of private ownership had not its builder lost it by
prescription. Applying the principle therein enunciated to the case at bar, the conclusion
would be inevitably in favor of private ownership, considering that the owners of Hacienda
San Esteban held them for their exclusive use and prohibited the public from using them.
It may be noted that in the opinion, mentioned earlier, issued on June 12, 1935, the Secretary
of Justice answered in the negative the query of the Secretary of Public Works and
Communications whether the latter can declare of private ownership those streams which
"were dug up artificially", because it was assumed that the streams were used "by the public
as fishing ground and in transporting their commerce in bancas or in small crafts without
the objection of the parties who dug" them. Precisely, Mercado v. Municipality of
Macabebe was given application therein. However, the facts, as then found by the Bureau of
Public Works, do not support the factual premise that the streams in question were used by
the public "without the objection of the parties who dug" them. We cannot therefore take as
controlling in determining the merits of this the factual premises and the legal conclusion
contained in said opinion.
The case at bar should be differentiated from those cases where We held illegal the closing
and/or appropriation of rivers or streams by owners of estates through which they flow for
purposes of converting them into fishponds or other works.
23
In those cases, the
watercourses which were dammed were natural navigable streams and used habitually by the
public for a long time as a means of navigation. Consequently, they belong to the public
domain either as rivers pursuant to Article 407 (1) of the Spanish Civil Code of 1889 or as
property devoted to public use under Article 339 of the same code. Whereas, the streams
involved in this case were artificially made and devoted to the exclusive use of the hacienda
owner.
Finally, Sapang Cansusu, being a natural stream and a continuation of the Cansusu River,
admittedly a public stream, belongs to the public domain. Its closure therefore by the
predecessors of Roman Santos was illegal.
The petition for the opening of Sapang Malauling Maragul, Quiorang Silab, Nigui,
Pepangebunan, Nasi and Bulacus was dismissed by the Secretary of Public Works and
Communications and the case considered closed. The said administrative decision has not
been questioned in this appeal by either party. Hence, they are deemed excluded herein.
All the other streams, being artificial and devoted exclusively for the use of the hacienda
owner and his personnel, are declared of private ownership. Hence, the dams across them
should not he ordered demolished as public nuisances.
With respect to the issue of contempt of court on the part of the Secretary of Public Works
and Communications and Julian Cargullo for the alleged issuance of a administrative
decisions ordering demolition of dikes involved in this case after the writ of injunction was
granted and served, suffice it to state that the lower court made no finding of contempt of
court. Necessarily, there is no conviction for contempt reviewable by this Court and any
discussion on the matter would be academic.
WHEREFORE, the decision appealed from is affirmed, except as to Sapang Cansusu which is
hereby declared public and as to which the judgment of the lower court is reversed. No costs.
So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal. Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ.,

G.R. No. L-31271 April 29, 1974
ROMEO MARTINEZ and LEONOR SUAREZ, spouses, petitioners-appellants,
vs.
HON. COURT OF APPEALS, SECRETARY and UNDERSECRETARY OF PUBLIC WORKS &
COMMUNICATIONS, respondents-appellees.
Flores Macapagal, Ocampo and Balbastro for petitioners-appellants.
Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General Dominador L.
Quiroz and Solicitor Concepcion T. Agapinan for respondents-appellees.

ESGUERRA, J.:p
Petition for review by certiorari of the judgment of the Court of Appeals dated November 17,
1969 in its CA-G.R. 27655-R which reverses the judgment of the Court of First Instance of
Pampanga in favor of petitioners-appellants against the Secretary and Undersecretary of
Public Works & Communications in the case instituted to annul the order of November 25,
1958 of respondent Secretary of Public Works & Communications directing the removal by
the petitioners of the dikes they had constructed on Lot No. 15856 of the Register of Deeds of
Pampanga, which order was issued pursuant to the provisions of Republic Act No. 2056. The
dispositive portion of the judgment of reversal of the Court of Appeals reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment appealed
from is hereby reversed, and another entered: [1] upholding the validity
of the decision reached by the respondent officials in the administrative
case; [2] dissolving the injunction issued by the Court below; and [3]
cancelling the registration of Lot No. 2, the disputed area, and ordering its
reconveyance to the public domain. No costs in this instance.
The background facts are stated by the Court of Appeals as follows:
The spouses Romeo Martinez and Leonor Suarez, now petitioners-
appellees, are the registered owners of two (2) parcels of land located in
Lubao, Pampanga, covered by transfer certificate of title No. 15856 of the
Register of Deeds of the said province. Both parcels of land are fishponds.
The property involved in the instant case is the second parcel mentioned
in the above-named transfer certificate of title.
The disputed property was originally owned by one Paulino Montemayor,
who secured a "titulo real" over it way back in 1883. After the death of
Paulino Montemayor the said property passed to his successors-in-
interest, Maria Montemayor and Donata Montemayor, who in turn, sold it,
as well as the first parcel, to a certain Potenciano Garcia.
Because Potenciano Garcia was prevented by the then municipal
president of Lubao, Pedro Beltran, from restoring the dikes constructed
on the contested property, the former, on June 22, 1914, filed Civil Case
No. 1407 with the Court of First Instance against the said Pedro Beltran to
restrain the latter in his official capacity from molesting him in the
possession of said second parcel, and on even date, applied for a writ of
preliminary injunction, which was issued against said municipal
president. The Court, by decision promulgated June 12, 1916, declared
permanent the preliminary injunction, which, decision, on appeal, was
affirmed by the Supreme Court on August 21, 1918. From June 22, 1914,
the dikes around the property in question remained closed until a portion
thereof was again opened just before the outbreak of the Pacific War.
On April 17, 1925. Potenciano Garcia applied for the registration of both
parcels of land in his name, and the Court of First Instance of Pampanga,
sitting as land registration court, granted the registration over and
against the opposition of the Attorney-General and the Director of
Forestry. Pursuant to the Court's decision, original certificate of title No.
14318, covering said parcels 1 and 2 was issued to the spouses
Potenciano Garcia and Lorenza Sioson.
These parcels of land were subsequently bought by Emilio Cruz de Dios in
whose name transfer certificate of title No. 1421 was first issued on
November 9, 1925.
Thereafter, the ownership of these properties changed hands until
eventually they were acquired by the herein appellee spouses who hold
them by virtue of transfer certificate of title No. 15856.
To avoid any untoward incident, the disputants agreed to refer the matter
to the Committee on Rivers and Streams, by then composed of the
Honorable Pedro Tuason, at that time Secretary of Justice, as chairman,
and the Honorable Salvador Araneta and Vicente Orosa, Secretary of
Agriculture and National Resources and Secretary of Public Works and
Communications, respectively, as members. This committee thereafter
appointed a Sub-Committee to investigate the case and to conduct an
ocular inspection of the contested property, and on March 11, 1954, said
Sub-Committee submitted its report to the Committee on Rivers and
Streams to the effect that Parcel No. 2 of transfer certificate of title No.
15856 was not a public river but a private fishpond owned by the herein
spouses.
On July 7, 1954, the Committee on Rivers and Streams rendered its
decision the dispositive part of which reads:
"In view of the foregoing considerations, the spouses
Romeo Martinez and Leonor Suarez should be restored
to the exclusive possession, use and enjoyment of the
creek in question which forms part of their registered
property and the decision of the courts on the matter
be given full force and effect."
The municipal officials of Lubao, led by Acting Mayor Mariano Zagad,
apparently refused to recognize the above decision, because on
September 1, 1954, the spouses Romeo Martinez and Leonor Suarez
instituted Civil Case No. 751 before the Court of First Instance of
Pampanga against said Mayor Zagad, praying that the latter be enjoined
from molesting them in their possession of their property and in the
construction of the dikes therein. The writ of preliminary injunction
applied for was issued against the respondent municipal Mayor, who
immediately elevated the injunction suit for review to the Supreme Court,
which dismissed Mayor Zagad's petition on September 7, 1953. With this
dismissal order herein appellee spouses proceeded to construct the dikes
in the disputed parcel of land.
Some four (4) years later, and while Civil Case No. 751 was still pending
the Honorable Florencio Moreno, then Secretary of Public Works and
Communications, ordered another investigation of the said parcel of land,
directing the appellees herein to remove the dikes they had constructed,
on the strength of the authority vested in him by Republic Act No. 2056,
approved on June 13, 1958, entitled "An Act To Prohibit, Remove and/or
Demolish the Construction of Dams. Dikes, Or Any Other Walls In Public
Navigable Waters, Or Waterways and In Communal Fishing Grounds, To
Regulate Works in Such Waters or Waterways And In Communal Fishing
Grounds, And To Provide Penalties For Its Violation, And For Other
Purposes. 1 The said order which gave rise to the instant proceedings,
embodied a threat that the dikes would be demolished should the herein
appellees fail to comply therewith within thirty (30) days.
The spouses Martinez replied to the order by commencing on January 2,
1959 the present case, which was decided in their favor by the lower
Court in a decision dated August 10, 1959, the dispositive part of which
reads:
"WHEREFORE, in view of the foregoing considerations,
the Court hereby declares the decision, Exhibit S,
rendered by the Undersecretary of Public Works and
Communications null and void; declares the
preliminary injunction, hereto for issued, permanent,
and forever enjoining both respondents from
molesting the spouses Romeo Martinez and Leonor
Suarez in their possession, use and enjoyment of their
property described in Plan Psu-9992 and referred to in
their petition."
"Without pronouncement as to costs."
"SO ORDERED."
As against this judgment respondent officials of the Department of Public
Works and Communications took the instant appeal, contending that the
lower Court erred:
1. In holding that then Senator Rogelio de la Rosa, complainant in the
administrative case, is not an interested party and his letter-complaint
dated August 15, 1958 did not confer jurisdiction upon the respondent
Undersecretary of Public Works and Communications to investigate the
said administrative case;
2. In holding that the duty to investigate encroachments upon public
rivers conferred upon the respondent Secretary under Republic Act No.
7056 cannot be lawfully delegated by him to his subordinates;
3. In holding that the investigation ordered by the respondent Secretary
in this case is illegal on the ground that the said respondent Secretary has
arrogated unto himself the power, which he does not possess, of
reversing, making nugatory, and setting aside the two lawful decisions of
the Court Exhibits K and I, and even annulling thereby, the one rendered
by the highest Tribunal of the land;
4. In not sustaining respondent's claim that petitioners have no cause of
action because the property in dispute is a public river and in holding that
the said claim has no basis in fact and in law;
5. In not passing upon and disposing of respondent's counterclaim;
6. In not sustaining respondent's claim that the petition should not have
been entertained on the ground that the petitioners have not exhausted
administrative remedies; and
7. In holding that the decision of the respondents is illegal on the ground
that it violates the principles that laws shall have no retroactive effect
unless the contrary is provided and in holding that the said Republic Act
No. 2056 is unconstitutional on the ground that respondents' threat of
prosecuting petitioners under Section 3 thereof for acts done four years
before its enactment renders the said lawex post facto.
The Court of Appeals sustained the above-mentioned assignment of errors committed by the
Court of First Instance of Pampanga and, as previously stated, reversed the judgment of the
latter court. From this reversal this appeal by certiorari was taken, and before this Court,
petitioners-appellants assigned the following errors allegedly committed by the Court of
Appeals:
1. THE COURT OF APPEALS ERRED IN DECLARING IN THE INSTANT
CASE THAT PARCEL NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO.
15856 IS A PUBLIC RIVER AND ORDERING THE CANCELLATION OF ITS
REGISTRATION BECAUSE THIS CONSTITUTES A COLLATERAL ATTACK
ON A TORRENS TITLE IN VIOLATION OF THE LAW AND THE WELL-
SETTLED JURISPRUDENCE ON THE MATTER.
2. THE COURT OF APPEALS ERRED IN REOPENING AND RE-LITIGATING
THE ISSUE AS TO WHETHER OR NOT LOT NO. 2 OF TRANSFER
CERTIFICATE OF TITLE NO. 15856 REGISTER OF DEEDS OF PAMPANGA,
IS A PUBLIC RIVER NOTWITHSTANDING THE FACT THAT THIS ISSUE
HAS BEEN LONG RESOLVED AND SETTLED BY THE LAND
REGISTRATION COURT OF PAMPANGA IN LAND REGISTRATION
PROCEEDING NO. 692 AND IS NOW RES JUDICATA.
3. THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION
OF THE REGISTRATION OF LOT NO. 2 OF TRANSFER CERTIFICATE OF
TITLE NO. 15856 NOTWITHSTANDING THE FACT THAT THE TORRENS
TITLE COVERING IT HAS BEEN VESTED IN THE PETITIONERS WHO ARE
THE SEVENTH OF THE SUCCESSIVE INNOCENT PURCHASERS THEREOF
AND WHO IN PURCHASING THE SAME RELIED ON THE PRINCIPLE THAT
THE PERSONS DEALING WITH REGISTERED LAND NEED NOT GO
BEHIND THE REGISTER TO DETERMINE THE CONDITION OF THE
PROPERTY.
The 1st and 2nd assignment of errors, being closely related, will be taken up together.
The ruling of the Court of Appeals that Lot No. 2 covered by Transfer Certificate of Title No.
15856 of the petitioners-appellants is a public stream and that said title should be cancelled
and the river covered reverted to public domain, is assailed by the petitioners-appellants as
being a collateral attack on the indefeasibility of the torrens title originally issued in 1925 in
favor of the petitioners-appellants' predecessor-in-interest, Potenciano Garcia, which is
violative of the rule of res judicata. It is argued that as the decree of registration issued by
the Land Registration Court was not re-opened through a petition for review filed within one
(1) year from the entry of the decree of title, the certificate of title issued pursuant thereto in
favor of the appellants for the land covered thereby is no longer open to attack under Section
38 of the Land Registration Act (Act 496) and the jurisprudence on the matter established by
this Tribunal. Section 38 of the Land Registration Act cited by appellants expressly makes a
decree of registration, which ordinarily makes the title absolute and indefeasible, subject to
the exemption stated in Section 39 of the said Act among which are: "liens, claims or rights
arising or existing under the laws or Constitution of the United States or of the Philippine
Islands which the statute of the Philippine Islands cannot require to appear of record in the
registry."
At the time of the enactment of Section 496, one right recognized or existing under the law is
that provided for in Article 339 of the old Civil Code which reads as follows:
Property of public ownership is:
1. That destined to the public use, such as roads, canals, rivers, torrents,
ports, and bridges constructed by the State, and banks shores, roadsteads,
and that of a similar character. (Par. 1)
The above-mentioned properties are parts of the public domain intended for public use, are
outside the commerce of men and, therefore, not subject to private appropriation. ( 3
Manresa, 6th ed. 101-104.)
In Ledesma v. Municipality of Iloilo, 49 Phil. 769, this Court held:
A simple possession of a certificate of title under the Torrens system does
not necessarily make the possessor a true owner of all the property
described therein. If a person obtains title under the Torrens system
which includes by mistake or oversight, lands which cannot be registered
under the Torrens system, he does not by virtue of said certificate alone
become the owner of the land illegally included.
In Mercado v. Municipal President of Macabebe, 59 Phil. 592, it was also said:
It is useless for the appellant now to allege that she has obtained
certificate of title No. 329 in her favor because the said certificate does not
confer upon her any right to the creek in question, inasmuch as the said
creek, being of the public domain, is included among the various
exceptions enumerated in Section 39 of Act 496 to which the said
certificate is subject by express provision of the law.
The same ruling was laid down in Director of Lands v. Roman Catholic Bishop of Zamboanga,
61 Phil. 644, as regards public plaza.
In Dizon, et al. v. Rodriguez, et al., G.R. No. L-20300-01 and G.R. No. L-20355-56, April 30,
1965, 20 SCRA 704, it was held that the incontestable and indefeasible character of a
Torrens certificate of title does not operate when the land covered thereby is not capable of
registration.
It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness and
incontestability of a Torrens certificate of title do not apply here. The Land Registration
Court has no jurisdiction over non-registerable properties, such as public navigable rivers
which are parts of the public domain, and cannot validly adjudge the registration of title in
favor of a private applicant. Hence, the judgment of the Court of First Instance of Pampanga
as regards the Lot No. 2 of Certificate of Title No. 15856 in the name of petitioners-
appellants may be attacked at any time, either directly or collaterally, by the State which is
not bound by any prescriptive period provided for by the Statute of Limitations (Article
1108, par. 4, new Civil Code). The right of reversion or reconveyance to the State of the
public properties fraudulently registered and which are not capable of private appropriation
or private acquisition does not prescribe. (Republic v. Ramona Ruiz, et al., G.R. No. L-23712,
April 29, 1968, 23 SCRA 348; Republic v. Ramos, G.R. No.
L-15484, January 31, 1963, 7 SCRA 47.)
When it comes to registered properties, the jurisdiction of the Secretary of Public Works &
Communications under Republic Act 2056 to order the removal or obstruction to navigation
along a public and navigable creek or river included therein, has been definitely settled and
is no longer open to question (Lovina v. Moreno, G.R. No L-17821, November 29, 1963, 9
SCRA 557; Taleon v. Secretary of Public Works & Communications G.R. No. L-24281, May 16,
1961, 20 SCRA 69, 74).
The evidence submitted before the trial court which was passed upon by the respondent
Court of Appeals shows that Lot No. 2 (Plan Psu 992) of Transfer Certificate of Title No.
15856, is a river of the public domain. The technical description of both Lots Nos. 1 and 2
appearing in Original Certificate of Title No. 14318 of the Register of Deeds of Pampanga,
from which the present Transfer Certificate of Title No. 15856 was derived, confirms the fact
that Lot No. 2 embraced in said title is bounded practically on all sides by rivers. As held by
the Court of First Instance of Pampanga in Civil Case No. 1247 for injunction filed by the
petitioners' predecessors-in-interest against the Municipal Mayor of Lubao and decided in
1916 (Exh. "L"), Lot No. 2 is a branch of the main river that has been covered with water
since time immemorial and, therefore, part of the public domain. This finding having been
affirmed by the Supreme Court, there is no longer any doubt that Lot No. 2 of Transfer
Certificate of Title No. 15856 of petitioners is a river which is not capable of private
appropriation or acquisition by prescription. (Palanca v. Com. of the Philippines, 69 Phil.
449; Meneses v. Com. of the Philippines, 69 Phil. 647). Consequently, appellants' title does
not include said river.
II
As regards the 3rd assignment of error, there is no weight in the appellants' argument that,
being a purchaser for value and in good faith of Lot No. 2, the nullification of its registration
would be contrary to the law and to the applicable decisions of the Supreme Court as it
would destroy the stability of the title which is the core of the system of registration.
Appellants cannot be deemed purchasers for value and in good faith as in the deed of
absolute conveyance executed in their favor, the following appears:
6. Que la segunda parcela arriba descrita y mencionada esta actualmente
abierta, sin malecones y excluida de la primera parcela en virtud de la
Orden Administrative No. 103, tal como fue enmendada, del pasado
regimen o Gobierno.
7. Que los citados compradores Romeo Martinez y Leonor Suarez se
encargan de gestionar de las autoridades correspondientes para que la
citada segunda parcela pueda ser convertida de nuevo en pesqueria,
corriendo a cuenta y cargo de los mismos todos los gastos.
8. Que en el caso de que dichos compradores no pudiesen conseguir sus
propositos de convertir de nuevo en pesquera la citada segunda parcela,
los aqui vendedores no devolveran ninguna cantidad de dinero a los
referidos compradores; este es, no se disminuiriat el precio de esta venta.
(Exh. 13-a, p. 52, respondents record of exhibits)
These stipulations were accepted by the petitioners-appellants in the same conveyance in
the following terms:
Romeo Martinez y Leonor Suarez, mayores de edad, filipinos y residentes
en al Barrio de Julo Municipio de Malabon, Provincia de Rizal, por la
presente, declaran que estan enterados del contenido de este documento
y lo aceptan en los precisos terminos en que arriba uedan consignados.
(Exh. 13-a, ibid)
Before purchasing a parcel of land, it cannot be contended that the appellants who were the
vendees did not know exactly the condition of the land that they were buying and the
obstacles or restrictions thereon that may be put up by the government in connection with
their project of converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully
and voluntarily assumed the risks attendant to the sale of said lot. One who buys something
with knowledge of defect or lack of title in his vendor cannot claim that he acquired it in
good faith (Leung Lee v. Strong Machinery Co., et al., 37 Phil. 664).
The ruling that a purchaser of a registered property cannot go beyond the record to make
inquiries as to the legality of the title of the registered owner, but may rely on the registry to
determine if there is no lien or encumbrances over the same, cannot be availed of as against
the law and the accepted principle that rivers are parts of the public domain for public use
and not capable of private appropriation or acquisition by prescription.
FOR ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is in
accordance with law, and the same is hereby affirmed with costs against the petitioners-
appellants.
Makalintal, C.J., Castro, Teehankee and Muoz Palma, JJ., concur.
Makasiar, J., is on leave.

