RESEARCH

- COA RULES ON DISPOSAL v. DISPOSITION OF PROPERTY

The above-quoted laws on GOCC's and disposition of their assets unmistakably show the policy of the
government to allow flexibility to GOCC's and to promote disposition of non-performing assets. This policy
undergirds both COA Circular No. 86-264 and 89-296. Thus, the exception provided in COA Circular No. 86-
264 should be, to the widest extent possible, construed to accommodate this policy and allow GOCC's wide
latitude in the disposition of their assets, including foreclosed assets or collaterals acquired in the regular
course of business. COA Circular No. 89-296 provides for two exceptions to the requirement of disposition
primarily through public bidding, i.e., (1) disposal of merchandise or inventory held for sale in the regular
course of business and (2) disposal by government financial institutions of foreclosed assets or collaterals
acquired in the regular course of business." In light of the declared policy of the government on GOCC's and
their assets, COA Circular No. 89-296 should be understood to have clarified the coverage of the exception
under COA Circular No. 86-264, i.e., sales of merchandise/inventory held for sale in the regular course of
business.

G.R. No. 137904            October 19, 2001

PURIFICACION M. VDA. DE URBANO, PEDRO DE CASTRO, AURELIO I. ARRIENDA, ARNEL U.

ARRIENDA, ALBERT U. ARRIENDA, ALICE A. PEDRON and MARILYN C. BILOG, petitioners, 
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), FELICIANO BELMONTE, JR., ZACARIAS
BELTRAN, JR., MARCIAL SECOQUIAN and CRISPINA DELA CRUZ, respondents.

Under Section 79 of the Government Auditing Code,77 the disposition

of government lands to private parties requires public bidding.78 COA Circular No. 89-926, issued on 27
January 1989, sets forth the guidelines on the disposal of property and other assets of the government. Part
V of the COA Circular provides:

Under the Compromise Agreement, PNCC shall dispose of substantial parcels of land, by way of dacion en
pago, in favor of Radstock. Citing Uy v. Sandiganbayan,79 PNCC argues that a dacion en pago is an
exception to the requirement of a public bidding.

PNCC’s reliance on Uy is misplaced. There is nothing in Uy declaring that public bidding is dispensed with in
a dacion en pago transaction. 

Besides, a dacion en pago is in essence a form of sale, which basically involves a disposition of a property.
In Filinvest Credit Corp. v. Philippine Acetylene, Co., Inc.,82 the Court defined dacion en pago in this wise:

Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor to the
creditor as an accepted equivalent of the performance of obligation. In dacion en pago, as a special mode of
payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an
outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for which is to be charged against the debtor's
debt.As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or
consideration must be present. In its modern concept, what actually takes place in dacion en pago is an
objective novation of the obligation where the thing offered as an accepted equivalent of the performance of
an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase
price. In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of
totally extinguishing the debt or obligation.83 (Emphasis supplied)

G.R. No. 178158               December 4, 2009

STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner, 
vs.
RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION,Respondents.
ASIAVEST MERCHANT BANKERS BERHAD, Intervenor.

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

G.R. No. 180428

LUIS SISON, Petitioner, 
vs.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION and RADSTOCK SECURITIES
LIMITED,Respondents.

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

The Regalian Doctrine

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

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

Ownership and Disposition of Reclaimed Lands

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

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

Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the maritime
zone of the Spanish territory belonged to the public domain for public use.44 The Spanish Law of Waters of
1866 allowed the reclamation of the sea under Article 5, which provided as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by
the provinces, pueblos or private persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the
reclamation, provided the government issued the necessary permit and did not reserve ownership of the
reclaimed land to the State.

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

"Art. 339. Property of public dominion is –

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

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

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

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

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

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

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

Act No. 1654 of the Philippine Commission

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

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

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

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

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

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

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

Act No. 2874 of the Philippine Legislature

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

"Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture

and Natural Resources, shall from time to time classify the lands of the public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

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

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

xxx

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

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

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

(b) Foreshore;

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

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

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

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

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

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

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

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

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

Dispositions under the 1935 Constitution

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

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

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

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

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

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

Commonwealth Act No. 141 of the Philippine National Assembly

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

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

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

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

and may at any time and in like manner transfer such lands from one class to another,53 for the
purpose of their administration and disposition.
 Sec. 7. For the purposes of the administration and disposition of alienable or disposable public
lands, the President, upon recommendation by the Secretary of Agriculture and Commerce,
shall from time to time declare what lands are open to disposition or concession  under this
Act.