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

G.R. No. 155650 July 20, 2006
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE,
SANGGUNIANG PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE, and
CITY TREASURER OF PARAAQUE, respondents.
D E C I S I O N
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903,
otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA
Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand
E. Marcos. Subsequently, Executive Order Nos. 909
1
and 298
2
amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and
equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately
600 hectares of land,
3
including the runways and buildings ("Airport Lands and Buildings")
then under the Bureau of Air Transportation.
4
The MIAA Charter further provides that no
portion of the land transferred to MIAA shall be disposed of through sale or any other mode
unless specifically approved by the President of the Philippines.
5

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion
No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption
from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City.
MIAA then paid some of the real estate tax already due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City
of Paraaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is
broken down as follows:
TAX DECLARATION TAXABLE YEAR TAX DUE PENALTY TOTAL
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.00
6

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and
warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque
threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay
the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The
OGCC pointed out that Section 206 of the Local Government Code requires persons exempt
from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the
MIAA Charter is the proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition
and injunction, with prayer for preliminary injunction or temporary restraining order. The
petition sought to restrain the City of Paraaque from imposing real estate tax on, levying
against, and auctioning for public sale the Airport Lands and Buildings. The petition was
docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond
the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002
MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence,
MIAA filed on 5 December 2002 the present petition for review.
7

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the
Barangay Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public
market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall. The City of
Paraaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily
Inquirer, a newspaper of general circulation in the Philippines. The notices announced the
public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February
2003, 10:00 a.m., at the Legislative Session Hall Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this
Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary
Restraining Order. The motion sought to restrain respondents the City of Paraaque, City
Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque,
and the City Assessor of Paraaque ("respondents") from auctioning the Airport Lands
and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective
immediately. The Court ordered respondents to cease and desist from selling at public
auction the Airport Lands and Buildings. Respondents received the TRO on the same day
that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three
hours after the conclusion of the public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the
directive issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor
General subsequently submitted their respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in
the name of MIAA. However, MIAA points out that it cannot claim ownership over these
properties since the real owner of the Airport Lands and Buildings is the Republic of the
Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for
the benefit of the general public. Since the Airport Lands and Buildings are devoted to public
use and public service, the ownership of these properties remains with the State. The Airport
Lands and Buildings are thus inalienable and are not subject to real estate tax by local
governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the
payment of real estate tax. MIAA insists that it is also exempt from real estate tax under
Section 234 of the Local Government Code because the Airport Lands and Buildings are
owned by the Republic. To justify the exemption, MIAA invokes the principle that the
government cannot tax itself. MIAA points out that the reason for tax exemption of public
property is that its taxation would not inure to any public advantage, since in such a case the
tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly
withdrew the tax exemption privileges of "government-owned and-controlled
corporations" upon the effectivity of the Local Government Code. Respondents also argue
that a basic rule of statutory construction is that the express mention of one person, thing, or
act excludes all others. An international airport is not among the exceptions mentioned in
Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim
that the Airport Lands and Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v.
Marcos
8
where we held that the Local Government Code has withdrawn the exemption from
real estate tax granted to international airports. Respondents further argue that since MIAA
has already paid some of the real estate tax assessments, it is now estopped from claiming
that the Airport Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA
are exempt from real estate tax under existing laws. If so exempt, then the real estate tax
assessments issued by the City of Paraaque, and all proceedings taken pursuant to such
assessments, are void. In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by
local governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of
the National Government and thus exempt from local taxation. Second, the real properties of
MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not
exempt from real estate tax. Respondents claim that the deletion of the phrase "any
government-owned or controlled so exempt by its charter" in Section 234(e) of the Local
Government Code withdrew the real estate tax exemption of government-owned or
controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real
Property Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from
real estate tax. However, MIAA is not a government-owned or controlled corporation.
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a
government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized
as a stock or non-stock corporation, vested with functions relating to public
needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) percent of its capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-
stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not
a stock corporation because it has no capital stock divided into shares. MIAA has no
stockholders or voting shares. Section 10 of the MIAA Charter
9
provides:
SECTION 10. Capital. The capital of the Authority to be contributed by the
National Government shall be increased from Two and One-half Billion
(P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment
and such other properties, movable and immovable[,] which may be contributed by
the National Government or transferred by it from any of its agencies, the valuation
of which shall be determined jointly with the Department of Budget and
Management and the Commission on Audit on the date of such contribution or
transfer after making due allowances for depreciation and other deductions taking
into account the loans and other liabilities of the Authority at the time of the
takeover of the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about
seventy percentum (70%) of the unremitted share of the National Government
from 1983 to 1986 to be remitted to the National Treasury as provided for in
Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the
National Government in the Authority. Thereafter, the Government contribution to
the capital of the Authority shall be provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code
10
defines a stock corporation as one whose "capital stock
is divided into shares and x x x authorized to distribute to the holders of such shares
dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no
stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the
Corporation Code defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." A non-stock corporation
must have members. Even if we assume that the Government is considered as the sole
member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations
cannot distribute any part of their income to their members. Section 11 of the MIAA Charter
mandates MIAA to remit 20% of its annual gross operating income to the National
Treasury.
11
This prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like
chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is
organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a
government-owned or controlled corporation. What then is the legal status of MIAA within
the National Government?
MIAA is a government instrumentality vested with corporate powers to perform
efficiently its governmental functions. MIAA is like any other government instrumentality,
the only difference is that MIAA is vested with corporate powers. Section 2(10) of the
Introductory Provisions of the Administrative Code defines a government "instrumentality"
as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a
charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality
does not become a corporation. Unless the government instrumentality is organized as a
stock or non-stock corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain,
12
police authority
13
and the levying of fees and charges.
14
At the same time,
MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this Executive Order."
15

Likewise, when the law makes a government instrumentality operationally autonomous,
the instrumentality remains part of the National Government machinery although not
integrated with the department framework. The MIAA Charter expressly states that
transforming MIAA into a "separate and autonomous body"
16
will make its operation more
"financially viable."
17

Many government instrumentalities are vested with corporate powers but they do not
become stock or non-stock corporations, which is a necessary condition before an agency or
instrumentality is deemed a government-owned or controlled corporation. Examples are the
Mactan International Airport Authority, the Philippine Ports Authority, the University of the
Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise
corporate powers but they are not organized as stock or non-stock corporations as required
by Section 2(13) of the Introductory Provisions of the Administrative Code. These
government instrumentalities are sometimes loosely called government corporate entities.
However, they are not government-owned or controlled corporations in the strict sense as
understood under the Administrative Code, which is the governing law defining the legal
relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local
Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of
the following:
x x x x
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units.(Emphasis and
underscoring supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax.
While the 1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power "subject to such guidelines
and limitations as the Congress may provide."
18

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

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

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

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

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

Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction
sale of any property of public dominion is void for being contrary to public policy. Essential
public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and
compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real
estate tax.
Before MIAA can encumber
26
the Airport Lands and Buildings, the President must
first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the
Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing
general law governing the classification and disposition of lands of the public domain other
than timber and mineral lands,"
27
provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural
Resources, the President may designate by proclamation any tract or tracts of land
of the public domain as reservations for the use of the Republic of the Philippines
or of any of its branches, or of the inhabitants thereof, in accordance with
regulations prescribed for this purposes, or for quasi-public uses or purposes when
the public interest requires it, including reservations for highways, rights of way
for railroads, hydraulic power sites, irrigation systems, communal pastures or
lequas communales, public parks, public quarries, public fishponds, working men's
village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of
Section eighty-three shall be non-alienable and shall not be subject to
occupation, entry, sale, lease, or other disposition until again declared
alienable under the provisions of this Act or by proclamation of the
President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport Lands and
Buildings from public use, these properties remain properties of public dominion and
are inalienable. Since the Airport Lands and Buildings are inalienable in their present status
as properties of public dominion, they are not subject to levy on execution or foreclosure
sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership
remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for public use, and to
withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government.
(1) The President shall have the power to reserve for settlement or public
use, and for specific public purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law. The reserved land shall
thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn
by law or presidential proclamation from public use, they are properties of public dominion,
owned by the Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.
Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like
MIAA to hold title to real properties owned by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance shall
be executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by
law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer
because even its executive head cannot sign the deed of conveyance on behalf of the
Republic. Only the President of the Republic can sign such deed of conveyance.
28

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

3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of
the Local Government Code of 1991 withdrew the tax exemption of "all persons, whether
natural or juridical" upon the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in
this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned or
controlled corporations, except local water districts, cooperatives duly registered
under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions are hereby withdrawn upon effectivity of this Code. (Emphasis
supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that
since the Local Government Code withdrew the tax exemption of all juridical persons, then
MIAA is not exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that
the withdrawn exemptions from realty tax cover not just GOCCs, but all
persons. To repeat, the provisions lay down the explicit proposition that the
withdrawal of realty tax exemption applies to all persons. The reference to or the
inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized
under our laws, natural and juridical persons. Obviously, MIAA is not a
natural person. Thus, the determinative test is not just whether MIAA is a
GOCC, but whether MIAA is a juridical person at all. (Emphasis and
underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local
taxation is its status whether MIAA is a juridical person or not. The minority also insists
that "Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain
MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code
expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise
provided in this Code." Now, Section 133(o) of the Local Government Code expressly
provides otherwise, specifically prohibiting local governments from imposing any kind of
tax on national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following:
x x x x
(o) Taxes, fees or charges of any kinds on the National Government, its agencies
and instrumentalities, and local government units. (Emphasis and underscoring
supplied)
By express mandate of the Local Government Code, local governments cannot impose any
kind of tax on national government instrumentalities like the MIAA. Local governments are
devoid of power to tax the national government, its agencies and instrumentalities. The
taxing powers of local governments do not extend to the national government, its agencies
and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving
clause of Section 133. The saving clause refers to Section 234(a) on the exception to the
exemption from real estate tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical
persons are subject to tax by local governments. The minority insists that the juridical
persons exempt from local taxation are limited to the three classes of entities specifically
enumerated as exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b)
cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and
non-profit hospitals and educational institutions. It would be belaboring the
obvious why the MIAA does not fall within any of the exempt entities under Section
193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the
Local Government Code. This theory will result in gross absurdities. It will make the national
government, which itself is a juridical person, subject to tax by local governments since the
national government is not included in the enumeration of exempt entities in Section 193.
Under this theory, local governments can impose any kind of local tax, and not only real
estate tax, on the national government.
Under the minority's theory, many national government instrumentalities with juridical
personalities will also be subject to any kind of local tax, and not only real estate tax. Some of
the national government instrumentalities vested by law with juridical personalities are:
Bangko Sentral ng Pilipinas,
30
Philippine Rice Research Institute,
31
Laguna Lake
Development Authority,
32
Fisheries Development Authority,
33
Bases Conversion
Development Authority,
34
Philippine Ports Authority,
35
Cagayan de Oro Port Authority,
36
San
Fernando Port Authority,
37
Cebu Port Authority,
38
and Philippine National Railways.
39

The minority's theory violates Section 133(o) of the Local Government Code which expressly
prohibits local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish between national government
instrumentalities with or without juridical personalities. Where the law does not distinguish,
courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether
MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it
is a national government instrumentality under Section 133(o) of the Local Government
Code. Section 133(o) is the specific provision of law prohibiting local governments from
imposing any kind of tax on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise
provided in this Code." This means that unless the Local Government Code grants an express
authorization, local governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no power to tax the
national government, its agencies and instrumentalities. As an exception to this rule, local
governments may tax the national government, its agencies and instrumentalities only if the
Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a)
of the Code, which makes the national government subject to real estate tax when it gives the
beneficial use of its real properties to a taxable entity. Section 234(a) of the Local
Government Code provides:
SEC. 234. Exemptions from Real Property Tax The following are exempted from
payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax.
The exception to this exemption is when the government gives the beneficial use of the real
property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national
government, its agencies and instrumentalities are subject to any kind of tax by local
governments. The exception to the exemption applies only to real estate tax and not to any
other tax. The justification for the exception to the exemption is that the real property,
although owned by the Republic, is not devoted to public use or public service but devoted to
the private gain of a taxable person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local
Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following
an accepted rule of construction, in case of conflict the subsequent provisions
should prevail. Therefore, MIAA, as a juridical person, is subject to real property
taxes, the general exemptions attaching to instrumentalities under Section 133(o)
of the Local Government Code being qualified by Sections 193 and 234 of the same
law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one
hand, and Sections 193 and 234 on the other. No one has urged that there is such a conflict,
much less has any one presenteda persuasive argument that there is such a conflict. The
minority's assumption of an irreconcilable conflict in the statutory provisions is an egregious
error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193
expressly admits its subordination to other provisions of the Code when Section 193 states
"[u]nless otherwise provided in this Code." By its own words, Section 193 admits the
superiority of other provisions of the Local Government Code that limit the exercise of the
taxing power in Section 193. When a provision of law grants a power but withholds such
power on certain matters, there is no conflict between the grant of power and the
withholding of power. The grantee of the power simply cannot exercise the power on
matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local
Government Units." Section 133 limits the grant to local governments of the power to tax,
and not merely the exercise of a delegated power to tax. Section 133 states that the taxing
powers of local governments "shall not extend to the levy" of any kind of tax on the national
government, its agencies and instrumentalities. There is no clearer limitation on the taxing
power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local
governments, Section 133 logically prevails over Section 193 which grants local
governments such taxing powers. By their very meaning and purpose, the "common
limitations" on the taxing power prevail over the grant or exercise of the taxing power. If the
taxing power of local governments in Section 193 prevails over the limitations on such
taxing power in Section 133, then local governments can impose any kind of tax on the
national government, its agencies and instrumentalities a gross absurdity.
Local governments have no power to tax the national government, its agencies and
instrumentalities, except as otherwise provided in the Local Government Code pursuant to
the saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This
exception which is an exception to the exemption of the Republic from real estate tax
imposed by local governments refers to Section 234(a) of the Code. The exception to the
exemption in Section 234(a) subjects real property owned by the Republic, whether titled in
the name of the national government, its agencies or instrumentalities, to real estate tax if
the beneficial use of such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase
"government-owned or controlled corporation" is not controlling. The minority points out
that Section 2 of the Introductory Provisions of the Administrative Code admits that its
definitions are not controlling when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or the
context as a whole, or a particular statute, shall require a different meaning:
x x x x
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code
recognizes that a statute may require a different meaning than that defined in the
Administrative Code. However, this does not automatically mean that the definition in the
Administrative Code does not apply to the Local Government Code. Section 2 of the
Administrative Code clearly states that "unless the specific words x x x of a particular statute
shall require a different meaning," the definition in Section 2 of the Administrative Code
shall apply. Thus, unless there is specific language in the Local Government Code defining
the phrase "government-owned or controlled corporation" differently from the definition in
the Administrative Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the
phrase "government-owned or controlled corporation" differently from the definition in the
Administrative Code. Indeed, there is none. The Local Government Code is silent on the
definition of the phrase "government-owned or controlled corporation." The Administrative
Code, however, expressly defines the phrase "government-owned or controlled
corporation." The inescapable conclusion is that the Administrative Code definition of the
phrase "government-owned or controlled corporation" applies to the Local Government
Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a
unified document the major structural, functional and procedural principles and rules of
governance." Thus, the Administrative Code is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and instrumentalities.
Unless a statute expressly provides for a different status and relationship for a specific
government unit or entity, the provisions of the Administrative Code prevail.
The minority also contends that the phrase "government-owned or controlled corporation"
should apply only to corporations organized under the Corporation Code, the general
incorporation law, and not to corporations created by special charters. The minority sees no
reason why government corporations with special charters should have a capital stock.
Thus, the minority declares:
I submit that the definition of "government-owned or controlled corporations"
under the Administrative Code refer to those corporations owned by the
government or its instrumentalities which are created not by legislative enactment,
but formed and organized under the Corporation Code through registration with
the Securities and Exchange Commission. In short, these are GOCCs without
original charters.
x x x x
It might as well be worth pointing out that there is no point in requiring a capital
structure for GOCCs whose full ownership is limited by its charter to the State or
Republic. Such GOCCs are not empowered to declare dividends or alienate their
capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution
and existing legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled
corporation" does not distinguish between one incorporated under the Corporation Code or
under a special charter. Where the law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned
corporations organized as stock corporations. Prime examples are the Land Bank of the
Philippines and the Development Bank of the Philippines. The special charter
40
of the Land
Bank of the Philippines provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine
billion pesos, divided into seven hundred and eighty million common shares with a
par value of ten pesos each, which shall be fully subscribed by the Government, and
one hundred and twenty million preferred shares with a par value of ten pesos
each, which shall be issued in accordance with the provisions of Sections seventy-
seven and eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter
41
of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank
shall be Five Billion Pesos to be divided into Fifty Million common shares with par
value of P100 per share. These shares are available for subscription by the National
Government. Upon the effectivity of this Charter, the National Government shall
subscribe to Twenty-Five Million common shares of stock worth Two Billion Five
Hundred Million which shall be deemed paid for by the Government with the net
asset values of the Bank remaining after the transfer of assets and liabilities as
provided in Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special
charters are the Philippine Crop Insurance Corporation,
42
Philippine International Trading
Corporation,
43
and the Philippine National Bank
44
before it was reorganized as a stock
corporation under the Corporation Code. All these government-owned corporations
organized under special charters as stock corporations are subject to real estate tax on real
properties owned by them. To rule that they are not government-owned or controlled
corporations because they are not registered with the Securities and Exchange Commission
would remove them from the reach of Section 234 of the Local Government Code, thus
exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters
are those that meet the two conditions prescribed in Section 16, Article XII of the
Constitution. The first condition is that the government-owned or controlled corporation
must be established for the common good. The second condition is that the government-
owned or controlled corporation must meet the test of economic viability. Section 16, Article
XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or
controlled corporations may be created or established by special charters in the
interest of the common good and subject to the test of economic viability.
(Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create "government-owned or
controlled corporations" through special charters only if these entities are required to meet
the twin conditions of common good and economic viability. In other words, Congress has no
power to create government-owned or controlled corporations with special charters unless
they are made to comply with the two conditions of common good and economic viability.
The test of economic viability applies only to government-owned or controlled corporations
that perform economic or commercial activities and need to compete in the market place.
Being essentially economic vehicles of the State for the common good meaning for
economic development purposes these government-owned or controlled corporations
with special charters are usually organized as stock corporations just like ordinary private
corporations.
In contrast, government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations. These
instrumentalities are not the "government-owned or controlled corporations" referred to in
Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or
public functions. Congress has plenary authority to create government instrumentalities
vested with corporate powers provided these instrumentalities perform essential
government functions or public services. However, when the legislature creates through
special charters corporations that perform economic or commercial activities, such entities
known as "government-owned or controlled corporations" must meet the test of
economic viability because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the
Philippines and similar government-owned or controlled corporations, which derive their
income to meet operating expenses solely from commercial transactions in competition with
the private sector. The intent of the Constitution is to prevent the creation of government-
owned or controlled corporations that cannot survive on their own in the market place and
thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the
government creates a corporation, there is a sense in which this corporation
becomes exempt from the test of economic performance. We know what happened
in the past. If a government corporation loses, then it makes its claim upon the
taxpayers' money through new equity infusions from the government and what is
always invoked is the common good. That is the reason why this year, out of a
budget of P115 billion for the entire government, about P28 billion of this will go
into equity infusions to support a few government financial institutions. And this is
all taxpayers' money which could have been relocated to agrarian reform, to social
services like health and education, to augment the salaries of grossly underpaid
public employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the
"common good," this becomes a restraint on future enthusiasts for state capitalism
to excuse themselves from the responsibility of meeting the market test so that
they become viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by Commissioner Foz,
the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST,"
together with the common good.
45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The
significant addition, however, is the phrase "in the interest of the common good
and subject to the test of economic viability." The addition includes the ideas that
they must show capacity to function efficiently in business and that they should not
go into activities which the private sector can do better. Moreover, economic
viability is more than financial viability but also includes capability to make profit
and generate benefits not quantifiable in financial terms.
46
(Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with
corporate powers and performing essential public services. The State is obligated to render
essential public services regardless of the economic viability of providing such service. The
non-economic viability of rendering such essential public service does not excuse the State
from withholding such essential services from the public.
However, government-owned or controlled corporations with special charters, organized
essentially for economic or commercial objectives, must meet the test of economic viability.
These are the government-owned or controlled corporations that are usually organized
under their special charters as stock corporations, like the Land Bank of the Philippines and
the Development Bank of the Philippines. These are the government-owned or controlled
corporations, along with government-owned or controlled corporations organized under the
Corporation Code, that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create
MIAA to compete in the market place. MIAA does not compete in the market place because
there is no competing international airport operated by the private sector. MIAA performs
an essential public service as the primary domestic and international airport of the
Philippines. The operation of an international airport requires the presence of personnel
from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and
departure of passengers, screening out those without visas or travel documents, or
those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited
importations;
3. The quarantine office of the Department of Health, to enforce health measures
against the spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant
and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the
entry of terrorists and the escape of criminals, as well as to secure the airport
premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications,
to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or
take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and buildings
for the government personnel, passengers, and airlines, and to manage the airport
operations.
All these agencies of government perform government functions essential to the operation of
an international airport.
MIAA performs an essential public service that every modern State must provide its citizens.
MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes
on passengers and airlines. The terminal fees that MIAA charges every passenger are
regulatory or administrative fees
47
and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. x x x
(Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a
government-owned or controlled corporation. Without a change in its capital structure,
MIAA remains a government instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code. More importantly, as long as MIAA renders essential
public services, it need not comply with the test of economic viability. Thus, MIAA is outside
the scope of the phrase "government-owned or controlled corporations" under Section 16,
Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-
owned or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The
1987 Constitution prescribes explicit conditions for the creation of "government-owned or
controlled corporations." The Administrative Code defines what constitutes a "government-
owned or controlled corporation." To belittle this phrase as "clarificatory or illustrative" is
grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section
2(13) of the Introductory Provisions of the Administrative Code because it is not organized
as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled
corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a government instrumentality vested
with corporate powers and performing essential public services pursuant to Section 2(10) of
the Introductory Provisions of the Administrative Code. As a government instrumentality,
MIAA is not subject to any kind of tax by local governments under Section 133(o) of the
Local Government Code. The exception to the exemption in Section 234(a) does not apply to
MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception
applies only if the beneficial use of real property owned by the Republic is given to a taxable
entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and
thus are properties of public dominion. Properties of public dominion are owned by the
State or the Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar
character;
(2) Those which belong to the State, without being for public use, and are intended
for some public service or for the development of the national wealth. (Emphasis
supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport
Lands and Buildings of MIAA are intended for public use, and at the very least intended for
public service. Whether intended for public use or public service, the Airport Lands and
Buildings are properties of public dominion. As properties of public dominion, the Airport
Lands and Buildings are owned by the Republic and thus exempt from real estate tax under
Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code,
which governs the legal relation and status of government units, agencies and offices within
the entire government machinery, MIAA is a government instrumentality and not a
government-owned or controlled corporation. Under Section 133(o) of the Local
Government Code, MIAA as a government instrumentality is not a taxable person because it
is not subject to "[t]axes, fees or charges of any kind" by local governments. The only
exception is when MIAA leases its real property to a "taxable person" as provided in Section
234(a) of the Local Government Code, in which case the specific real property leased
becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings
leased to taxable persons like private parties are subject to real estate tax by the City of
Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted
to public use, are properties of public dominion and thus owned by the State or the Republic
of the Philippines. Article 420 specifically mentions "ports x x x constructed by the State,"
which includes public airports and seaports, as properties of public dominion and owned by
the Republic. As properties of public dominion owned by the Republic, there is no doubt
whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax
under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled
that properties of public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court
of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878.
We DECLARE the Airport Lands and Buildings of the Manila International Airport
Authority EXEMPT from the real estate tax imposed by the City of Paraaque. We
declare VOID all the real estate tax assessments, including the final notices of real estate tax
delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the
Manila International Airport Authority, except for the portions that the Manila International
Airport Authority has leased to private parties. We also declareVOID the assailed auction
sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport
Authority.
No costs.
SO ORDERED.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez,
Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr.,
J.J., concur.



x-------------------------------------------------------------------------------x
DISSENTING OPINION
TINGA, J. :
The legally correct resolution of this petition would have had the added benefit of an utterly
fair and equitable result a recognition of the constitutional and statutory power of the City
of Paraaque to impose real property taxes on the Manila International Airport Authority
(MIAA), but at the same time, upholding a statutory limitation that prevents the City of
Paraaque from seizing and conducting an execution sale over the real properties of MIAA.
In the end, all that the City of Paraaque would hold over the MIAA is a limited lien,
unenforceable as it is through the sale or disposition of MIAA properties. Not only is this the
legal effect of all the relevant constitutional and statutory provisions applied to this case, it
also leaves the room for negotiation for a mutually acceptable resolution between the City of
Paraaque and MIAA.
Instead, with blind but measured rage, the majority today veers wildly off-course, shattering
statutes and judicial precedents left and right in order to protect the precious Ming vase that
is the Manila International Airport Authority (MIAA). While the MIAA is left unscathed, it is
surrounded by the wreckage that once was the constitutional policy, duly enacted into law,
that was local autonomy. Make no mistake, the majority has virtually declared war on the
seventy nine (79) provinces, one hundred seventeen (117) cities, and one thousand five
hundred (1,500) municipalities of the Philippines.
1

The icing on this inedible cake is the strained and purposely vague rationale used to justify
the majority opinion. Decisions of the Supreme Court are expected to provide clarity to the
parties and to students of jurisprudence, as to what the law of the case is, especially when
the doctrines of long standing are modified or clarified. With all due respect, the decision in
this case is plainly so, so wrong on many levels. More egregious, in the majority's resolve to
spare the Manila International Airport Authority (MIAA) from liability for real estate taxes,
no clear-cut rule emerges on the important question of the power of local government units
(LGUs) to tax government corporations, instrumentalities or agencies.
The majority would overturn sub silencio, among others, at least one dozen precedents
enumerated below:
1) Mactan-Cebu International Airport Authority v. Hon. Marcos,
2
the leading case penned in
1997 by recently retired Chief Justice Davide, which held that the express withdrawal by the
Local Government Code of previously granted exemptions from realty taxes applied to
instrumentalities and government-owned or controlled corporations (GOCCs) such as the
Mactan-Cebu International Airport Authority (MCIAA). The majority invokes the ruling in
Basco v. Pagcor,
3
a precedent discredited in Mactan, and a vanguard of a doctrine so noxious
to the concept of local government rule that the Local Government Code was drafted
precisely to counter such philosophy. The efficacy of several rulings that expressly rely on
Mactan, such as PHILRECA v. DILG Secretary,
4
City Government of San Pablo v. Hon. Reyes
5
is
now put in question.
2) The rulings in National Power Corporation v. City of Cabanatuan,
6
wherein the Court,
through Justice Puno, declared that the National Power Corporation, a GOCC, is liable for
franchise taxes under the Local Government Code, and succeeding cases that have relied on
it such as Batangas Power Corp. v. Batangas City
7
The majority now states that deems
instrumentalities as defined under the Administrative Code of 1987 as purportedly beyond
the reach of any form of taxation by LGUs, stating "[l]ocal governments are devoid of power
to tax the national government, its agencies and instrumentalities."
8
Unfortunately, using the
definition employed by the majority, as provided by Section 2(d) of the Administrative Code,
GOCCs are also considered as instrumentalities, thus leading to the astounding conclusion
that GOCCs may not be taxed by LGUs under the Local Government Code.
3) Lung Center of the Philippines v. Quezon City,
9
wherein a unanimous en banc Court held
that the Lung Center of the Philippines may be liable for real property taxes. Using the
majority's reasoning, the Lung Center would be properly classified as an instrumentality
which the majority now holds as exempt from all forms of local taxation.
10

4) City of Davao v. RTC,
11
where the Court held that the Government Service Insurance
System (GSIS) was liable for real property taxes for the years 1992 to 1994, its previous
exemption having been withdrawn by the enactment of the Local Government Code.
12
This
decision, which expressly relied on Mactan, would be directly though silently overruled by
the majority.
5) The common essence of the Court's rulings in the two Philippine Ports Authority v. City of
Iloilo,
13
cases penned by Justices Callejo and Azcuna respectively, which relied in part on
Mactan in holding the Philippine Ports Authority (PPA) liable for realty taxes,
notwithstanding the fact that it is a GOCC. Based on the reasoning of the majority, the PPA
cannot be considered a GOCC. The reliance of these cases on Mactan, and its rationale for
holding governmental entities like the PPA liable for local government taxation is mooted by
the majority.
6) The 1963 precedent of Social Security System Employees Association v. Soriano,
14
which
declared the Social Security Commission (SSC) as a GOCC performing proprietary functions.
Based on the rationale employed by the majority, the Social Security System is not a GOCC.
Or perhaps more accurately, "no longer" a GOCC.
7) The decision penned by Justice (now Chief Justice) Panganiban, Light Rail Transit
Authority v. Central Board of Assessment.
15
The characterization therein of the Light Rail
Transit Authority (LRTA) as a "service-oriented commercial endeavor" whose patrimonial
property is subject to local taxation is now rendered inconsequential, owing to the majority's
thinking that an entity such as the LRTA is itself exempt from local government taxation
16
,
irrespective of the functions it performs. Moreover, based on the majority's criteria, LRTA is
not a GOCC.
8) The cases of Teodoro v. National Airports Corporation
17
and Civil Aeronautics
Administration v. Court of Appeals.
18
wherein the Court held that the predecessor agency of
the MIAA, which was similarly engaged in the operation, administration and management of
the Manila International Agency, was engaged in the exercise of proprietary, as opposed to
sovereign functions. The majority would hold otherwise that the property maintained by
MIAA is actually patrimonial, thus implying that MIAA is actually engaged in sovereign
functions.
9) My own majority in Phividec Industrial Authority v. Capitol Steel,
19
wherein the Court
held that the Phividec Industrial Authority, a GOCC, was required to secure the services of
the Office of the Government Corporate Counsel for legal representation.
20
Based on the
reasoning of the majority, Phividec would not be a GOCC, and the mandate of the Office of the
Government Corporate Counsel extends only to GOCCs.
10) Two decisions promulgated by the Court just last month (June 2006), National Power
Corporation v. Province of Isabela
21
and GSIS v. City Assessor of Iloilo City.
22
In the former,
the Court pronounced that "[a]lthough as a general rule, LGUs cannot impose taxes, fees, or
charges of any kind on the National Government, its agencies and instrumentalities, this rule
admits of an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose
taxes, fees or charges on the aforementioned entities." Yet the majority now rules that the
exceptions in the LGC no longer hold, since "local governments are devoid of power to tax
the national government, its agencies and instrumentalities."
23
The ruling in the latter case,
which held the GSIS as liable for real property taxes, is now put in jeopardy by the majority's
ruling.
There are certainly many other precedents affected, perhaps all previous jurisprudence
regarding local government taxation vis-a-vis government entities, as well as any previous
definitions of GOCCs, and previous distinctions between the exercise of governmental and
proprietary functions (a distinction laid down by this Court as far back as 1916
24
). What is
the reason offered by the majority for overturning or modifying all these precedents and
doctrines? None is given, for the majority takes comfort instead in the pretense that these
precedents never existed. Only children should be permitted to subscribe to the theory that
something bad will go away if you pretend hard enough that it does not exist.
I.
Case Should Have Been Decided
Following Mactan Precedent
The core issue in this case, whether the MIAA is liable to the City of Paraaque for real
property taxes under the Local Government Code, has already been decided by this Court in
the Mactan case, and should have been resolved by simply applying precedent.
Mactan Explained
A brief recall of the Mactan case is in order. The Mactan-Cebu International Airport
Authority (MCIAA) claimed that it was exempt from payment of real property taxes to the
City of Cebu, invoking the specific exemption granted in Section 14 of its charter, Republic
Act No. 6958, and its status as an instrumentality of the government performing
governmental functions.
25
Particularly, MCIAA invoked Section 133 of the Local Government
Code, precisely the same provision utilized by the majority as the basis for MIAA's
exemption. Section 133 reads:
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
x x x
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units. (emphasis and underscoring supplied).
However, the Court in Mactan noted that Section 133 qualified the exemption of the National
Government, its agencies and instrumentalities from local taxation with the phrase "unless
otherwise provided herein." It then considered the other relevant provisions of the Local
Government Code, particularly the following:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code,
tax exemption or incentives granted to, or enjoyed by all persons, whether natural or
juridical, including government-owned and controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, are hereby withdrawn upon the effectivity of this
Code.
26

SECTION 232. Power to Levy Real Property Tax. A province or city or a municipality within
the Metropolitan Manila area may levy an annual ad valorem tax on real property such as
land, building, machinery, and other improvements not hereafter specifically exempted.
27

SECTION 234. Exemptions from Real Property Tax. -- The following are exempted from
payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person:
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,
non-profit or religious cemeteries and all lands, buildings, and improvements actually,
directly, and exclusively used for religious charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned and controlled corporations engaged in the
distribution of water and/or generation and transmission of electric power;
(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 effectivity of
this Code.
28

Clearly, Section 133 was not intended to be so absolute a prohibition on the power of LGUs
to tax the National Government, its agencies and instrumentalities, as evidenced by these
cited provisions which "otherwise provided." But what was the extent of the limitation
under Section 133? This is how the Court, correctly to my mind, defined the parameters in
Mactan:
The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local
government units and the exceptions to such limitations; and (b) the rule on tax exemptions
and the exceptions thereto. The use of exceptions or provisos in these sections, as shown by
the following clauses:
(1) "unless otherwise provided herein" in the opening paragraph of Section 133;
(2) "Unless otherwise provided in this Code" in Section 193;
(3) "not hereafter specifically exempted" in Section 232; and
(4) "Except as provided herein" in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that the aforementioned
clause in Section 133 seems to be inaccurately worded. Instead of the clause "unless
otherwise provided herein," with the "herein" to mean, of course, the section, it should have
used the clause "unless otherwise provided in this Code." The former results in absurdity
since the section itself enumerates what are beyond the taxing powers of local government
units and, where exceptions were intended, the exceptions are explicitly indicated in the
next. For instance, in item (a) which excepts income taxes "when levied on banks and other
financial institutions"; item (d) which excepts "wharfage on wharves constructed and
maintained by the local government unit concerned"; and item (1) which excepts taxes, fees
and charges for the registration and issuance of licenses or permits for the driving of
"tricycles." It may also be observed that within the body itself of the section, there are
exceptions which can be found only in other parts of the LGC, but the section
interchangeably uses therein the clause, "except as otherwise provided herein" as in items
(c) and (i), or the clause "except as provided in this Code" in item (j). These clauses would be
obviously unnecessary or mere surplusages if the opening clause of the section were "Unless
otherwise provided in this Code" instead of "Unless otherwise provided herein." In any
event, even if the latter is used, since under Section 232 local government units have the
power to levy real property tax, except those exempted therefrom under Section 234, then
Section 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general
rule, as laid down in Section 133, the taxing powers of local government units cannot extend
to the levy of, inter alia, "taxes, fees and charges of any kind on the National Government, its
agencies and instrumentalities, and local government units"; however, pursuant to Section
232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the
real property tax except on, inter alia, "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," as provided in item (a) of
the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial
persons, including government-owned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except
those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational institutions, and unless otherwise provided in
the LGC. The latter proviso could refer to Section 234 which enumerates the properties
exempt from real property tax. But the last paragraph of Section 234 further qualifies the
retention of the exemption insofar as real property taxes are concerned by limiting the
retention only to those enumerated therein; all others not included in the enumeration lost
the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by
the Republic of the Philippines or any of its political subdivisions covered by item (a) of the
first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such
property has been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
LGC, exemptions from payment of real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations, except as provided in the said
section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily
follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958,
has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek
refuge under any of the exceptions provided in Section 234, but not under Section 133, as it
now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.
29

The Court in Mactan acknowledged that under Section 133, instrumentalities were generally
exempt from all forms of local government taxation, unless otherwise provided in the Code.
On the other hand, Section 232 "otherwise provided" insofar as it allowed LGUs to levy an ad
valorem real property tax, irrespective of who owned the property. At the same time, the
imposition of real property taxes under Section 232 is in turn qualified by the phrase "not
hereinafter specifically exempted." The exemptions from real property taxes are enumerated
in Section 234, which specifically states that only real properties owned "by the Republic of
the Philippines or any of its political subdivisions" are exempted from the payment of the
tax. Clearly, instrumentalities or GOCCs do not fall within the exceptions under Section 234.
30

Mactan Overturned the
Precedents Now Relied
Upon by the Majority
But the petitioners in Mactan also raised the Court's ruling in Basco v. PAGCOR,
31
decided
before the enactment of the Local Government Code. The Court in Basco declared the
PAGCOR as exempt from local taxes, justifying the exemption in this wise:
Local governments have no power to tax instrumentalities of the National Government.
PAGCOR is a government owned or controlled corporation with an original charter, PD 1869.
All of its shares of stocks are owned by the National Government. In addition to its corporate
powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers xxx
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and actually is
exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected
to control by a mere Local government.
"The states have no power by taxation or otherwise, to retard impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government." (McCulloch v. Marland, 4 Wheat
316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local
governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of
power on the part of the States to touch, in that way (taxation) at least, the instrumentalities
of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
political subdivision can regulate a federal instrumentality in such a way as to prevent it
from consummating its federal responsibilities, or even to seriously burden it in the
accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis
supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of
what local authorities may perceive to be undesirable activates or enterprise using the
power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch
v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very
entity which has the inherent power to wield it.
32

Basco is as strident a reiteration of the old guard view that frowned on the principle of local
autonomy, especially as it interfered with the prerogatives and privileges of the national
government. Also consider the following citation from Maceda v. Macaraig,
33
decided the
same year as Basco. Discussing the rule of construction of tax exemptions on government
instrumentalities, the sentiments are of a similar vein.
Moreover, it is a recognized principle that the rule on strict interpretation does not apply in
the case of exemptions in favor of a government political subdivision or instrumentality.
The basis for applying the rule of strict construction to statutory provisions granting tax
exemptions or deductions, even more obvious than with reference to the affirmative or
levying provisions of tax statutes, is to minimize differential treatment and foster
impartiality, fairness, and equality of treatment among tax payers.
The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely
to reduce the amount of money that has to be handled by government in the course of its
operations. For these reasons, provisions granting exemptions to government agencies may
be construed liberally, in favor of non tax-liability of such agencies.
In the case of property owned by the state or a city or other public corporations, the express
exemption should not be construed with the same degree of strictness that applies to
exemptions contrary to the policy of the state, since as to such property "exemption is the
rule and taxation the exception."
34

Strikingly, the majority cites these two very cases and the stodgy rationale provided therein.
This evinces the perspective from which the majority is coming from. It is admittedly a
viewpoint once shared by this Court, and en vogue prior to the enactment of the Local
Government Code of 1991.
However, the Local Government Code of 1991 ushered in a new ethos on how the art of
governance should be practiced in the Philippines, conceding greater powers once held in
the private reserve of the national government to LGUs. The majority might have private
qualms about the wisdom of the policy of local autonomy, but the members of the Court are
not expected to substitute their personal biases for the legislative will, especially when the
1987 Constitution itself promotes the principle of local autonomy.
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
Section 3. The Congress shall enact a local government code which shall provide for a more
responsive and accountable local government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative, and referendum, allocate
among the different local government units their powers, responsibilities, and resources,
and provide for the qualifications, election, appointment and removal, term, salaries, powers
and functions and duties of local officials, and all other matters relating to the organization
and operation of the local units.
xxx
Section 5. Each local government unit shall have the power to create its own sources of
revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local governments.
xxx
The Court in Mactan recognized that a new day had dawned with the enactment of the 1987
Constitution and the Local Government Code of 1991. Thus, it expressly rejected the
contention of the MCIAA that Basco was applicable to them. In doing so, the language of the
Court was dramatic, if only to emphasize how monumental the shift in philosophy was with
the enactment of the Local Government Code:
Accordingly, the position taken by the [MCIAA] is untenable. Reliance on Basco v. Philippine
Amusement and Gaming Corporation is unavailing since it was decided before the effectivity
of the [Local Government Code]. Besides, nothing can prevent Congress from decreeing that
even instrumentalities or agencies of the Government performing governmental functions
may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and
national policy, no one can doubt its wisdom.
35
(emphasis supplied)
The Court Has Repeatedly
Reaffirmed Mactan Over the
Precedents Now Relied Upon
By the Majority
Since then and until today, the Court has been emphatic in declaring the Basco doctrine as
dead. The notion that instrumentalities may be subjected to local taxation by LGUs was again
affirmed in National Power Corporation v. City of Cabanatuan,
36
which was penned by Justice
Puno. NPC or Napocor, invoking its continued exemption from payment of franchise taxes to
the City of Cabanatuan, alleged that it was an instrumentality of the National Government
which could not be taxed by a city government. To that end, Basco was cited by NPC. The
Court had this to say about Basco.
xxx[T]he doctrine in Basco vs. Philippine Amusement and Gaming Corporation relied upon
by the petitioner to support its claim no longer applies. To emphasize, the Basco case was
decided prior to the effectivity of the LGC, when no law empowering the local government
units to tax instrumentalities of the National Government was in effect. However, as this
Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos,
nothing prevents Congress from decreeing that even instrumentalities or agencies of the
government performing governmental functions may be subject to tax. In enacting the LGC,
Congress exercised its prerogative to tax instrumentalities and agencies of government as it
sees fit. Thus, after reviewing the specific provisions of the LGC, this Court held that MCIAA,
although an instrumentality of the national government, was subject to real property tax.
37