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

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

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

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

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

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

(b) Foreshore;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Civil Code of 1950

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

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

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

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

x x x.

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

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

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

Dispositions under the 1973 Constitution

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

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

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

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

"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development
requirements of the natural resources, shall determine by law the size of land of the public domain
which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or
association, and the conditions therefor. No private corporation or association may hold
alienable lands of the public domain except by lease not to exceed one thousand hectares in
area nor may any citizen hold such lands by lease in excess of five hundred hectares or acquire by
purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or
association may hold by lease, concession, license or permit, timber or forest lands and other
timber or forest resources in excess of one hundred thousand hectares. However, such area may
be increased by the Batasang Pambansa upon recommendation of the National Economic and
Development Authority." (Emphasis supplied)

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

PD No. 1084 Creating the Public Estates Authority

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

"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
 (a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;

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

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

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

(a)To prescribe its by-laws.

xxx

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

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

xxx

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

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

The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public domain
did not apply to PEA since it was then, and until today, a fully owned government corporation. The
constitutional ban applied then, as it still applies now, only to "private corporations and associations." PD No.
1084 expressly empowers PEA "to hold lands of the public domain" even "in excess of the area
permitted to private corporations by statute." Thus, PEA can hold title to private lands, as well as title to
lands of the public domain.

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there
must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in
view of Section 60 of CA No.141, which states –

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

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

Dispositions under the 1987 Constitution

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

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

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

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

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

The Rationale behind the Constitutional Ban

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

"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:

`No private corporation or association may hold alienable lands of the public domain except by
lease, not to exceed one thousand hectares in area.'

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

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

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

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

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

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

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

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

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

The Amended Joint Venture Agreement

The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:

1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"

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

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

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

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

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

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

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

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

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

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

The Threshold Issue

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

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

xxx

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

Classification of Reclaimed Foreshore and Submerged Areas

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

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

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

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

 x x x.'" (Emphasis supplied)

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

"D. Conclusion

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

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

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

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

"The fact that the Roppongi site has not been used for a long time for actual Embassy service does
not automatically convert it to patrimonial property. Any such conversion happens only if the
property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481
[1975]. A property continues to be part of the public domain, not available for private
appropriation or ownership 'until there is a formal declaration on the part of the government
to withdraw it from being such'  (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis
supplied)

PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands
reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then
President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares
comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of
the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to
Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents. To
this day, these certificates of title are still in the name of PEA.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom
Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable
lands of the public domain. PD No. 1085 and President Aquino's issuance of a land patent also constitute a
declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are
thus alienable or disposable lands of the public domain, open to disposition or concession to
qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom
Islands although subsequently there were partial erosions on some areas. The government had also
completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of
Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the
public domain into "agricultural, forest or timber, mineral lands, and national parks." Being neither timber,
mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of
agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public domain
are the only natural resources that the State may alienate to qualified private parties. All other natural
resources, such as the seas or bays, are "waters x x x owned by the State" forming part of the public
domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.

AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation,
reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public
Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the ownership of
reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed
lands are lands of the public domain which the State may not alienate."75 Article 5 of the Spanish Law of
Waters reads as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by
the provinces, pueblos or private persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the terms of the grant of
authority." (Emphasis supplied)

Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with
"proper permission" from the State. Private parties could own the reclaimed land only if not "otherwise
provided by the terms of the grant of authority." This clearly meant that no one could reclaim from the sea
without permission from the State because the sea is property of public dominion. It also meant that the
State could grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea from
which it emerged, belonged to the State. Thus, a private person reclaiming from the sea without permission
from the State could not acquire ownership of the reclaimed land which would remain property of public
dominion like the sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored
principle of land ownership that "all lands that were not acquired from the government, either by purchase or
by grant, belong to the public domain."77

Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first be
classified as alienable or disposable before the government can alienate them. These lands must not be
reserved for public or quasi-public purposes.78 Moreover, the contract between CDCP and the government
was executed after the effectivity of the 1973 Constitution which barred private corporations from acquiring
any kind of alienable land of the public domain. This contract could not have converted the Freedom Islands
into private lands of a private corporation.

Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of
areas under water and revested solely in the National Government the power to reclaim lands. Section 1 of
PD No. 3-A declared that –

"The provisions of any law to the contrary notwithstanding, the reclamation of areas under
water, whether foreshore or inland, shall be limited to the National Government or any person
authorized by it under a proper contract. (Emphasis supplied)

x x x."

PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under
water could now be undertaken only by the National Government or by a person contracted by the National
Government. Private parties may reclaim from the sea only under a contract with the National Government,
and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.

Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Government's
implementing arm to undertake "all reclamation projects of the government," which "shall be undertaken
by the PEA or through a proper contract executed by it with any person or entity." Under such
contract, a private party receives compensation for reclamation services rendered to PEA. Payment to the
contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the constitutional
ban on private corporations from acquiring alienable lands of the public domain. The reclaimed land can be
used as payment in kind only if the reclaimed land is first classified as alienable or disposable land open to
disposition, and then declared no longer needed for public service.

The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are
still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying
these submerged areas as alienable or disposable lands of the public domain open to disposition.
These submerged areas are not covered by any patent or certificate of title. There can be no dispute that
these submerged areas form part of the public domain, and in their present state are inalienable and
outside the commerce of man. Until reclaimed from the sea, these submerged areas are, under the
Constitution, "waters x x x owned by the State," forming part of the public domain and consequently
inalienable. Only when actually reclaimed from the sea can these submerged areas be classified as public
agricultural lands, which under the Constitution are the only natural resources that the State may alienate.
Once reclaimed and transformed into public agricultural lands, the government may then officially classify
these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare
these lands no longer needed for public service. Only then can these reclaimed lands be considered
alienable or disposable lands of the public domain and within the commerce of man.

The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable lands
open to disposition is necessary because PEA is tasked under its charter to undertake public services that
require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA include
the following: "[T]o own or operate railroads, tramways and other kinds of land transportation, x x x; [T]o
construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o construct,
maintain and operate such storm drains as may be necessary." PEA is empowered to issue "rules and
regulations as may be necessary for the proper use by private parties of any or all of the highways, roads,
utilities, buildings and/or any of its properties and to impose or collect fees or tolls for their use." Thus,
part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed for public
use or service since many of the functions imposed on PEA by its charter constitute essential public
services.

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government." The same section also states that "[A]ll reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A
and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity
"to undertake the reclamation of lands and ensure their maximum utilization in promoting public welfare
and interests."79 Since large portions of these reclaimed lands would obviously be needed for public
service, there must be a formal declaration segregating reclaimed lands no longer needed for public service
from those still needed for public service.1âwphi1.nêt

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned by the
PEA," could not automatically operate to classify inalienable lands into alienable or disposable lands of the
public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would
automatically become alienable once reclaimed by PEA, whether or not classified as alienable or
disposable.

The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the
Department of Environment and Natural Resources ("DENR" for brevity) the following powers and functions:

"Sec. 4. Powers and Functions. The Department shall:

(1) x x x

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

xxx

(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits,

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

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

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

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

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

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

Absent two official acts – a classification that these lands are alienable or disposable and open to disposition
and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain
inalienable lands of the public domain. Only such an official classification and formal declaration can convert
reclaimed lands into alienable or disposable lands of the public domain, open to disposition under the
Constitution, Title I and Title III83 of CA No. 141 and other applicable laws.84

PEA's Authority to Sell Reclaimed Lands

PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the
reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing
Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the
government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its
title, except when authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which states
that –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed in
behalf of the government by the following: x x x."