In the 2003 case of Philippine Ports Authority v. City of Iloilo,
38
the Court, in the able
ponencia of Justice Azcuna, affirmed the levy of realty taxes on the PPA. Although the taxes
were assessed under the old Real Property Tax Code and not the Local Government Code,
the Court again cited Mactan to refute PPA's invocation of Basco as the basis of its
exemption.
[Basco] did not absolutely prohibit local governments from taxing government
instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is always subject to "limitations"
which Congress may provide by law. Since P.D. 1869 remains an "operative" law until
"amended, repealed or revoked". . . its "exemption clause" remains an exemption to the
exercise of the power of local governments to impose taxes and fees.
Furthermore, in the more recent case of Mactan Cebu International Airport Authority v.
Marcos, where the Basco case was similarly invoked for tax exemption, we stated: "[N]othing
can prevent Congress from decreeing that even instrumentalities or agencies of the
Government performing governmental functions may be subject to tax. Where it is done
precisely to fulfill a constitutional mandate and national policy, no one can doubt its
wisdom." The fact that tax exemptions of government-owned or controlled corporations
have been expressly withdrawn by the present Local Government Code clearly attests
against petitioner's claim of absolute exemption of government instrumentalities from local
taxation.
39

Just last month, the Court in National Power Corporation v. Province of Isabela
40
again
rejected Basco in emphatic terms. Held the Court, through Justice Callejo, Sr.:
Thus, the doctrine laid down in the Basco case is no longer true. In the Cabanatuan case, the
Court noted primarily that the Basco case was decided prior to the effectivity of the LGC,
when no law empowering the local government units to tax instrumentalities of the National
Government was in effect. It further explained that in enacting the LGC, Congress
empowered the LGUs to impose certain taxes even on instrumentalities of the National
Government.
41

The taxability of the PPA recently came to fore in Philippine Ports Authority v. City of
Iloilo
42
case, a decision also penned by Justice Callejo, Sr., wherein the Court affirmed the sale
of PPA's properties at public auction for failure to pay realty taxes. The Court again
reiterated that "it was the intention of Congress to withdraw the tax exemptions granted to
or presently enjoyed by all persons, including government-owned or controlled
corporations, upon the effectivity" of the Code.
43
The Court in the second Public Ports
Authority case likewise cited Mactan as providing the "raison d'etre for the withdrawal of
the exemption," namely, "the State policy to ensure autonomy to local governments and the
objective of the [Local Government Code] that they enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as self-reliant communities. . . .
"
44

Last year, the Court, in City of Davao v. RTC,
45
affirmed that the legislated exemption from
real property taxes of the Government Service Insurance System (GSIS) was removed under
the Local Government Code. Again, Mactan was relied upon as the governing precedent. The
removal of the tax exemption stood even though the then GSIS law
46
prohibited the removal
of GSIS' tax exemptions unless the exemption was specifically repealed, "and a provision is
enacted to substitute the declared policy of exemption from any and all taxes as an essential
factor for the solvency of the fund."
47
The Court, citing established doctrines in statutory
construction and Duarte v. Dade
48
ruled that such proscription on future legislation was
itself prohibited, as "the legislature cannot bind a future legislature to a particular mode of
repeal."
49

And most recently, just less than one month ago, the Court, through Justice Corona in
Government Service Insurance System v. City Assessor of Iloilo
50
again affirmed that the
Local Government Code removed the previous exemption from real property taxes of the
GSIS. Again Mactan was cited as having "expressly withdrawn the [tax] exemption of the
[GOCC].
51

Clearly then, Mactan is not a stray or unique precedent, but the basis of a jurisprudential rule
employed by the Court since its adoption, the doctrine therein consistent with the Local
Government Code. Corollarily, Basco, the polar opposite of Mactan has been emphatically
rejected and declared inconsistent with the Local Government Code.
II.
Majority, in Effectively Overturning Mactan,
Refuses to Say Why Mactan Is Wrong
The majority cites Basco in support. It does not cite Mactan, other than an incidental
reference that it is relied upon by the respondents.
52
However, the ineluctable conclusion is
that the majority rejects the rationale and ruling in Mactan. The majority provides for a
wildly different interpretation of Section 133, 193 and 234 of the Local Government Code
than that employed by the Court in Mactan. Moreover, the parties in Mactan and in this case
are similarly situated, as can be obviously deducted from the fact that both petitioners are
airport authorities operating under similarly worded charters. And the fact that the majority
cites doctrines contrapuntal to the Local Government Code as in Basco and Maceda evinces
an intent to go against the Court's jurisprudential trend adopting the philosophy of
expanded local government rule under the Local Government Code.
Before I dwell upon the numerous flaws of the majority, a brief comment is necessitated on
the majority's studied murkiness vis--vis the Mactan precedent. The majority is obviously
inconsistent with Mactan and there is no way these two rulings can stand together.
Following basic principles in statutory construction, Mactan will be deemed as giving way to
this new ruling.
However, the majority does not bother to explain why Mactan is wrong. The interpretation
in Mactan of the relevant provisions of the Local Government Code is elegant and rational,
yet the majority refuses to explain why this reasoning of the Court in Mactan is erroneous. In
fact, the majority does not even engage Mactan in any meaningful way. If the majority
believes that Mactan may still stand despite this ruling, it remains silent as to the viable
distinctions between these two cases.
The majority's silence on Mactan is baffling, considering how different this new ruling is with
the ostensible precedent. Perhaps the majority does not simply know how to dispense with
the ruling in Mactan. If Mactan truly deserves to be discarded as precedent, it deserves a
more honorable end than death by amnesia or ignonominous disregard. The majority could
have devoted its discussion in explaining why it thinks Mactan is wrong, instead of
pretending that Mactan never existed at all. Such an approach might not have won the votes
of the minority, but at least it would provide some degree of intellectual clarity for the
parties, LGUs and the national government, students of jurisprudence and practitioners. A
more meaningful debate on the matter would have been possible, enriching the study of law
and the intellectual dynamic of this Court.
There is no way the majority can be justified unless Mactan is overturned. The MCIAA and
the MIAA are similarly situated. They are both, as will be demonstrated, GOCCs, commonly
engaged in the business of operating an airport. They are the owners of airport properties
they respectively maintain and hold title over these properties in their name.
53
These
entities are both owned by the State, and denied by their respective charters the absolute
right to dispose of their properties without prior approval elsewhere.
54
Both of them are
not empowered to obtain loans or encumber their properties without prior approval the
prior approval of the President.
55

III.
Instrumentalities, Agencies
And GOCCs Generally
Liable for Real Property Tax
I shall now proceed to demonstrate the errors in reasoning of the majority. A bulwark of my
position lies with Mactan, which will further demonstrate why the majority has found it
inconvenient to even grapple with the precedent that is Mactan in the first place.
Mactan held that the prohibition on taxing the national government, its agencies and
instrumentalities under Section 133 is qualified by Section 232 and Section 234, and
accordingly, the only relevant exemption now applicable to these bodies is as provided
under Section 234(o), or on "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."
It should be noted that the express withdrawal of previously granted exemptions by the
Local Government Code do not even make any distinction as to whether the exempt person
is a governmental entity or not. As Sections 193 and 234 both state, the withdrawal applies
to "all persons, including [GOCCs]", thus encompassing the two classes of persons recognized
under our laws, natural persons
56
and juridical persons.
57

The fact that the Local Government Code mandates the withdrawal of previously granted
exemptions evinces certain key points. If an entity was previously granted an express
exemption from real property taxes in the first place, the obvious conclusion would be that
such entity would ordinarily be liable for such taxes without the exemption. If such entities
were already deemed exempt due to some overarching principle of law, then it would be a
redundancy or surplusage to grant an exemption to an already exempt entity. This fact
militates against the claim that MIAA is preternaturally exempt from realty taxes, since it
required the enactment of an express exemption from such taxes in its charter.
Amazingly, the majority all but ignores the disquisition in Mactan and asserts that
government instrumentalities are not taxable persons unless they lease their properties to a
taxable person. The general rule laid down in Section 232 is given short shrift. In arriving at
this conclusion, several leaps in reasoning are committed.
Majority's Flawed Definition
of GOCCs.
The majority takes pains to assert that the MIAA is not a GOCC, but rather an instrumentality.
However, and quite grievously, the supposed foundation of this assertion is an adulteration.
The majority gives the impression that a government instrumentality is a distinct concept
from a government corporation.
58
Most tellingly, the majority selectively cites a portion of
Section 2(10) of the Administrative Code of 1987, as follows:
Instrumentality refers to any agency of the National Government not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. xxx
59
(emphasis omitted)
However, Section 2(10) of the Administrative Code, when read in full, makes an important
clarification which the majority does not show. The portions omitted by the majority are
highlighted below:
(10)Instrumentality refers to any agency of the National Government not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes regulatory agencies, chartered
institutions and governmentowned or controlled corporations.
60

Since Section 2(10) makes reference to "agency of the National Government," Section 2(4) is
also worth citing in full:
(4) Agency of the Government refers to any of the various units of the Government, including
a department, bureau, office, instrumentality, or government-owned or controlled
corporation, or a local government or a distinct unit therein. (emphasis supplied)
61

Clearly then, based on the Administrative Code, a GOCC may be an instrumentality or an
agency of the National Government. Thus, there actually is no point in the majority's
assertion that MIAA is not a GOCC, since based on the majority's premise of Section 133 as
the key provision, the material question is whether MIAA is either an instrumentality, an
agency, or the National Government itself. The very provisions of the Administrative Code
provide that a GOCC can be either an instrumentality or an agency, so why even bother to
extensively discuss whether or not MIAA is a GOCC?
Indeed as far back as the 1927 case of Government of the Philippine Islands v. Springer,
62
the
Supreme Court already noted that a corporation of which the government is the majority
stockholder "remains an agency or instrumentality of government."
63

Ordinarily, the inconsequential verbiage stewing in judicial opinions deserve little rebuttal.
However, the entire discussion of the majority on the definition of a GOCC, obiter as it may
ultimately be, deserves emphatic refutation. The views of the majority on this matter are
very dangerous, and would lead to absurdities, perhaps unforeseen by the majority. For in
fact, the majority effectively declassifies many entities created and recognized as GOCCs and
would give primacy to the Administrative Code of 1987 rather than their respective charters
as to the definition of these entities.
Majority Ignores the Power
Of Congress to Legislate and
Define Chartered Corporations
First, the majority declares that, citing Section 2(13) of the Administrative Code, a GOCC
must be "organized as a stock or non-stock corporation," as defined under the Corporation
Code. To insist on this as an absolute rule fails on bare theory. Congress has the undeniable
power to create a corporation by legislative charter, and has been doing so throughout
legislative history. There is no constitutional prohibition on Congress as to what structure
these chartered corporations should take on. Clearly, Congress has the prerogative to create
a corporation in whatever form it chooses, and it is not bound by any traditional format.
Even if there is a definition of what a corporation is under the Corporation Code or the
Administrative Code, these laws are by no means sacrosanct. It should be remembered that
these two statutes fall within the same level of hierarchy as a congressional charter, since
they all are legislative enactments. Certainly, Congress can choose to disregard either the
Corporation Code or the Administrative Code in defining the corporate structure of a GOCC,
utilizing the same extent of legislative powers similarly vesting it the putative ability to
amend or abolish the Corporation Code or the Administrative Code.
These principles are actually recognized by both the Administrative Code and the
Corporation Code. The definition of GOCCs, agencies and instrumentalities under the
Administrative Code are laid down in the section entitled "General Terms Defined," which
qualifies:
Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a
whole, or a particular statute, shall require a different meaning: (emphasis supplied)
xxx
Similar in vein is Section 6 of the Corporation Code which provides:
SEC. 4. Corporations created by special laws or charters. Corporations created by special
laws or charters shall be governed primarily by the provisions of the special law or charter
creating them or applicable to them, supplemented by the provisions of this Code, insofar as
they are applicable. (emphasis supplied)
Thus, the clear doctrine emerges the law that governs the definition of a corporation or
entity created by Congress is its legislative charter. If the legislative enactment defines an
entity as a corporation, then it is a corporation, no matter if the Corporation Code or the
Administrative Code seemingly provides otherwise. In case of conflict between the
legislative charter of a government corporation, on one hand, and the Corporate Code and
the Administrative Code, on the other, the former always prevails.
Majority, in Ignoring the
Legislative Charters, Effectively
Classifies Duly Established GOCCs,
With Disastrous and Far Reaching
Legal Consequences
Second, the majority claims that MIAA does not qualify either as a stock or non-stock
corporation, as defined under the Corporation Code. It explains that the MIAA is not a stock
corporation because it does not have any capital stock divided into shares. Neither can it be
considered as a non-stock corporation because it has no members, and under Section 87, a
non-stock corporation is one where no part of its income is distributable as dividends to its
members, trustees or officers.
This formulation of course ignores Section 4 of the Corporation Code, which again provides
that corporations created by special laws or charters shall be governed primarily by the
provisions of the special law or charter, and not the Corporation Code.
That the MIAA cannot be considered a stock corporation if only because it does not have a
stock structure is hardly a plausible proposition. Indeed, there is no point in requiring a
capital stock structure for GOCCs whose full ownership is limited by its charter to the State
or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital
shares.
Admittedly, there are GOCCs established in such a manner, such as the National Power
Corporation (NPC), which is provided with authorized capital stock wholly subscribed and
paid for by the Government of the Philippines, divided into shares but at the same time, is
prohibited from transferring, negotiating, pledging, mortgaging or otherwise giving these
shares as security for payment of any obligation.
64
However, based on the Corporation Code
definition relied upon by the majority, even the NPC cannot be considered as a stock
corporation. Under Section 3 of the Corporation Code, stock corporations are defined as
being "authorized to distribute to the holders of its shares dividends or allotments of the
surplus profits on the basis of the shares held."
65
On the other hand, Section 13 of the NPC's
charter states that "the Corporation shall be non-profit and shall devote all its returns from
its capital investment, as well as excess revenues from its operation, for expansion."
66
Can
the holder of the shares of NPC, the National Government, receive its surplus profits on the
basis of its shares held? It cannot, according to the NPC charter, and hence, following Section
3 of the Corporation Code, the NPC is not a stock corporation, if the majority is to be
believed.
The majority likewise claims that corporations without members cannot be deemed non-
stock corporations. This would seemingly exclude entities such as the NPC, which like MIAA,
has no ostensible members. Moreover, non-stock corporations cannot distribute any part of
its income as dividends to its members, trustees or officers. The majority faults MIAA for
remitting 20% of its gross operating income to the national government. How about the
Philippine Health Insurance Corporation, created with the "status of a tax-exempt
government corporation attached to the Department of Health" under Rep. Act No. 7875.
67
It
too cannot be considered as a stock corporation because it has no capital stock structure. But
using the criteria of the majority, it is doubtful if it would pass muster as a non-stock
corporation, since the PHIC or Philhealth, as it is commonly known, is expressly empowered
"to collect, deposit, invest, administer and disburse" the National Health Insurance
Fund.
68
Or how about the Social Security System, which under its revised charter, Republic
Act No. 8282, is denominated as a "corporate body."
69
The SSS has no capital stock structure,
but has capital comprised of contributions by its members, which are eventually remitted
back to its members. Does this disqualify the SSS from classification as a GOCC,
notwithstanding this Court's previous pronouncement in Social Security System Employees
Association v. Soriano?
70

In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs, whether stock or
non-stock,
71
declare and remit at least fifty percent (50%) of their annual net earnings as
cash, stock or property dividends to the National Government.
72
But according to the
majority, non-stock corporations are prohibited from declaring any part of its income as
dividends. But if Republic Act No. 7656 requires even non-stock corporations to declare
dividends from income, should it not follow that the prohibition against declaration of
dividends by non-stock corporations under the Corporation Code does not apply to
government-owned or controlled corporations? For if not, and the majority's illogic is
pursued, Republic Act No. 7656, passed in 1993, would be fatally flawed, as it would
contravene the Administrative Code of 1987 and the Corporation Code.
In fact, the ruinous effects of the majority's hypothesis on the nature of GOCCs can be
illustrated by Republic Act No. 7656. Following the majority's definition of a GOCC and in
accordance with Republic Act No. 7656, here are but a few entities which are not obliged to
remit fifty (50%) of its annual net earnings to the National Government as they are excluded
from the scope of Republic Act No. 7656:
1) Philippine Ports Authority
73
has no capital stock
74
, no members, and obliged to apply
the balance of its income or revenue at the end of each year in a general reserve.
75

2) Bases Conversion Development Authority
76
- has no capital stock,
77
no members.
3) Philippine Economic Zone Authority
78
- no capital stock,
79
no members.
4) Light Rail Transit Authority
80
- no capital stock,
81
no members.
5) Bangko Sentral ng Pilipinas
82
- no capital stock,
83
no members, required to remit fifty
percent (50%) of its net profits to the National Treasury.
84

6) National Power Corporation
85
- has capital stock but is prohibited from "distributing to
the holders of its shares dividends or allotments of the surplus profits on the basis of the
shares held;"
86
no members.
7) Manila International Airport Authority no capital stock
87
, no members
88
, mandated to
remit twenty percent (20%) of its annual gross operating income to the National Treasury.
89

Thus, for the majority, the MIAA, among many others, cannot be considered as within the
coverage of Republic Act No. 7656. Apparently, President Fidel V. Ramos disagreed. How else
then could Executive Order No. 483, signed in 1998 by President Ramos, be explained? The
issuance provides:
WHEREAS, Section 1 of Republic Act No. 7656 provides that:
"Section 1. Declaration of Policy. - It is hereby declared the policy of the State that in order
for the National Government to realize additional revenues, government-owned and/or
controlled corporations, without impairing their viability and the purposes for which they
have been established, shall share a substantial amount of their net earnings to the National
Government."
WHEREAS, to support the viability and mandate of government-owned and/or controlled
corporations [GOCCs], the liquidity, retained earnings position and medium-term plans and
programs of these GOCCs were considered in the determination of the reasonable dividend
rates of such corporations on their 1997 net earnings.
WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance recommended the
adjustment on the percentage of annual net earnings that shall be declared by the Manila
International Airport Authority [MIAA] and Phividec Industrial Authority [PIA] in the
interest of national economy and general welfare.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines, by virtue of the powers
vested in me by law, do hereby order:
SECTION 1. The percentage of net earnings to be declared and remitted by the MIAA and PIA
as dividends to the National Government as provided for under Section 3 of Republic Act No.
7656 is adjusted from at least fifty percent [50%] to the rates specified hereunder:
1. Manila International Airport Authority - 35% [cash]
2. Phividec Industrial Authority - 25% [cash]
SECTION 2. The adjusted dividend rates provided for under Section 1 are only applicable on
1997 net earnings of the concerned government-owned and/or controlled corporations.
Obviously, it was the opinion of President Ramos and the Secretary of Finance that MIAA is a
GOCC, for how else could it have come under the coverage of Republic Act No. 7656, a law
applicable only to GOCCs? But, the majority apparently disagrees, and resultantly holds that
MIAA is not obliged to remit even the reduced rate of thirty five percent (35%) of its net
earnings to the national government, since it cannot be covered by Republic Act No. 7656.
All this mischief because the majority would declare the Administrative Code of 1987 and
the Corporation Code as the sole sources of law defining what a government corporation is.
As I stated earlier, I find it illogical that chartered corporations are compelled to comply with
the templates of the Corporation Code, especially when the Corporation Code itself states
that these corporations are to be governed by their own charters. This is especially true
considering that the very provision cited by the majority, Section 87 of the Corporation Code,
expressly says that the definition provided therein is laid down "for the purposes of this
[Corporation] Code." Read in conjunction with Section 4 of the Corporation Code which
mandates that corporations created by charter be governed by the law creating them, it is
clear that contrary to the majority, MIAA is not disqualified from classification as a non-stock
corporation by reason of Section 87, the provision not being applicable to corporations
created by special laws or charters. In fact, I see no real impediment why the MIAA and
similarly situated corporations such as the PHIC, the SSS, the Philippine Deposit Insurance
Commission, or maybe even the NPC could at the very least, be deemed as no stock
corporations (as differentiated from non-stock corporations).
The point, stripped to bare simplicity, is that entity created by legislative enactment is a
corporation if the legislature says so. After all, it is the legislature that dictates what a
corporation is in the first place. This is better illustrated by another set of entities created
before martial law. These include the Mindanao Development Authority,
90
the Northern
Samar Development Authority,
91
the Ilocos Sur Development Authority,
92
the Southeastern
Samar Development Authority
93
and the Mountain Province Development Authority.
94
An
examination of the first section of the statutes creating these entities reveal that they were
established "to foster accelerated and balanced growth" of their respective regions, and
towards such end, the charters commonly provide that "it is recognized that a government
corporation should be created for the purpose," and accordingly, these charters "hereby
created a body corporate."
95
However, these corporations do not have capital stock nor
members, and are obliged to return the unexpended balances of their appropriations and
earnings to a revolving fund in the National Treasury. The majority effectively declassifies
these entities as GOCCs, never mind the fact that their very charters declare them to be
GOCCs.
I mention these entities not to bring an element of obscurantism into the fray. I cite them as
examples to emphasize my fundamental pointthat it is the legislative charters of these
entities, and not the Administrative Code, which define the class of personality of these
entities created by Congress. To adopt the view of the majority would be, in effect, to
sanction an implied repeal of numerous congressional charters for the purpose of
declassifying GOCCs. Certainly, this could not have been the intent of the crafters of the
Administrative Code when they drafted the "Definition of Terms" incorporated therein.
MIAA Is Without
Doubt, A GOCC
Following the charters of government corporations, there are two kinds of GOCCs, namely:
GOCCs which are stock corporations and GOCCs which are no stock corporations (as
distinguished from non-stock corporation). Stock GOCCs are simply those which have capital
stock while no stock GOCCs are those which have no capital stock. Obviously these
definitions are different from the definitions of the terms in the Corporation Code. Verily,
GOCCs which are not incorporated with the Securities and Exchange Commission are not
governed by the Corporation Code but by their respective charters.
For the MIAA's part, its charter is replete with provisions that indubitably classify it as a
GOCC. Observe the following provisions from MIAA's charter:
SECTION 3. Creation of the Manila International Airport Authority.There is hereby
established a body corporate to be known as the Manila International Airport Authority
which shall be attached to the Ministry of Transportation and Communications. The
principal office of the Authority shall be located at the New Manila International Airport. The
Authority may establish such offices, branches, agencies or subsidiaries as it may deem
proper and necessary; Provided, That any subsidiary that may be organized shall have the
prior approval of the President.
The land where the Airport is presently located as well as the surrounding land area of
approximately six hundred hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to existing rights, if any. The Bureau
of Lands and other appropriate government agencies shall undertake an actual survey of the
area transferred within one year from the promulgation of this Executive Order and the
corresponding title to be issued in the name of the Authority. Any portion thereof shall not
be disposed through sale or through any other mode unless specifically approved by the
President of the Philippines.
xxx
SECTION 5. Functions, Powers, and Duties. The Authority shall have the following
functions, powers and duties:
xxx
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same from time to time;
(h) To execute or enter into contracts of any kind or nature;
(i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any
land, building, airport facility, or property of whatever kind and nature, whether movable or
immovable, or any interest therein;
(j) To exercise the power of eminent domain in the pursuit of its purposes and objectives;
xxx
(o) To exercise all the powers of a corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this Executive Order.
xxx
SECTION 16. Borrowing Power. The Authority may, after consultation with the Minister of
Finance and with the approval of the President of the Philippines, as recommended by the
Minister of Transportation and Communications, raise funds, either from local or
international sources, by way of loans, credits or securities, and other borrowing
instruments, with the power to create pledges, mortgages and other voluntary liens or
encumbrances on any of its assets or properties.
All loans contracted by the Authority under this Section, together with all interests and other
sums payable in respect thereof, shall constitute a charge upon all the revenues and assets of
the Authority and shall rank equally with one another, but shall have priority over any other
claim or charge on the revenue and assets of the Authority: Provided, That this provision
shall not be construed as a prohibition or restriction on the power of the Authority to create
pledges, mortgages, and other voluntary liens or encumbrances on any assets or property of
the Authority.
Except as expressly authorized by the President of the Philippines the total outstanding
indebtedness of the Authority in the principal amount, in local and foreign currency, shall
not at any time exceed the net worth of the Authority at any given time.
xxx
The President or his duly authorized representative after consultation with the Minister of
Finance may guarantee, in the name and on behalf of the Republic of the Philippines, the
payment of the loans or other indebtedness of the Authority up to the amount herein
authorized.
These cited provisions establish the fitness of MIAA to be the subject of legal
relations.
96
MIAA under its charter may acquire and possess property, incur obligations, and
bring civil or criminal actions. It has the power to contract in its own name, and to acquire
title to real or personal property. It likewise may exercise a panoply of corporate powers and
possesses all the trappings of corporate personality, such as a corporate name, a corporate
seal and by-laws. All these are contained in MIAA's charter which, as conceded by the
Corporation Code and even the Administrative Code, is the primary law that governs the
definition and organization of the MIAA.
In fact, MIAA itself believes that it is a GOCC represents itself as such. It said so itself in the
very first paragraph of the present petition before this Court.
97
So does, apparently, the
Department of Budget and Management, which classifies MIAA as a "government owned &
controlled corporation" on its internet website.
98
There is also the matter of Executive Order
No. 483, which evinces the belief of the then-president of the Philippines that MIAA is a
GOCC. And the Court before had similarly characterized MIAA as a government-owned and
controlled corporation in the earlier MIAA case, Manila International Airport Authority v.
Commission on Audit.
99

Why then the hesitance to declare MIAA a GOCC? As the majority repeatedly asserts, it is
because MIAA is actually an instrumentality. But the very definition relied upon by the
majority of an instrumentality under the Administrative Code clearly states that a GOCC is
likewise an instrumentality or an agency. The question of whether MIAA is a GOCC might not
even be determinative of this Petition, but the effect of the majority's disquisition on that
matter may even be more destructive than the ruling that MIAA is exempt from realty taxes.
Is the majority ready to live up to the momentous consequences of its flawed reasoning?
Novel Proviso in 1987 Constitution
Prescribing Standards in the
Creation of GOCCs Necessarily
Applies only to GOCCs Created
After 1987.
One last point on this matter on whether MIAA is a GOCC. The majority triumphantly points
to Section 16, Article XII of the 1987 Constitution, which mandates that the creation of
GOCCs through special charters be "in the interest of the common good and subject to the
test of economic viability." For the majority, the test of economic viability does not apply to
government entities vested with corporate powers and performing essential public services.
But this test of "economic viability" is new to the constitutional framework. No such test was
imposed in previous Constitutions, including the 1973 Constitution which was the
fundamental law in force when the MIAA was created. How then could the MIAA, or any
GOCC created before 1987 be expected to meet this new precondition to the creation of a
GOCC? Does the dissent seriously suggest that GOCCs created before 1987 may be
declassified on account of their failure to meet this "economic viability test"?
Instrumentalities and Agencies
Also Generally Liable For
Real Property Taxes
Next, the majority, having bludgeoned its way into asserting that MIAA is not a GOCC, then
argues that MIAA is an instrumentality. It cites incompletely, as earlier stated, the provision
of Section 2(10) of the Administrative Code. A more convincing view offered during
deliberations, but which was not adopted by the ponencia, argued that MIAA is not an
instrumentality but an agency, considering the fact that under the Administrative Code, the
MIAA is attached within the department framework of the Department of Transportation
and Communications.
100
Interestingly, Executive Order No. 341, enacted by President Arroyo
in 2004, similarly calls MIAA an agency. Since instrumentalities are expressly defined as "an
agency not integrated within the department framework," that view concluded that MIAA
cannot be deemed an instrumentality.
Still, that distinction is ultimately irrelevant. Of course, as stated earlier, the Administrative
Code considers GOCCs as agencies,
101
so the fact that MIAA is an agency does not exclude it
from classification as a GOCC. On the other hand, the majority justifies MIAA's purported
exemption on Section 133 of the Local Government Code, which similarly situates "agencies
and instrumentalities" as generally exempt from the taxation powers of LGUs. And on this
point, the majority again evades Mactan and somehow concludes that Section 133 is the
general rule, notwithstanding Sections 232 and 234(a) of the Local Government Code. And
the majority's ultimate conclusion? "By express mandate of the Local Government Code,
local governments cannot impose any kind of tax on national government instrumentalities
like the MIAA. Local governments are devoid of power to tax the national government, its
agencies and instrumentalities."
102

The Court's interpretation of the Local Government Code in Mactan renders the law
integrally harmonious and gives due accord to the respective prerogatives of the national
government and LGUs. Sections 133 and 234(a) ensure that the Republic of the Philippines
or its political subdivisions shall not be subjected to any form of local government taxation,
except realty taxes if the beneficial use of the property owned has been granted for
consideration to a taxable entity or person. On the other hand, Section 133 likewise assures
that government instrumentalities such as GOCCs may not be arbitrarily taxed by LGUs,
since they could be subjected to local taxation if there is a specific proviso thereon in the
Code. One such proviso is Section 137, which as the Court found in National Power
Corporation,
103
permits the imposition of a franchise tax on businesses enjoying a franchise,
even if it be a GOCC such as NPC. And, as the Court acknowledged in Mactan, Section 232
provides another exception on the taxability of instrumentalities.
The majority abjectly refuses to engage Section 232 of the Local Government Code although
it provides the indubitable general rule that LGUs "may levy an annual ad valorem tax on
real property such as land, building, machinery, and other improvements not hereafter
specifically exempted." The specific exemptions are provided by Section 234. Section 232
comes sequentially after Section 133(o),
104
and even if the sequencing is irrelevant, Section
232 would fall under the qualifying phrase of Section 133, "Unless otherwise provided
herein." It is sad, but not surprising that the majority is not willing to consider or even
discuss the general rule, but only the exemptions under Section 133 and Section 234. After
all, if the majority is dead set in ruling for MIAA no matter what the law says, why bother
citing what the law does say.
Constitution, Laws and
Jurisprudence Have Long
Explained the Rationale
Behind the Local Taxation
Of GOCCs.
This blithe disregard of precedents, almost all of them unanimously decided, is nowhere
more evident than in the succeeding discussion of the majority, which asserts that the power
of local governments to tax national government instrumentalities be construed strictly
against local governments. The Maceda case, decided before the Local Government Code, is
cited, as is Basco. This section of the majority employs deliberate pretense that the Code
never existed, or that the fundamentals of local autonomy are of limited effect in our country.
Why is it that the Local Government Code is barely mentioned in this section of the majority?
Because Section 5 of the Code, purposely omitted by the majority provides for a different
rule of interpretation than that asserted:
Section 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the
following rules shall apply:
(a) Any provision on a power of a local government unit shall be liberally interpreted in its
favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of
powers and of the lower local government unit. Any fair and reasonable doubt as to the
existence of the power shall be interpreted in favor of the local government unit concerned;
(b) In case of doubt, any tax ordinance or revenue measure shall be construed strictly
against the local government unit enacting it, and liberally in favor of the taxpayer. Any tax
exemption, incentive or relief granted by any local government unit pursuant to the
provisions of this Code shall be construed strictly against the person claiming it; xxx
Yet the majority insists that "there is no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of public funds from one
government pocket to another."
105
I wonder whether the Constitution satisfies the majority's
desire for "a sound and compelling policy." To repeat:
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
xxx
Section 5. Each local government unit shall have the power to create its own sources of
revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local governments.
Or how about the Local Government Code, presumably an expression of sound and
compelling policy considering that it was enacted by the legislature, that veritable source of
all statutes:
SEC. 129. Power to Create Sources of Revenue. - Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local government units.
Justice Puno, in National Power Corporation v. City of Cabanatuan,
106
provides a more
"sound and compelling policy considerations" that would warrant sustaining the taxability of
government-owned entities by local government units under the Local Government Code.
Doubtless, the power to tax is the most effective instrument to raise needed revenues to
finance and support myriad activities of the local government units for the delivery of basic
services essential to the promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people. As this Court observed in the Mactan case, "the
original reasons for the withdrawal of tax exemption privileges granted to government-
owned or controlled corporations and all other units of government were that such privilege
resulted in serious tax base erosion and distortions in the tax treatment of similarly situated
enterprises." With the added burden of devolution, it is even more imperative for
government entities to share in the requirements of development, fiscal or otherwise, by
paying taxes or other charges due from them.
107

I dare not improve on Justice Puno's exhaustive disquisition on the statutory and
jurisprudential shift brought about the acceptance of the principles of local autonomy:
In recent years, the increasing social challenges of the times expanded the scope of state
activity, and taxation has become a tool to realize social justice and the equitable distribution
of wealth, economic progress and the protection of local industries as well as public welfare
and similar objectives. Taxation assumes even greater significance with the ratification of
the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given direct authority to levy taxes, fees and other
charges pursuant to Article X, section 5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create its own sources of
revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees
and charges shall accrue exclusively to the Local Governments."
This paradigm shift results from the realization that genuine development can be achieved
only by strengthening local autonomy and promoting decentralization of governance. For a
long time, the country's highly centralized government structure has bred a culture of
dependence among local government leaders upon the national leadership. It has also
"dampened the spirit of initiative, innovation and imaginative resilience in matters of local
development on the part of local government leaders." 35 The only way to shatter this
culture of dependence is to give the LGUs a wider role in the delivery of basic services, and
confer them sufficient powers to generate their own sources for the purpose. To achieve this
goal, section 3 of Article X of the 1987 Constitution mandates Congress to enact a local
government code that will, consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers, viz:
"Section 3. The Congress shall enact a local government code which shall provide for a more
responsive and accountable local government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative, and referendum, allocate
among the different local government units their powers, responsibilities, and resources,
and provide for the qualifications, election, appointment and removal, term, salaries, powers
and functions and duties of local officials, and all other matters relating to the organization
and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160, also known as the Local
Government Code of 1991 (LGC), various measures have been enacted to promote local
autonomy. These include the Barrio Charter of 1959, the Local Autonomy Act of 1959, the
Decentralization Act of 1967 and the Local Government Code of 1983. Despite these
initiatives, however, the shackles of dependence on the national government remained.
Local government units were faced with the same problems that hamper their capabilities to
participate effectively in the national development efforts, among which are: (a) inadequate
tax base, (b) lack of fiscal control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence on external sources of
income, and (e) limited supervisory control over personnel of national line agencies.
Considered as the most revolutionary piece of legislation on local autonomy, the LGC
effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to
include taxes which were prohibited by previous laws such as the imposition of taxes on
forest products, forest concessionaires, mineral products, mining operations, and the like.
The LGC likewise provides enough flexibility to impose tax rates in accordance with their
needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the
minimum and maximum tax rates and leaves the determination of the actual rates to the
respective sanggunian.
108

And the Court's ruling through Justice Azcuna in Philippine Ports Authority v. City of Iloilo
109
,
provides especially clear and emphatic rationale:
In closing, we reiterate that in taxing government-owned or controlled corporations, the
State ultimately suffers no loss. In National Power Corp. v. Presiding Judge, RTC, Br. XXV, 38
we elucidated:
Actually, the State has no reason to decry the taxation of NPC's properties, as and by way of
real property taxes. Real property taxes, after all, form part and parcel of the financing
apparatus of the Government in development and nation-building, particularly in the local
government level.
xxxxxxxxx
To all intents and purposes, real property taxes are funds taken by the State with one hand
and given to the other. In no measure can the government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax
exemption privileges granted to government-owned and controlled corporations and all
other units of government was that such privilege resulted in serious tax base erosion and
distortions in the tax treatment of similarly situated enterprises, hence resulting in the need
for these entities to share in the requirements of development, fiscal or otherwise, by paying
the taxes and other charges due from them.
110

How does the majority counter these seemingly valid rationales which establish the
soundness of a policy consideration subjecting national instrumentalities to local taxation?
Again, by simply ignoring that these doctrines exist. It is unfortunate if the majority deems
these cases or the principles of devolution and local autonomy as simply too inconvenient,
and relies instead on discredited precedents. Of course, if the majority faces the issues
squarely, and expressly discusses why Basco was right and Mactan was wrong, then this
entire endeavor of the Court would be more intellectually satisfying. But, this is not a game
the majority wants to play.
Mischaracterization of My
Views on the Tax Exemption
Enjoyed by the National Government
Instead, the majority engages in an extended attack pertaining to Section 193,
mischaracterizing my views on that provision as if I had been interpreting the provision as
making "the national government, which itself is a juridical person, subject to tax by local
governments since the national government is not included in the enumeration of exempt
entities in Section 193."
111

Nothing is farther from the truth. I have never advanced any theory of the sort imputed in
the majority. My main thesis on the matter merely echoes the explicit provision of Section
193 that unless otherwise provided in the Local Government Code (LGC) all tax exemptions
enjoyed by all persons, whether natural or juridical, including GOCCs, were withdrawn upon
the effectivity of the Code. Since the provision speaks of withdrawal of tax exemptions of
persons, it follows that the exemptions theretofore enjoyed by MIAA which is definitely a
person are deemed withdrawn upon the advent of the Code.
On the other hand, the provision does not address the question of who are beyond the reach
of the taxing power of LGUs. In fine, the grant of tax exemption or the withdrawal thereof
assumes that the person or entity involved is subject to tax. Thus, Section 193 does not apply
to entities which were never given any tax exemption. This would include the national
government and its political subdivisions which, as a general rule, are not subjected to tax in
the first place.
112
Corollarily, the national government and its political subdivisions do not
need tax exemptions. And Section 193 which ordains the withdrawal of tax exemptions is
obviously irrelevant to them.
Section 193 is in point for the disposition of this case as it forecloses dependence for the
grant of tax exemption to MIAA on Section 21 of its charter. Even the majority should
concede that the charter section is now ineffectual, as Section 193 withdraws the tax
exemptions previously enjoyed by all juridical persons.
With Section 193 mandating the withdrawal of tax exemptions granted to all persons upon
the effectivity of the LGC, for MIAA to continue enjoying exemption from realty tax, it will
have to rely on a basis other than Section 21 of its charter.
Lung Center of the Philippines v. Quezon City
113
provides another illustrative example of the
jurisprudential havoc wrought about by the majority. Pursuant to its charter, the Lung
Center was organized as a trust administered by an eponymous GOCC organized with the
SEC.
114
There is no doubt it is a GOCC, even by the majority's reckoning. Applying the
Administrative Code, it is also considered as an agency, the term encompassing even GOCCs.
Yet since the Administrative Code definition of "instrumentalities" encompasses agencies,
especially those not attached to a line department such as the Lung Center, it also follows
that the Lung Center is an instrumentality, which for the majority is exempt from all local
government taxes, especially real estate taxes. Yet just in 2004, the Court unanimously held
that the Lung Center was not exempt from real property taxes. Can the majority and Lung
Center be reconciled? I do not see how, and no attempt is made to demonstrate otherwise.
Another key point. The last paragraph of Section 234 specifically asserts that any previous
exemptions from realty taxes granted to or enjoyed by all persons, including all GOCCs, are
thereby withdrawn. The majority's interpretation of Sections 133 and 234(a) however
necessarily implies that all instrumentalities, including GOCCs, can never be subjected to real
property taxation under the Code. If that is so, what then is the sense of the last paragraph
specifically withdrawing previous tax exemptions to all persons, including GOCCs when
juridical persons such as MIAA are anyway, to his view, already exempt from such taxes
under Section 133? The majority's interpretation would effectively render the express and
emphatic withdrawal of previous exemptions to GOCCs inutile. Ut magis valeat quam pereat.
Hence, where a statute is susceptible of more than one interpretation, the court should adopt
such reasonable and beneficial construction which will render the provision thereof
operative and effective, as well as harmonious with each other.
115