Thus, the Court concluded that a law is needed to convey any real property belonging to the Government.
The Court declared that -

"It is not for the President to convey real property of the government on his or her own sole
will. Any such conveyance must be authorized and approved by a law enacted by the
Congress. It requires executive and legislative concurrence." (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell its
reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that –

"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract
for the reclamation and construction of the Manila-Cavite Coastal Road Project between the
Republic of the Philippines and the Construction and Development Corporation of the Philippines
dated November 20, 1973 and/or any other contract or reclamation covering the same area is
hereby transferred, conveyed and assigned to the ownership and administration of the
Public Estates Authority established pursuant to PD No. 1084; Provided, however, That the rights
and interests of the Construction and Development Corporation of the Philippines pursuant to the
aforesaid contract shall be recognized and respected.

Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the
Republic of the Philippines (Department of Public Highways) arising from, or incident to, the
aforesaid contract between the Republic of the Philippines and the Construction and Development
Corporation of the Philippines.

In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue
in favor of the Republic of the Philippines the corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be deemed fully paid and non-assessable.

The Secretary of Public Highways and the General Manager of the Public Estates Authority shall
execute such contracts or agreements, including appropriate agreements with the Construction and
Development Corporation of the Philippines, as may be necessary to implement the above.

Special land patent/patents shall be issued by the Secretary of Natural Resources in favor
of the Public Estates Authority without prejudice to the subsequent transfer to the
contractor or his assignees of such portion or portions of the land reclaimed or to be
reclaimed as provided for in the above-mentioned contract. On the basis of such patents,
the Land Registration Commission shall issue the corresponding certificate of title."
(Emphasis supplied)

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -

"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be
responsible for its administration, development, utilization or disposition in accordance with the
provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the
sale, lease or use of reclaimed lands shall be used in accordance with the provisions of
Presidential Decree No. 1084."

There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands.
PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from Manila Bay to PEA,
while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525
expressly states that PEA should dispose of its reclaimed lands "in accordance with the provisions of
Presidential Decree No. 1084," the charter of PEA.

PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by
the government."87(Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell
its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private parties
its patrimonial propertiesin accordance with the PEA charter free from constitutional limitations. The
constitutional ban on private corporations from acquiring alienable lands of the public domain does not apply
to the sale of PEA's patrimonial lands.

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

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

The requirement of public auction in the sale of reclaimed lands

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

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

"Section 79. When government property has become unserviceable for any cause, or is no

longer needed, it shall, upon application of the officer accountable therefor, be inspected by the
head of the agency or his duly authorized representative in the presence of the auditor concerned
and, if found to be valueless or unsaleable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the supervision of the
proper committee on award or similar body in the presence of the auditor concerned or other
authorized representative of the Commission, after advertising by printed notice in the Official
Gazette, or for not less than three consecutive days in any newspaper of general circulation,
or where the value of the property does not warrant the expense of publication, by notices posted
for a like period in at least three public places in the locality where the property is to be sold. In the
event that the public auction fails, the property may be sold at a private sale at such price
as may be fixed by the same committee or body concerned and approved by the
Commission."

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

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

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

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

Reclamation under the BOT Law and the Local Government Code

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

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

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

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

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

Projects by the Private Sector. x x x

xxx

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

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

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

Registration of lands of the public domain

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

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

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

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

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

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

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

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

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

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

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

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly
government owned corporation performing public as well as proprietary functions. No patent or certificate of
title has been issued to any private party. No one is asking the Director of Lands to cancel PEA's patent or
certificates of title. In fact, the thrust of the instant petition is that PEA's certificates of title should remain with
PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be
sold to a private corporation.

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public
ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of
ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does
not give the registrant a better right than what the registrant had prior to the registration.102 The registration
of lands of the public domain under the Torrens system, by itself, cannot convert public lands into private
lands.103

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable
land of the public domain automatically becomes private land cannot apply to government units and entities
like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as
expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit:

"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in
conformity with the provisions of Presidential Decree No. 1084, supplemented by
Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the
Public Estates Authority the aforesaid tracts of land containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical
description of which are hereto attached and made an integral part hereof." (Emphasis supplied)

Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084.
Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of alienable lands of the
public domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes,
under Section 44 of PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated
on the certificate of title.104Alienable lands of the public domain held by government entities under Section 60
of CA No. 141 remain public lands because they cannot be alienated or encumbered unless Congress
passes a law authorizing their disposition. Congress, however, cannot authorize the sale to private
corporations of reclaimed alienable lands of the public domain because of the constitutional ban. Only
individuals can benefit from such law.