But, the majority seems content rendering as absurd the Local Government Code, since it
does not have much use anyway for the Code's general philosophy of fiscal autonomy, as
evidently seen by the continued reliance on Basco or Maceda. Local government rule has
never been a grant of emancipation from the national government. This is the favorite
bugaboo of the opponents of local autonomythe fallacy that autonomy equates to
independence.
Thus, the conclusion of the majority is that under Section 133(o), MIAA as a government
instrumentality is beyond the reach of local taxation because it is not subject to taxes, fees or
charges of any kind. Moreover, the taxation of national instrumentalities and agencies by
LGUs should be strictly construed against the LGUs, citing Maceda and Basco. No mention is
made of the subsequent rejection of these cases in jurisprudence following the Local
Government Code, including Mactan. The majority is similarly silent on the general rule
under Section 232 on real property taxation or Section 5 on the rules of construction of the
Local Government Code.
V.
MIAA, and not the National Government
Is the Owner of the Subject Taxable Properties
Section 232 of the Local Government Code explicitly provides that there are exceptions to
the general rule on rule property taxation, as "hereafter specifically exempted." Section 234,
certainly "hereafter," provides indubitable basis for exempting entities from real property
taxation. It provides the most viable legal support for any claim that an governmental entity
such as the MIAA is exempt from real property taxes. To repeat:
SECTION 234. Exemptions from Real Property Tax. -- The following are exempted from
payment of the real property tax:
xxx
(f) 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:
The majority asserts that the properties owned by MIAA are owned by the Republic of the
Philippines, thus placing them under the exemption under Section 234. To arrive at this
conclusion, the majority employs four main arguments.
MIAA Property Is Patrimonial
And Not Part of Public Dominion
The majority claims that the Airport Lands and Buildings are property of public dominion as
defined by the Civil Code, and therefore owned by the State or the Republic of the
Philippines. But as pointed out by Justice Azcuna in the first PPA case, if indeed a property is
considered part of the public dominion, such property is "owned by the general public and
cannot be declared to be owned by a public corporation, such as [the PPA]."
Relevant on this point are the following provisions of the MIAA charter:
Section 3. Creation of the Manila International Airport Authority. xxx
The land where the Airport is presently located as well as the surrounding land area of
approximately six hundred hectares, are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to existing rights, if any. xxx Any
portion thereof shall not be disposed through sale or through any other mode unless
specifically approved by the President of the Philippines.
Section 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport
facilities, runways, lands, buildings and other property, movable or immovable, belonging to
the Airport, and all assets, powers rights, interests and privileges belonging to the Bureau of
Air Transportation relating to airport works or air operations, including all equipment which
are necessary for the operation of crash fire and rescue facilities, are hereby transferred to
the Authority.
Clearly, it is the MIAA, and not either the State, the Republic of the Philippines or the national
government that asserts legal title over the Airport Lands and Buildings. There was an
express transfer of ownership between the MIAA and the national government. If the
distinction is to be blurred, as the majority does, between the State/Republic/Government
and a body corporate such as the MIAA, then the MIAA charter showcases the remarkable
absurdity of an entity transferring property to itself.
Nothing in the Civil Code or the Constitution prohibits the State from transferring ownership
over property of public dominion to an entity that it similarly owns. It is just like a family
transferring ownership over the properties its members own into a family corporation. The
family exercises effective control over the administration and disposition of these
properties. Yet for several purposes under the law, such as taxation, it is the corporation that
is deemed to own those properties. A similar situation obtains with MIAA, the State, and the
Airport Lands and Buildings.
The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful
doctrines in this regard. The Court refuted the claim that the properties of the PPA were
owned by the Republic of the Philippines, noting that PPA's charter expressly transferred
ownership over these properties to the PPA, a situation which similarly obtains with MIAA.
The Court even went as far as saying that the fact that the PPA "had not been issued any
torrens title over the port and port facilities and appurtenances is of no legal consequence. A
torrens title does not, by itself, vest ownership; it is merely an evidence of title over
properties. xxx It has never been recognized as a mode of acquiring ownership over real
properties."
116

The Court further added:
xxx The bare fact that the port and its facilities and appurtenances are accessible to the
general public does not exempt it from the payment of real property taxes. It must be
stressed that the said port facilities and appurtenances are the petitioner's corporate
patrimonial properties, not for public use, and that the operation of the port and its facilities
and the administration of its buildings are in the nature of ordinary business. The petitioner
is clothed, under P.D. No. 857, with corporate status and corporate powers in the
furtherance of its proprietary interests xxx The petitioner is even empowered to invest its
funds in such government securities approved by the Board of Directors, and derives its
income from rates, charges or fees for the use by vessels of the port premises, appliances or
equipment. xxx Clearly then, the petitioner is a profit-earning corporation; hence, its
patrimonial properties are subject to tax.
117

There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public
use. A similar argument was propounded by the Light Rail Transit Authority in Light Rail
Transit Authority v. Central Board of Assessment,
118
which was cited in Philippine Ports
Authority and deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a body
corporate, "provides valuable transportation facilities to the paying public."
119
It claimed
that its carriage-ways and terminal stations are immovably attached to government-owned
national roads, and to impose real property taxes thereupon would be to impose taxes on
public roads. This view did not persuade the Court, whose decision was penned by Justice
(now Chief Justice) Panganiban. It was noted:
Though the creation of the LRTA was impelled by public service to provide mass
transportation to alleviate the traffic and transportation situation in Metro Manila its
operation undeniably partakes of ordinary business. Petitioner is clothed with corporate
status and corporate powers in the furtherance of its proprietary objectives. Indeed, it
operates much like any private corporation engaged in the mass transport industry. Given
that it is engaged in a service-oriented commercial endeavor, its carriageways and terminal
stations are patrimonial property subject to tax, notwithstanding its claim of being a
government-owned or controlled corporation.
xxx
Petitioner argues that it merely operates and maintains the LRT system, and that the actual
users of the carriageways and terminal stations are the commuting public. It adds that the
public use character of the LRT is not negated by the fact that revenue is obtained from the
latter's operations.
We do not agree. Unlike public roads which are open for use by everyone, the LRT is
accessible only to those who pay the required fare. It is thus apparent that petitioner does
not exist solely for public service, and that the LRT carriageways and terminal stations are
not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-
earning. It actually uses those carriageways and terminal stations in its public utility
business and earns money therefrom.
120

xxx
Even granting that the national government indeed owns the carriageways and terminal
stations, the exemption would not apply because their beneficial use has been granted to
petitioner, a taxable entity.
121

There is no substantial distinction between the properties held by the PPA, the LRTA, and
the MIAA. These three entities are in the business of operating facilities that promote public
transportation.
The majority further asserts that MIAA's properties, being part of the public dominion, are
outside the commerce of man. But if this is so, then why does Section 3 of MIAA's charter
authorize the President of the Philippines to approve the sale of any of these properties? In
fact, why does MIAA's charter in the first place authorize the transfer of these airport
properties, assuming that indeed these are beyond the commerce of man?
No Trust Has Been Created
Over MIAA Properties For
The Benefit of the Republic
The majority posits that while MIAA might be holding title over the Airport Lands and
Buildings, it is holding it in trust for the Republic. A provision of the Administrative Code is
cited, but said provision does not expressly provide that the property is held in trust. Trusts
are either express or implied, and only those situations enumerated under the Civil Code
would constitute an implied trust. MIAA does not fall within this enumeration, and neither is
there a provision in MIAA's charter expressly stating that these properties are being held in
trust. In fact, under its charter, MIAA is obligated to retain up to eighty percent (80%) of its
gross operating income, not an inconsequential sum assuming that the beneficial owner of
MIAA's properties is actually the Republic, and not the MIAA.
Also, the claim that beneficial ownership over the MIAA remains with the government and
not MIAA is ultimately irrelevant. Section 234(a) of the Local Government Code provides
among those exempted from paying real property taxes are "[r]eal property owned by the
[Republic] except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." In the context of Section 234(a), the identity of the beneficial
owner over the properties is not determinative as to whether the exemption avails. It is the
identity of the beneficial user of the property owned by the Republic or its political
subdivisions that is crucial, for if said beneficial user is a taxable person, then the exemption
does not lie.
I fear the majority confuses the notion of what might be construed as "beneficial ownership"
of the Republic over the properties of MIAA as nothing more than what arises as a
consequence of the fact that the capital of MIAA is contributed by the National
Government.
122
If so, then there is no difference between the State's ownership rights over
MIAA properties than those of a majority stockholder over the properties of a corporation.
Even if such shareholder effectively owns the corporation and controls the disposition of its
assets, the personality of the stockholder remains separately distinct from that of the
corporation. A brief recall of the entrenched rule in corporate law is in order:
The first consequence of the doctrine of legal entity regarding the separate identity of the
corporation and its stockholders insofar as their obligations and liabilities are concerned, is
spelled out in this general rule deeply entrenched in American jurisprudence:
Unless the liability is expressly imposed by constitutional or statutory provisions, or by the
charter, or by special agreement of the stockholders, stockholders are not personally liable
for debts of the corporation either at law or equity. The reason is that the corporation is a
legal entity or artificial person, distinct from the members who compose it, in their
individual capacity; and when it contracts a debt, it is the debt of the legal entity or artificial
person the corporation and not the debt of the individual members. (13A Fletcher Cyc.
Corp. Sec. 6213)
The entirely separate identity of the rights and remedies of a corporation itself and its
individual stockholders have been given definite recognition for a long time. Applying said
principle, the Supreme Court declared that a corporation may not be made to answer for acts
or liabilities of its stockholders or those of legal entities to which it may be connected, or vice
versa. (Palay Inc. v. Clave et. al. 124 SCRA 638) It was likewise declared in a similar case that
a bonafide corporation should alone be liable for corporate acts duly authorized by its
officers and directors. (Caram Jr. v. Court of Appeals et.al. 151 SCRA, p. 372)
123

It bears repeating that MIAA under its charter, is expressly conferred the right to exercise all
the powers of a corporation under the Corporation Law, including the right to corporate
succession, and the right to sue and be sued in its corporate name.
124
The national
government made a particular choice to divest ownership and operation of the Manila
International Airport and transfer the same to such an empowered entity due to perceived
advantages. Yet such transfer cannot be deemed consequence free merely because it was the
State which contributed the operating capital of this body corporate.
The majority claims that the transfer the assets of MIAA was meant merely to effect a
reorganization. The imputed rationale for such transfer does not serve to militate against the
legal consequences of such assignment. Certainly, if it was intended that the transfer should
be free of consequence, then why was it effected to a body corporate, with a distinct legal
personality from that of the State or Republic? The stated aims of the MIAA could have very
well been accomplished by creating an agency without independent juridical personality.
VI.
MIAA Performs Proprietary Functions
Nonetheless, Section 234(f) exempts properties owned by the Republic of the Philippines or
its political subdivisions from realty taxation. The obvious question is what comprises "the
Republic of the Philippines." I think the key to understanding the scope of "the Republic" is
the phrase "political subdivisions." Under the Constitution, political subdivisions are defined
as "the provinces, cities, municipalities and barangays."
125
In correlation, the Administrative
Code of 1987 defines "local government" as referring to "the political subdivisions
established by or in accordance with the Constitution."
Clearly then, these political subdivisions are engaged in the exercise of sovereign functions
and are accordingly exempt. The same could be said generally of the national government,
which would be similarly exempt. After all, even with the principle of local autonomy, it is
inherently noxious and self-defeatist for local taxation to interfere with the sovereign
exercise of functions. However, the exercise of proprietary functions is a different matter
altogether.
Sovereign and Proprietary
Functions Distinguished
Sovereign or constituent functions are those which constitute the very bonds of society and
are compulsory in nature, while ministrant or proprietary functions are those undertaken by
way of advancing the general interests of society and are merely optional.
126
An exhaustive
discussion on the matter was provided by the Court in Bacani v. NACOCO:
127

xxx This institution, when referring to the national government, has reference to what our
Constitution has established composed of three great departments, the legislative, executive,
and the judicial, through which the powers and functions of government are exercised.
These functions are twofold: constituent and ministrant. The former are those which
constitute the very bonds of society and are compulsory in nature; the latter are those that
are undertaken only by way of advancing the general interests of society, and are merely
optional. President Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons and property from
violence and robbery.
'(2) The fixing of the legal relations between man and wife and between parents and
children.
'(3) The regulation of the holding, transmission, and interchange of property, and the
determination of its liabilities for debt or for crime.
'(4) The determination of contract rights between individuals.
'(5) The definition and punishment of crime.
'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges, and relations of citizens.
'(8) Dealings of the state with foreign powers: the preservation of the state from external
danger or encroachment and the advancement of its international interests.'" (Malcolm, The
Government of the Philippine Islands, p. 19.)
The most important of the ministrant functions are: public works, public education, public
charity, health and safety regulations, and regulations of trade and industry. The principles
determining whether or not a government shall exercise certain of these optional functions
are: (1) that a government should do for the public welfare those things which private
capital would not naturally undertake and (2) that a government should do these things
which by its very nature it is better equipped to administer for the public welfare than is any
private individual or group of individuals. (Malcolm, The Government of the Philippine
Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our
government is required to exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute of sovereignty, and those which it
may exercise to promote merely the welfare, progress and prosperity of the people. To this
latter class belongs the organization of those corporations owned or controlled by the
government to promote certain aspects of the economic life of our people such as the
National Coconut Corporation. These are what we call government-owned or controlled
corporations which may take on the form of a private enterprise or one organized with
powers and formal characteristics of a private corporations under the Corporation Law.
128

The Court in Bacani rejected the proposition that the National Coconut Corporation
exercised sovereign functions:
Does the fact that these corporations perform certain functions of government make them a
part of the Government of the Philippines?
The answer is simple: they do not acquire that status for the simple reason that they do not
come under the classification of municipal or public corporation. Take for instance the
National Coconut Corporation. While it was organized with the purpose of "adjusting the
coconut industry to a position independent of trade preferences in the United States" and of
providing "Facilities for the better curing of copra products and the proper utilization of
coconut by-products," a function which our government has chosen to exercise to promote
the coconut industry, however, it was given a corporate power separate and distinct from
our government, for it was made subject to the provisions of our Corporation Law in so far
as its corporate existence and the powers that it may exercise are concerned (sections 2 and
4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other
private corporations, and in this sense it is an entity different from our government. As this
Court has aptly said, "The mere fact that the Government happens to be a majority
stockholder does not make it a public corporation" (National Coal Co. vs. Collector of Internal
Revenue, 46 Phil., 586-587). "By becoming a stockholder in the National Coal Company, the
Government divested itself of its sovereign character so far as respects the transactions of
the corporation. . . . Unlike the Government, the corporation may be sued without its consent,
and is subject to taxation. Yet the National Coal Company remains an agency or
instrumentality of government." (Government of the Philippine Islands vs. Springer, 50 Phil.,
288.)
The following restatement of the entrenched rule by former SEC Chairperson Rosario Lopez
bears noting:
The fact that government corporations are instrumentalities of the State does not divest
them with immunity from suit. (Malong v. PNR, 138 SCRA p. 63) It is settled that when the
government engages in a particular business through the instrumentality of a corporation, it
divests itself pro hoc vice of its sovereign character so as to subject itself to the rules
governing private corporations, (PNB v. Pabolan 82 SCRA 595) and is to be treated like any
other corporation. (PNR v. Union de Maquinistas Fogonero y Motormen, 84 SCRA 223)
In the same vein, when the government becomes a stockholder in a corporation, it does not
exercise sovereignty as such. It acts merely as a corporator and exercises no other power in
the management of the affairs of the corporation than are expressly given by the
incorporating act. Nor does the fact that the government may own all or a majority of the
capital stock take from the corporation its character as such, or make the government the
real party in interest. (Amtorg Trading Corp. v. US 71 F2d 524, 528)
129

MIAA Performs Proprietary
Functions No Matter How
Vital to the Public Interest
The simple truth is that, based on these accepted doctrinal tests, MIAA performs proprietary
functions. The operation of an airport facility by the State may be imbued with public
interest, but it is by no means indispensable or obligatory on the national government. In
fact, as demonstrated in other countries, it makes a lot of economic sense to leave the
operation of airports to the private sector.
The majority tries to becloud this issue by pointing out that the MIAA does not compete in
the marketplace as there is no competing international airport operated by the private
sector; and that MIAA performs an essential public service as the primary domestic and
international airport of the Philippines. This premise is false, for one. On a local scale, MIAA
competes with other international airports situated in the Philippines, such as Davao
International Airport and MCIAA. More pertinently, MIAA also competes with other
international airports in Asia, at least. International airlines take into account the quality and
conditions of various international airports in determining the number of flights it would
assign to a particular airport, or even in choosing a hub through which destinations
necessitating connecting flights would pass through.
Even if it could be conceded that MIAA does not compete in the market place, the example of
the Philippine National Railways should be taken into account. The PNR does not compete in
the marketplace, and performs an essential public service as the operator of the railway
system in the Philippines. Is the PNR engaged in sovereign functions? The Court, in Malong v.
Philippine National Railways,
130
held that it was not.
131

Even more relevant to this particular case is Teodoro v. National Airports
Corporation,
132
concerning the proper appreciation of the functions performed by the Civil
Aeronautics Administration (CAA), which had succeeded the defunction National Airports
Corporation. The CAA claimed that as an unincorporated agency of the Republic of the
Philippines, it was incapable of suing and being sued. The Court noted:
Among the general powers of the Civil Aeronautics Administration are, under Section 3, to
execute contracts of any kind, to purchase property, and to grant concession rights, and
under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline,
accessories and supplies, and rentals for the use of any property under its management.
These provisions confer upon the Civil Aeronautics Administration, in our opinion, the
power to sue and be sued. The power to sue and be sued is implied from the power to
transact private business. And if it has the power to sue and be sued on its behalf, the Civil
Aeronautics Administration with greater reason should have the power to prosecute and
defend suits for and against the National Airports Corporation, having acquired all the
properties, funds and choses in action and assumed all the liabilities of the latter. To deny
the National Airports Corporation's creditors access to the courts of justice against the Civil
Aeronautics Administration is to say that the government could impair the obligation of its
corporations by the simple expedient of converting them into unincorporated agencies.
133

xxx
Eventually, the charter of the CAA was revised, and it among its expanded functions was
"[t]o administer, operate, manage, control, maintain and develop the Manila International
Airport."
134
Notwithstanding this expansion, in the 1988 case of CAA v. Court of
Appeals
135
the Court reaffirmed the ruling that the CAA was engaged in "private or non-
governmental functions."
136
Thus, the Court had already ruled that the predecessor agency
of MIAA, the CAA was engaged in private or non-governmental functions. These are more
precedents ignored by the majority. The following observation from the Teodoro case very
well applies to MIAA.
The Civil Aeronautics Administration comes under the category of a private entity. Although
not a body corporate it was created, like the National Airports Corporation, not to maintain a
necessary function of government, but to run what is essentially a business, even if revenues
be not its prime objective but rather the promotion of travel and the convenience of the
traveling public. It is engaged in an enterprise which, far from being the exclusive
prerogative of state, may, more than the construction of public roads, be undertaken by
private concerns.
137

If the determinative point in distinguishing between sovereign functions and proprietary
functions is the vitality of the public service being performed, then it should be noted that
there is no more important public service performed than that engaged in by public utilities.
But notably, the Constitution itself authorizes private persons to exercise these functions as
it allows them to operate public utilities in this country
138
If indeed such functions are
actually sovereign and belonging properly to the government, shouldn't it follow that the
exercise of these tasks remain within the exclusive preserve of the State?
There really is no prohibition against the government taxing itself,
139
and nothing obscene
with allowing government entities exercising proprietary functions to be taxed for the
purpose of raising the coffers of LGUs. On the other hand, it would be an even more noxious
proposition that the government or the instrumentalities that it owns are above the law and
may refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in the exercise
of proprietary, and not sovereign functions, cannot avoid the adverse-effects of tax evasion
simply on the claim that it is imbued with some of the attributes of government.
VII.
MIAA Property Not Subject to
Execution Sale Without Consent
Of the President.
Despite the fact that the City of Paraaque ineluctably has the power to impose real property
taxes over the MIAA, there is an equally relevant statutory limitation on this power that must
be fully upheld. Section 3 of the MIAA charter states that "[a]ny portion [of the [lands
transferred, conveyed and assigned to the ownership and administration of the MIAA] shall
not be disposed through sale or through any other mode unless specifically approved by the
President of the Philippines."
140

Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be
deemed as repealing this prohibition under Section 3, even if it effectively forecloses one
possible remedy of the LGU in the collection of delinquent real property taxes. While the
Local Government Code withdrew all previous local tax exemptions of the MIAA and other
natural and juridical persons, it did not similarly withdraw any previously enacted
prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the
resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand
shielding its properties from any form of sale or disposition, is not contradictory or
paradoxical, onerous as its effect may be on the LGU. It simply means that the LGU has to find
another way to collect the taxes due from MIAA, thus paving the way for a mutually
acceptable negotiated solution.
141

There are several other reasons this statutory limitation should be upheld and applied to
this case. It is at this juncture that the importance of the Manila Airport to our national life
and commerce may be accorded proper consideration. The closure of the airport, even by
reason of MIAA's legal omission to pay its taxes, will have an injurious effect to our national
economy, which is ever reliant on air travel and traffic. The same effect would obtain if
ownership and administration of the airport were to be transferred to an LGU or some other
entity which were not specifically chartered or tasked to perform such vital function. It is for
this reason that the MIAA charter specifically forbids the sale or disposition of MIAA
properties without the consent of the President. The prohibition prevents the peremptory
closure of the MIAA or the hampering of its operations on account of the demands of its
creditors. The airport is important enough to be sheltered by legislation from ordinary legal
processes.
Section 3 of the MIAA charter may also be appreciated as within the proper exercise of
executive control by the President over the MIAA, a GOCC which despite its separate legal
personality, is still subsumed within the executive branch of government. The power of
executive control by the President should be upheld so long as such exercise does not
contravene the Constitution or the law, the President having the corollary duty to faithfully
execute the Constitution and the laws of the land.
142
In this case, the exercise of executive
control is precisely recognized and authorized by the legislature, and it should be upheld
even if it comes at the expense of limiting the power of local government units to collect real
property taxes.
Had this petition been denied instead with Mactan as basis, but with the caveat that the
MIAA properties could not be subject of execution sale without the consent of the President,
I suspect that the parties would feel little distress. Through such action, both the Local
Government Code and the MIAA charter would have been upheld. The prerogatives of LGUs
in real property taxation, as guaranteed by the Local Government Code, would have been
preserved, yet the concerns about the ruinous effects of having to close the Manila
International Airport would have been averted. The parties would then be compelled to try
harder at working out a compromise, a task, if I might add, they are all too willing to engage
in.
143
Unfortunately, the majority will cause precisely the opposite result of unremitting
hostility, not only to the City of Paraaque, but to the thousands of LGUs in the country.
VIII.
Summary of Points
My points may be summarized as follows:
1) Mactan and a long line of succeeding cases have already settled the rule that under the
Local Government Code, enacted pursuant to the constitutional mandate of local autonomy,
all natural and juridical persons, even those GOCCs, instrumentalities and agencies, are no
longer exempt from local taxes even if previously granted an exemption. The only
exemptions from local taxes are those specifically provided under the Local Government
Code itself, or those enacted through subsequent legislation.
2) Under the Local Government Code, particularly Section 232, instrumentalities, agencies
and GOCCs are generally liable for real property taxes. The only exemptions therefrom under
the same Code are provided in Section 234, which include real property owned by the
Republic of the Philippines or any of its political subdivisions.
3) The subject properties are owned by MIAA, a GOCC, holding title in its own name. MIAA, a
separate legal entity from the Republic of the Philippines, is the legal owner of the
properties, and is thus liable for real property taxes, as it does not fall within the exemptions
under Section 234 of the Local Government Code.
4) The MIAA charter expressly bars the sale or disposition of MIAA properties. As a result,
the City of Paraaque is prohibited from seizing or selling these properties by public auction
in order to satisfy MIAA's tax liability. In the end, MIAA is encumbered only by a limited lien
possessed by the City of Paraaque.
On the other hand, the majority's flaws are summarized as follows:
1) The majority deliberately ignores all precedents which run counter to its hypothesis,
including Mactan. Instead, it relies and directly cites those doctrines and precedents which
were overturned by Mactan. By imposing a different result than that warranted by the
precedents without explaining why Mactan or the other precedents are wrong, the majority
attempts to overturn all these ruling sub silencio and without legal justification, in a manner
that is not sanctioned by the practices and traditions of this Court.
2) The majority deliberately ignores the policy and philosophy of local fiscal autonomy, as
mandated by the Constitution, enacted under the Local Government Code, and affirmed by
precedents. Instead, the majority asserts that there is no sound rationale for local
governments to tax national government instrumentalities, despite the blunt existence of
such rationales in the Constitution, the Local Government Code, and precedents.
3) The majority, in a needless effort to justify itself, adopts an extremely strained exaltation
of the Administrative Code above and beyond the Corporation Code and the various
legislative charters, in order to impose a wholly absurd definition of GOCCs that effectively
declassifies innumerable existing GOCCs, to catastrophic legal consequences.
4) The majority asserts that by virtue of Section 133(o) of the Local Government Code, all
national government agencies and instrumentalities are exempt from any form of local
taxation, in contravention of several precedents to the contrary and the proviso under
Section 133, "unless otherwise provided herein [the Local Government Code]."
5) The majority erroneously argues that MIAA holds its properties in trust for the Republic
of the Philippines, and that such properties are patrimonial in character. No express or
implied trust has been created to benefit the national government. The legal distinction
between sovereign and proprietary functions, as affirmed by jurisprudence, likewise
preclude the classification of MIAA properties as patrimonial.
IX.
Epilogue
If my previous discussion still fails to convince on how wrong the majority is, then the
following points are well-worth considering. The majority cites the Bangko Sentral ng
Pilipinas (Bangko Sentral) as a government instrumentality that exercises corporate powers
but not organized as a stock or non-stock corporation. Correspondingly for the majority, the
Bangko ng Sentral is exempt from all forms of local taxation by LGUs by virtue of the Local
Government Code.
Section 125 of Rep. Act No. 7653, The New Central Bank Act, states:
SECTION 125. Tax Exemptions. The Bangko Sentral shall be exempt for a period of five (5)
years from the approval of this Act from all national, provincial, municipal and city taxes,
fees, charges and assessments.
The New Central Bank Act was promulgated after the Local Government Code if the BSP is
already preternaturally exempt from local taxation owing to its personality as an
"government instrumentality," why then the need to make a new grant of exemption, which
if the majority is to be believed, is actually a redundancy. But even more tellingly, does not
this provision evince a clear intent that after the lapse of five (5) years, that the Bangko
Sentral will be liable for provincial, municipal and city taxes? This is the clear congressional
intent, and it is Congress, not this Court which dictates which entities are subject to taxation
and which are exempt.
Perhaps this notion will offend the majority, because the Bangko Sentral is not even a
government owned corporation, but a government instrumentality, or perhaps "loosely", a
"government corporate entity." How could such an entity like the Bangko Sentral , which is
not even a government owned corporation, be subjected to local taxation like any mere
mortal? But then, see Section 1 of the New Central Bank Act:
SECTION 1. Declaration of Policy. The State shall maintain a central monetary authority
that shall function and operate as an independent and accountable body corporate in the
discharge of its mandated responsibilities concerning money, banking and credit. In line
with this policy, and considering its unique functions and responsibilities, the central
monetary authority established under this Act, while being a government-owned
corporation, shall enjoy fiscal and administrative autonomy.
Apparently, the clear legislative intent was to create a government corporation known as the
Bangko Sentral ng Pilipinas. But this legislative intent, the sort that is evident from the text
of the provision and not the one that needs to be unearthed from the bowels of the archival
offices of the House and the Senate, is for naught to the majority, as it contravenes the
Administrative Code of 1987, which after all, is "the governing law defining the status and
relationship of government agencies and instrumentalities" and thus superior to the
legislative charter in determining the personality of a chartered entity. Its like saying that
the architect who designed a school building is better equipped to teach than the professor
because at least the architect is familiar with the geometry of the classroom.
Consider further the example of the Philippine Institute of Traditional and Alternative Health
Care (PITAHC), created by Republic Act No. 8243 in 1997. It has similar characteristics as
MIAA in that it is established as a body corporate,
144
and empowered with the attributes of a
corporation,
145
including the power to purchase or acquire real properties.
146
However the
PITAHC has no capital stock and no members, thus following the majority, it is not a GOCC.
The state policy that guides PITAHC is the development of traditional and alternative health
care,
147
and its objectives include the promotion and advocacy of alternative, preventive and
curative health care modalities that have been proven safe, effective and cost
effective.
148
"Alternative health care modalities" include "other forms of non-allophatic,
occasionally non-indigenous or imported healing methods" which include, among others
"reflexology, acupuncture, massage, acupressure" and chiropractics.
149

Given these premises, there is no impediment for the PITAHC to purchase land and construct
thereupon a massage parlor that would provide a cheaper alternative to the opulent spas
that have proliferated around the metropolis. Such activity is in line with the purpose of the
PITAHC and with state policy. Is such massage parlor exempt from realty taxes? For the
majority, it is, for PITAHC is an instrumentality or agency exempt from local government
taxation, which does not fall under the exceptions under Section 234 of the Local
Government Code. Hence, this massage parlor would not just be a shelter for frazzled nerves,
but for taxes as well.
Ridiculous? One might say, certainly a decision of the Supreme Court cannot be construed to
promote an absurdity. But precisely the majority, and the faulty reasoning it utilizes, opens
itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one of the
lesser evils that could arise from the majority ruling. This is indeed a very strange and very
wrong decision.
I dissent.
DANTE O. TINGA
Associate Justice

G.R. No. L-17635 March 30, 1963
EDUARDO SANCHEZ, GREGORIO NUEZ, SULPICIO BANAAG, LINO BASA and RODOLPO
FERNANDEZ,petitioners-appellants,
vs.
MUNICIPALITY OF ASINGAN, Province of Pangasinan, respondent-appellee.
Castillo, Diaz, Tayabas and Torres for petitioners-appellants.
Guillermo, Navarro, Rame and Venture for respondent-appellee.
MAKALINTAL, J.:
This case is before us on appeal by the plaintiffs from the decision of the Court of First
Instance of Pangasinan.
The facts as found by the trial court are as follows: The defendant municipality, appellee
herein, is the owner of a triangular strip of land situated between the site of the municipal
school building and the provincial road, measuring 42 x 26-1/2 x 46 meters. On that land
appellants, with the knowledge and implied consent of the municipality, constructed
temporary stores and buildings of light materials shortly after the end of the last war.
Between 1952 and 1959 they paid rents to appellee. When a new local administration took
over after the elections of November 1959 the municipal council passed a resolution
notifying the occupants of the land that the same was needed for certain public purposes,
such as parking space, expansion of school grounds, widening of the road and waiting area
for pedestrians. Appellants were therefore advised to vacate on or before May 15, 1960,
some five (5) months after the date of notice. Instead of moving, however, appellants filed a
petition for prohibition with the court a quo on May 10, 1960 to prevent the municipality
from ejecting them from the land, with the alternative prayer that should they be ejected,
appellee be ordered to reimburse to them the rents which they had paid, in the total sum of
P1,178.20. There was also a demand for damages and attorney's fees. After trial, the court
dismissed the petition and ordered appellants to vacate the land, with costs.
Appellants' first contention here is that the land in question belongs to the Province of
Pangasinan and therefore appellee has no right to order their ejectment. The premise of the
contention is incorrect, for the clear and specific finding of the court a quo is that the said
land is owned by the Municipality of Asingan. This is a factual conclusion that is no longer
open to review in the present appeal. The additional statement by the court "that it is part of
the broad shoulder of the provincial road" does not make the land provincial property, such
statement being merely descriptive of its location and not indicative of its ownership..
The next issue raised by appellants is with reference to the sum of P1,178.20 paid by them as
rents from 1952 to 1959. They claim the right to be reimbursed in case they should be
ejected, and cite the case of Rojas v. Municipality of Cavite, 30 Phil. 607, where this Court, after
declaring null and void the lease of a public plaza belonging to the said municipality and
ordering the lessee to vacate the same, ordered the municipality to reimburse the rentals
collected. It should be noted that while the property involved in that case was clearly
devoted to public use, and therefore outside the commerce of man, and could not under any
circumstance have been the object of a valid contract of lease, appellee's position herein is
that the land in question is patrimonial character, not being included in any of the categories
of municipal properties for public use enumerated in Article 424 of the Civil Code, namely:
"municipal streets, squares, fountains, public waters, promenades and public works for
public service in said municipality." There is indeed nothing in the decision appealed from or
in the briefs of the parties to show that the land was devoted to any of those purposes when
appellants began their occupancy. Consequently, the implied agreement of lease with them
was not null and void, although terminable upon the notice as appellee herein elected to
terminate it. That being so, there is no ground on which reimbursement of the rents may be
ordered.
In any event, even granting that the land in question is for public use and therefore the
municipality of Asingan could not legally lease it to private parties, we see no justification for
the stand maintained by appellants that after having occupied said land and derived benefits
therefrom they should still be entitled to recover what they have paid as a condition for their
ejectment. That would be to enrich them unduly to the prejudice of appellee. Besides, it may
be said that when they built their temporary structures on the land with the latter's
knowledge and implied consent they both treated it as municipal patrimonial property.
Insofar as the rents already paid by them are concerned appellants are estopped from
claiming otherwise in order to obtain a recovery.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1wph1.t
The judgment appealed from is affirmed, with cost against appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes,
Dizon and Regala, JJ., concur.

G.R. No. L-2017 November 24, 1906
THE MUNICIPALITY OF OAS, plaintiff-appellee,
vs.
BARTOLOME ROA, defendant-appellant.
Del-Pan, Ortigas and Fisher, for appellant.
Enrique Llopiz for appellee.

WILLARD, J.:
The plaintiff brought this action for the recovery of a tract of land in the pueblo of Oas,
claiming that it was a part of the public square of said town. The defendant in his answer
alleged that he was the owner of the property. Judgment was rendered in favor of the
plaintiff and the defendant has brought the case here by bill of exceptions.
As we look at the case, the only question involved is one of fact. Was the property in question
a part of the public square of the town of Oas? The testimony upon this point in favor of the
plaintiff consisted of statements made by witnesses to the effect that this land had always
been a part of the public square, and of certain resolutions adopted by the principalia of the
pueblo reciting the same fact, the most important of these being the minutes of the meeting
of the 27th of February, 1892. In that document it is expressly stated that this land was
bought in 1832 by the then parish priest for the benefit of the pueblo. It recites various
proceedings taken thereafter in connection with this ownership, including among them an
order of the corregidor of Nueva Caceres prohibiting the erection of houses upon the land by
reason of the fact above recited namely, that the land belonged to the pueblo. This
resolution terminated with an order to the occupant of the building then standing upon the
property that he should not repair it. The defendant signed this resolution.
It further appears that the same building was almost entirely destroyed by a baguio on the
13th and 14th of May, 1893, and that the authorities of the puebo ordered the complete
demolition thereof. The resolution of the 31st of May, 1893, declared that the then owner of
the building, Jose Castillo, had no right to reconstruct it because it was situated upon land
which did not belong to him. This resolution was also signed by the defendant.
The evidence on the part of the defendant tends to show that in 1876 Juana Ricarte and
Juana Riquiza sold the land in question to Juan Roco, and that on the 17th day of December,
1894, Jose Castillo sold it to the defendant. No deed of conveyance from Juan Roco to Jose
Castillo was presented in evidence, but Castillo, testifying as a witness, said that he had
bought the property by verbal contract from Roco, his father-in-law. The defendant, after his
purchase in 1894, procured a possessory of information which was allowed by an order of
the justice of the peace of Oas on the 19th day of January, 1895, and recorded in the Registry
of Property on the 28th of March of the same year.
In this state of the evidence, we can not say that the proof is plainly and manifestly against
the decision of the court below. Unless it is so, the finding of fact made by that court can not
be reversed. (De la Rama vs. De la Rama, 201 U. S., 303.)
The two statements signed by Roa, one in 1892 and the other in 1893, are competent
evidence against him. They are admissions by him to the effect that at that time the pueblo
was the owner of the property in question. They are, of course, not conclusive against him.
He was entitled to, and did present evidence to overcome the effect of these admissions. The
evidence does not make out a case of estoppel against him. (sec. 333, par. 1, Code of Civil
Procedure.)
The admissibility of these statements made by Roa do not rest upon section 278 of the Code
of Civil Procedure, which relates to declarations or admissions made by persons not a party
to the suit, but it rests upon the principle that when the defendant in a suit has himself made
an admission of any fact pertinent to issue involved, it can be received against him.
This action was commenced on the 17th of December, 1902. There is no evidence of any
adverse occupation of this land for thirty years, consequently the extraordinary period of
prescription does not apply. The defendant can not rely upon the ordinary period of
prescription of ten years because he was not a holder in good faith. He knew at that time of
his purchase in 1894, and had so stated in writing, that the pueblo was the owner of the
property. So that, even if the statute of limitations ran against a municipality in reference to a
public square, it could not avail the defendant in this case.
It appears that Roa has constructed upon the property, and that there now stands thereon, a
substantial building. As early as 1852 this land had been used by the municipality
constructed thereon buildings for the storage of property of the State, quarters for
the cuadrilleros, and others of a like character. It therefore had ceased to be property used by
the public and had become a part of the bienes patrimoniales of the pueblo. (Civil Code, arts.
341, 344.) To the case are applicable those provisions of the Civil Code which relate to the
construction by one person of a building upon land belonging to another. Article 364 of the
Civil Code is as follows:
Where there has been bad faith, not only on the part of the person who built,
sowed, or planted on another's land, but also on the part of the owner of the latter,
the rights of both shall be the same as if they had acted in good faith.
Bad faith on the part of the owner is understood whenever the act has been
executed in his presence with his knowledge and tolerance and without objection.
The defendant constructed the building in bad faith for, as we have said, he had knowledge
of the fact that his grantor was not the owner thereof. There was a bad faith also on the part
of the plaintiff in accordance with the express provisions of article 364 since it allowed Roa
to construct the building without any opposition on its part and to so occupy it for eight
years. The rights of the parties must, therefore, be determined as if they both had acted in
good faith. Their rights in such cases are governed by article 361 of the Civil Code, which is
as follows:
The owner of the land on which the building, sowing, or planting is done in good
faith shall have a right to appropriate as his own the work, sowing, or planting after
the indemnity mentioned in articles 453 and 454, or, to oblige the person who has
built or planted, to pay him the value of the land and to force the person who
sowed to pay the proper rent.
The judgment of the court below is so modified as to declare that the plaintiff is the owner of
the land and that it has the option of buying the building thereon, which is the property of
the defendant, or of selling to him the land on which it stands. The plaintiff is entitled to
recover the costs of both instances.1wphil.net
After the expiration of twenty days let judgment be entered in accordance herewith and at
the proper time thereafter let the record be remanded to the court below for proper action.
So ordered.
Johnson, Carson and Tracey, JJ., concur.

G.R. No. L-7054 January 20, 1913
MUNICIPALITY OF HINUNANGAN, plaintiff-appellee,
vs.
THE DIRECTOR OF LANDS, defendant-appellant.
Attorney-General Villamor, for appellant.
Provincial Fiscal De la Rama, for appellee.
MORELAND, J.:
This is an appeal from the judgment of the Court of Land Registration, ordering the
registration of the title of the petitioner to the lands described in the petition. The appeal is
taken by the Insular Government from the registration of the title of one of the parcels of
land only. It is situated in the municipality of Hinunangan, Province of Leyte, and contains an
area of 10,328.8 square meters. It is bounded on the northeast by the maritime zone; on the
southeast by North America Street; on the southwest by Manilili Street, and on the
northwest by San Isidro Labrador Street. Upon this lot is built a stone fort which has stood
there from time immemorial and was in times past used as a defense against the invasion of
the Moros.
Formerly, as now, the defense of the national territory against invasion by foreign enemies
rested upon the state and not upon the towns and villages and for this reason all of the
defenses were constructed by the National Government. In volume 2, book 3, title 7, law 1 of
the Laws of the Indies appears the following:
We command that all the ground roundabout the castles and fortresses be clear
and unoccupied, and if any building is erected within 300 paces of the wall or other
building so strong that even at a greater distance it would prejudice the defenses, it
shall be torn down, and the owner of the same shall be paid from the Royal
Treasury for the damages caused him.
Book 4, title 7, law 12, reads as follows:
We order that, for the security and defense of the cities as is now assured by the
castles and fortresses, no building shall be erected within 300 paces of the walls or
stockades of the new cities.
Article 339 of the Civil Code is as follows, in part:
ART. 339. The following are public property:
xxx xxx xxx
2. That which belongs privately to the state, which is not for public use and which is
destined for the public good or to increase the national riches, such as walls,
fortresses and other constructions for the defense of the country, and the mines as
long as no concession in regard to them is made.
Article 341 of the Civil Code provides:
ART. 341. Public property, when it ceases to be used for the public good or for the
necessities of the defense of the country, becomes a part of the property of the
state.
From these provisions it seems clear that the fortress in question was erected for the
national defense and was a part of the property of the state destined and used for that
purpose. As a necessary result, the land upon which it stands must also have been dedicated
to that purpose.
The fact that said fortress may not have been used for many years for the purposes for which
it was originally built does not of necessity deprive the state of its ownership therein. As we
have seen, the Civil Code provides that, when the fortress ceases to be used for the purposes
for which it was constructed, it becomes the property of the state in what may be called the
private sense. That the municipality may have exercised within recent years acts of
ownership over the land by permitting it to be occupied and consenting to the erection of
private houses thereon does not determine necessarily that the land has become the
property of the municipality. We have held in several cases that, where the municipality has
occupied lands distinctly for public purposes, such as for the municipal court house, the
public school, the public market, or other necessary municipal building, we will, in the
absence of proof to the contrary, presume a grant from the state in favor of the municipality;
but, as indicated by the wording, that rule may be invoked only as to property which is used
distinctly for public purposes. It cannot be applied against the state when occupied for any
other purpose.
The evidence does not disclose that the municipality has used the land for purposes
distinctly public.
The judgment in relation to the parcel of land heretofore described is reversed and the
petition as to that parcel dismissed. In all other respects the judgment is affirmed. So
ordered.
Arellano, C.J., Torres, Mapa, Johnson, and Trent, JJ., concur.

G.R. No. L-5631 October 17, 1910
THE MUNICIPALITY OF CATBALOGAN, petitioner-appellee,
vs.
THE DIRECTOR OF LANDS, opponent-appellant.
Attorney-General Villamor, for appellant.
Provincial fiscal Barrios, for appellee.

TORRES, J.:
On June 19, 1908, the municipal president of the pueblo of Catbalogan, Province of Samar,
filed, in the name of the municipality, an application with the Court of Land Registration in
which he asked for the registration, in conformity with the Land Registration Act, of a parcel
of land of which the said municipality was the absolute owner, bounded on the north by calle
Corto south of the church square, on the east by Second Avenue, on the south by land
belonging to Smith, Bell & Co., and on the west by First Avenue; the application states that
the said land has an area of 666.60 square meters and its description and boundaries are
given in detail in the map attached to the application, which sets forth that the property
described was appraised at the last assessment levied for the purpose of the payment of the
land tax, and that there is no encumbrance on it; that no one other than the applicant, to the
latter's best knowledge and belief, has any right or interest therein; that the said land was
acquired by possession and material occupation for a large number of years and is at present
occupied by the applicant as a municipal corporation duly organized; and that, in the
unlikely event of the denial of the said application, made in accordance with the Land
Registration Act, the applicant invokes the benefits of chapter 6 of Act No. 926, since the said
corporation has been in poossession of the land mentioned, which is entirely surrounded by
a fence, and has been cultivating it for a great many years.
On March 18, 1909, the Attorney-General, in representation of the Director of Lands, filed a
writing opposing the registration solicited and alleged that the land in question belonged to
the United States and was under the control of the Government of the Philippines Islands. He
asked that the applicant's prayer be denied and that, in case the said property should be
declared to belong to the Insular Government, the same be awarded to it, together with the
issuance thereto of the proper certificate of registration.
The case having been heard on March 22, 23, and 24, 1909, and oral evidence adduced by
both parties, the judge, on the 24th of the said month, overruled the opposition of the
Director of Lands, and decreed, after a declaration of general default, that the property in
question be awarded to the applicant, the municipality of Catbalogan, and be registered in its
name. The Attorney-General, in representation of the Director of Lands, excepted to this
ruling and announced his purpose of filing a bill of exceptions. He asked at the same time for
a new trial on the grounds that the findings of fact of the court were openly and manifestly
contrary to the weight of the evidence, and that the latter did not justify the said decision
which, he alleged, was contrary to law. This motion was denied and exception was taken
thereto by the Attorney-General, who duly presented the required bill of exceptions which
was certified and forwarded to this court.
The question submitted to the decision of this court, through the appeal raised by the
Attorney-General in representation of the Director of Lands, is whether the lot occupied by
the court-house of the municipality of Catbalogan, of the Islands and Province of Samar,
belongs to the said municipality or is state land under the control of the Insular Government.
In order to obtain a better understanding of the final conclusion to be established in this
decision, it is meet to state: That for the purpose of the establishment of new pueblos in this
Archipelago, at the beginning of its occupation by the Spaniards, an endeavor was always
made to find, in favorable places, a nucleus of inhabitants and, later, near the pueblos already
established, barrios, which ordinarily served as a basis for the formation of other new
pueblos that became a populated as the centers on which they were dependent.
The executive authorities and other officials who then represented the Spanish Government
in these Islands were obliged to adjust their procedure, in the fulfillment of their duties with
regard to the establishment and laying out of new towns, to the Laws of the Indies, which
determined the course that they were to pursue for such purposes, as may be seen by the
following:
Law 6, title 5, book 4, of the Recompilation of the Laws of the Indies, provides, among other
things:
That within the boundaries which may be assigned to it, there must be at least
thirty residents, and each one of them must have a house, etc.
Law 7 of the same title and book contains this provision:
Whoever wishes to undertake to establish a new town in the manner provided for,
of not more than thirty nor less than ten residents, shall be granted the time and
territory necessary for the purpose and under the same conditions.
It may be affirmed that years afterwards all the modern pueblos of the Archipelago were
formed by taking as a basis for their establishment the barrios already populated by a large
number of residents who, under the agreement to build the church of the new pueblo, the
court-house, and afterwards the schoolhouse, obtained from the General Government the
administrative separation of their barrio from the pueblo on which it depended and in
whose territory it was previously comprised. In such cases procedure analogous to that
prescribed by the Laws of the Indies was observed.
For the establishment, then, of new pueblos, the administrative authority of the province, in
representation of the Governor-General, designated the territory for their location and
extension and the metes and bounds of the same; and before alloting the lands among the
new settlers, a special demarcation was made of the places which were to serve as the public
square of the pueblo, for the erection of the church, and as sites for the public buildings,
among others, the municipal building or the casa real, as well as of the lands which were to
constitute the commons, pastures, and propios of the municipality and the streets and roads
which were to intersect the new town were laid out, as many be seen by the following laws:
Law 7, title 7, book 4, of the Recompilation of the Laws of the Indies, provides:
The district or territory to be given for settlement by composition shall be allotted
in the following manner: There shall be first be set apart the portion required for
the lots of the pueblo, the exido or public lands, and pastures amply sufficient for
the stock which the residents may have, and as much more as propios del lugar or
common lands of the locality; the rest of the territory and district shall be divided
into four parts one of them, of his choice, shall be for him who takes upon
himself the obligation to fund the pueblo, and the other three shall be apportioned
equally among the settlers.
Law 8, of the same title and book, prescribes, among other things:
That, between the main square and the church, there shall be constructed the casas
reales or municipal buildings, the cabildo, concejo, customs buildings, etc.
Law 14 of the said title and book, also directs among other things:
That the viceroys shall set aside such lands as to them appear suitable as the
common lands (propios) of the pueblos that have none, therewith to assist in the
payment of the salaries of the corregidores, and sufficient public lands (exidos) and
pasture lands as provided for and prescribed by law.
Law 1, title 13 of the aforesaid book, provides the following:
Such viceroys and governors as have due authority shall designate to
each villa and lugar newly founded and settled the lands and lots which they may
need and may be given to them, without detriment to a third party, as propios, and
a statement shall be sent to us of what was designated and given to each, in order
that we may have such action approved.
The municipality of Catbalogan, as the provincial seat of Samar, must have been the first and
oldest pueblo established in the said province and has been occupying, if not since time
immemorial, as affirmed in the application, at least for a long period of years, some forty or
forty-five years according to the evidence given at trial, the lot in litigation on which it had
built the successive court-house buildings constructed for the public service of the head
municipality authority and his council. Some of these buildings were burned and others
were ruined by typhoons. The court-house building aforesaid has been used and enjoyed
quietly and peaceably and without any opposition up to the present time, wherefore it is to
be presumed that, on founding the pueblo and on proceeding to designate and demarcate the
area of land to be occupied by the town of Catbalogan, with its square, streets, church, and
other public buildings, the said lot was also designated as a site for the municipal or court
building, in accordance with the laws hereinbefore mentioned, and that the adjudication of
the lot to the municipality for its court-house was duly confirmed by the Spanish
Government, as must be inferred, in view of the continuous possession for so long a time up
to the present; nor does the record show that the court-house of the said pueblo was ever
built on any other lot than the one in question.
It is to be noted that, in former times, the court-house buildings of the pueblos were
called casas reales (royal buildings), undoubtedly for the purpose of giving greater dignity to
the principle of authority represented in them and inculcating respect among the inhabitants
of the pueblo toward the building where the chief local authority exercised his governmental
duties and at the same time administered justice, for the old pedaneos or petty mayors, later
called capitanes or gobernadorcillos, while they had governmental powers, at the same time
administered justice as local judges.
In paragraph 92 of the royal ordinances of February 26, 1768, the following appears, among
other things:
And because, while there is a notable excess of pomp in the buildings of the
ministers and parish priests, there is, on the other hand, great abandonment of
the casas reales which, as a general rule, are not habitable on account of their
uncomfortable and ruinous conditions, etc., . . . it is ordered that in all the pueblos,
and especially in those of the seats of government, the native inhabitants thereof
shall erect decent and convenient municipal buildings modeled after the plans to be
furnished by the central government, and that therein the gobernadorcillos shall
have their court rooms and their jails for the security of prisoners, and all leaks and
other damages shall be repaired in time in order that, through neglect they may not
cause greater detriment and expense.
If the inhabitants of a pueblo, at the time of its foundation, were obliged to erect their casa
real of municipal building, it is to be supposed that they built it on their own ground after a
designation of the site had been made by the governmental authority of the province a
designation which had to be made, according to the Laws of the Indies, at the same time as
that of the main plaza and of the site to be occupied by the temple of church, which latter
building is so necessary and indispensable for every pueblo as well as the casa real or court-
house, since in them, respectively, divine worship is had and the local authorities perform
their duties. The land designated for the church is considered to belong thereto, and likewise
the land intended for the court-house should be deemed to be the property of municipality,
since no pueblo was able to exist administratively without having a church of its own and a
court-house which should be the seat of its local authority and its municipal government.
It should be remembered that the court-house and the church of every pueblo were always
built, in accordance with the provisions of the Laws of the Indies, on one of the sides of
the plaza mayor or main square of the town, either together or the same side, or each
buildings on an opposite side; but the said square nearly always occupies a central site
within the territory of the pueblo, with the frequent exception of where the town has
extended toward only one end or side of the territory, in which event its main square ceased
to be in the center of the town. However, the said square was never located outside of the
inhabited place, as were the commons and pasturages. (Law 13, title 7, book 4,
Recompilation of the Laws of the Indies.)
It is of course to presumed, in accordance with the provisions of the laws aforementioned,
that the main square of the pueblo of Catbalogan occupies nearly the central part of its
territory, and that the lot on which were successively constructed the several court-houses
which the said pueblo has and, in situated on one of the sides of the said square and
consequently in a central point and not outside the town. It can not, however, on account of
this circumstances, be concluded that the said lot formed a part of the commons, exido, or the
pasturage lands of the said pueblo, but consisted of land which belonged to the pueblo and
was legally acquired through the distribution and adjudication of lots made at the beginning
of its foundation, as proved by the laws hereinbefore quoted.
In technical administrative terms bienes propios are: Cultivated real properties, pasturage,
houses or any other property which a city, village, or hamlet has for the payment of the
public expenses. The administration of this class of property lay with the municipalities, and
they could be alienated after proper procedure and authorization of the competent superior
authorities in accordance with the administrative laws.
It is therefore unquestionable that the assets of each pueblo comprised its bienes propios and
the revenues or products derived therefrom, and this fact is recognized in the Ordenanza de
Intendentes of 1786, the forty-seventh article of which reads:
The funds which any pueblo may have left over as an annual surplus from the
products of its property and its taxes, after meeting the expenses specified in its
own particular ordinance, shall be invested in the purchase of real estate and
revenue-bearing investments, so that, having a sufficient income for the payment of
its obligations and to aid in defraying its ordinary needs, the excise taxes, which are
always a burden to the public, may be abolished; and in case it should have no such
taxes, nor annuities to redeem on its common properties (propios), the said surplus
shall be applied to promote establishments useful to the pueblo and to its province,
or by investments to be previous proposed by the intendentes and approved by
the junta superior.
From the foregoing it is concluded that the land in question is the common property of the
pueblo and is comprised within the patrimonial property of the municipality of Catbalogan,
to which it was awarded for the construction thereon of the court-house, on the demarcation
and distribution being made of the lands which were to be occupied by the town in its
development, in accordance with the provisions of the Laws of the Indies, and other
complementary laws, at a time when there was an excess of land and a few inhabitants to
occupy them. It was for this reason that the royal cedula of October 15, 1754, directed that
neither the possessors of unappropriate crown lands, nor their successors in interest, should
be disturbed or denounced, although they had no titles, it being sufficient for them to prove
their prior possession to obtain a title by just prescription.
The said municipality is today in possession of the land in litigation, as the owner thereof,
under the protection of the civil and administrative laws which guarantee the right of
ownership of the corporations that are capable of contracting, acquiring, and possessing real
and personal property.
Article 343 of the Civil Code reads:
The property of provinces an of towns is divided into property for public use and
patrimonial property.
Article 344 of the same codes prescribes:
Property for public use in provinces and in towns comprises the provincial and
town roads, the squares, streets, fountains, and public waters, the promenades, and
public works of general services supported by the said towns or provinces.
All other property possessed by either is patrimonial, and shall be governed by the
provisions of this code, unless otherwise prescribed in special laws.
Section 2 of Act No. 82, entitled "The Municipal Code," is as follows:
(a) Pueblos incorporated under this Act shall be designated as municipalities
(municipios), and shall be known respectively by the names heretofore adopted.
Under such names they may sue and be sued, contract and be contracted with,
acquire and hold real and personal property for the general interest of the
municipality, and exercise all the powers hereinafter conferred upon them.
(b) All property and property rights vested in any pueblo under its former
organization shall continue to be vested in the same municipality after its
incorporation under this Act.
By this last-cited administrative Act the rights of the old municipalities to acquire real and
personal property, in accordance with their former organization, are recognized, and it is
declared that the said property and rights shall continue to pertain to the municipalities
created in harmony with the provisions of the Municipal Code, on account of such property
being the patrimonial property of the municipalities.
Under these principles, perfectly in accord with both the old and the mother legislation of
this country, the municipality of Catbalogan ought to be considered as the owner of the land
in question, on account of the same having been awarded to it as its own, under its exclusive
ownership, on the founding of the pueblo, for the erection of the courthouse, the record of
the case showing no proof nor data to the contrary. As the plaintiff municipality, the
applicant, has been occupying the property on which its court-house is situated during such
a long space of time, much longer than that required for extraordinary prescription (art.
1959 of the Civil Code), it can not be denied that the presumption exists, in its favor, that it
has been holding the land in its character of owner, since the trial record exhibits no proof
that any other parcel of land, distinct from that in controversy, was awarded to the said
municipality for the erection thereon of its court-house, a court-house and the land on which
to build it being necessary and indispensable for the existence of the pueblo.
The title under which the municipality of Catbalogan holds and enjoys the said lot is the
same as that under which it is recognized as a pueblo and under which the municipality is
justified in its present occupancy of the territory where the town is established with its
streets, squares, and common lands (terreno comunal), a title identical with that now held by
the church, as a religious institution, to the land now occupied by the temple that exists in
the said pueblo. 1awph!l.net
At the time of the beginning of the foundation of the pueblo mentioned and of the
distribution or allotment of the lands among its first inhabitants, who, in accordance with the
Laws of the Indies, must have numbered at least thirty men with their respective families, for
the purpose of founding a pueblo, perhaps none of them was provided with any particular
title to accredit the fact that this or that parcel of land had fallen to him in the allotment.
Possibly the facts pertaining to the distribution of the lands were entered in the record kept
of the organization of the pueblo, if one such was made, for it must be remembered that, in
ancient times and up to the years immediately preceding the beginning of the nineteenth
century, fewer records were made than in modern times, and, besides, the Laws of the Indies
themselves recommended that, in administrative proceeding, the institution of suits should
be avoided in so far as possible where verbal information and investigations could be had to
enable proper action to be taken.
Besides the reasons hereinabove noted, there is that of the continuous and constant
renovation of the personnel which composed the officials of a municipality in the
Philippines, for the pedaneo or gobernadorcillo, his tenientes, judges, and other subordinates
were first chosen and appointed annually, and after every two years; and, though in the
beginning the capitan pedaneo of the pueblo may have had in his possession the record of
the necessary concession and award of the land on which the court-house was built, and that
of the pueblo of Catbalogan was constructed of stone, it would in nowise be strange that, in
spite of the zeal and diligence which may have been exercised by his many successors, the
said record or title should have disappeared or been destroyed in the case of Catbalogan,
during the lapse of so long a time; indeed, it would be marvelous and extraordinary that such
a document should exist, intrusted to the more or less diligent care of so many municipal
officials who, at the most, occupied their offices but two years. It is certain, however, that the
successive court-houses which the said pueblo has had have occupied the land in question
without opposition on the part of anyone, or of the state, and including the building which
served as a court-house, together with the land on which it is built, as one of the properties
which form the assets of the pueblo of Catbalogan, as they should be classed, it is
incontrovertible that the right of the said municipality therein must be respected, as the
right of ownership is consecrated and sanctioned by the laws of every civilized county in the
interest and for the benefit of society, public order, and civilization itself.
As has been shown in the preceding paragraphs, the land in litigation, which is a lot occupied
by the court-house, anciently termed the casa real, of the pueblo of Catbalogan, pertains to
the said pueblo, awarded to the same, not gratuitously, but on account of the necessity
arising from its organization, and forms a part, as a patrimonial property, of its municipal
assets, and therefore it is not comprised within the common land (terreno comunal) which
may have been granted to the said pueblo. Law 8, title 3, book 6 of the Recompilation of the
Laws of the Indies, is not applicable to the question at issue with respect to the said land or
lot, nor are the provisions of article 53 of the ordinances of good government, before cited, of
February 26, 1768, nor the subsequent royal decrees of February 28, August 1, 1883, and of
January 17, 1885, relative to the legua or terreno comunal; and, consequently, the doctrine
laid down in the decision rendered in the case of The City of Manila vs. The Insular
Government (10 Phil. Rep., 327) is likewise inapplicable, for the reason that the land in
dispute is not that of a common, but of a building lot of which the pueblo of Catbalogan had
absolute need at the beginning of its organization for the erection thereon of its court-house.
This was duly proved at trial, without possible contradiction.
Notwithstanding the number of years during which the municipality of Catbalogan has been
in possession of the lot, once it has been shown by unquestionable evidence that the
property was assigned to it as its own, in order that it might erect its court-house thereon, as
it did do at the beginning of its foundation, and its possession of the said land not being by
mere unlawful occupation, the municipality has no need to rely upon the right of
prescription, although, being entitled to acquire and possess property in the character of
owner, according to its organic law, it is not understood why it could not acquire such right
by prescription in accordance with law, it being, as it is, a juridical person susceptible of
rights and duties.
The present case has nothing to do with any contract made by the old municipality of
Catbalogan, nor administrative acts or procedure of the applicant herein, but relates to its
right of ownership in a parcel of land vested with the character of bien propio of its own, or
patrimonial property; for which reason the doctrine established in the decision rendered in
the case of Aguado vs. The City of Manila (9 Phil. Rep., 513) is also inapplicable, inasmuch as
the said municipality, in the exercise of the right of ownership in its own property, has an
independent personality of its own, recognized by law, and does not act as a mere delegate
of the central authority.
For the foregoing reasons, and considering that the municipality of Catbalogan is the owner
of the land occupied by its court-house and that it is entitled to have the said property
registered in its name in the Court of Land Registration, it is proper, in our opinion, to affirm
and we hereby affirm the judgment appealed from in its present form.
Arellano, C.J., Moreland and Trent, JJ., concur.