The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not
automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable
lands of the public domain must be transferred to qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise,
the constitutional ban will become illusory if Congress can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow
private corporations to acquire directly from government agencies limitless areas of lands which, prior to
such law, are concededly public lands.

Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim
foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that –

"EXECUTIVE ORDER NO. 525

Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation
Projects
 Whereas, there are several reclamation projects which are ongoing or being proposed to be
undertaken in various parts of the country which need to be evaluated for consistency with national
programs;

Whereas, there is a need to give further institutional support to the Government's declared policy to
provide for a coordinated, economical and efficient reclamation of lands;

Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the
National Government or any person authorized by it under proper contract;

Whereas, a central authority is needed to act on behalf of the National Government which
shall ensure a coordinated and integrated approach in the reclamation of lands;

Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a
government corporation to undertake reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests; and

Whereas, Presidential Decree No. 1416 provides the President with continuing authority to
reorganize the national government including the transfer, abolition, or merger of functions and
offices.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby
order and direct the following:

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

x x x ."

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to
sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling
reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private
lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private
lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will
the lands become private lands. In the hands of the government agency tasked and authorized to
dispose of alienable of disposable lands of the public domain, these lands are still public, not
private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as
"any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere
fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued
land patents or certificates of title in PEA's name does not automatically make such lands private.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will
sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain. PEA will simply turn around, as PEA has now done under the
Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands
to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional
ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership
of alienable lands of the public domain among Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA
can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even
individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that in the
hands of PEA these lands are private lands. This will result in corporations amassing huge landholdings
never before seen in this country - creating the very evil that the constitutional ban was designed to prevent.
This will completely reverse the clear direction of constitutional development in this country. The 1935
Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands.105 The
1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987
Constitution has unequivocally reiterated this prohibition.

The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529,
automatically become private lands is contrary to existing laws. Several laws authorize lands of the public
domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their
character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively,
provide as follows:

Act No. 496

"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of
the Philippine Islands are alienated, granted, or conveyed to persons or the public or private
corporations, the same shall be brought forthwith under the operation of this Act and shall become
registered lands."

PD No. 1529

"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated,
granted or conveyed to any person, the same shall be brought forthwith under the operation of this
Decree." (Emphasis supplied)

Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529 includes
conveyances of public lands to public corporations.

Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or branch
or subdivision of the Government," as provided in Section 60 of CA No. 141, may be registered under the
Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is expressly subject to
the condition in Section 60 of CA No. 141 that the land "shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when authorized by Congress." This provision refers
to government reclaimed, foreshore and marshy lands of the public domain that have been titled but still
cannot be alienated or encumbered unless expressly authorized by Congress. The need for legislative
authority prevents the registered land of the public domain from becoming private land that can be disposed
of to qualified private parties.

The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be registered
under the Torrens System. Section 48, Chapter 12, Book I of the Code states –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government
is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:

(1) x x x

(2) For property belonging to the Republic of the Philippines, but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of
the agency or instrumentality." (Emphasis supplied)

Thus, private property purchased by the National Government for expansion of a public wharf may be titled
in the name of a government corporation regulating port operations in the country. Private property
purchased by the National Government for expansion of an airport may also be titled in the name of the
government agency tasked to administer the airport. Private property donated to a municipality for use as a
town plaza or public school site may likewise be titled in the name of the municipality.106 All these properties
become properties of the public domain, and if already registered under Act No. 496 or PD No. 1529, remain
registered land. There is no requirement or provision in any existing law for the de-registration of land from
the Torrens System.

Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the Register
of Deeds to issue in the name of the National Government new certificates of title covering such
expropriated lands. Section 85 of PD No. 1529 states –

"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is
expropriated or taken by eminent domain, the National Government, province, city or municipality,
or any other agency or instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an adequate description, the
particular property or interest expropriated, the number of the certificate of title, and the nature of
the public use. A memorandum of the right or interest taken shall be made on each certificate of
title by the Register of Deeds, and where the fee simple is taken, a new certificate shall be
issued in favor of the National Government, province, city, municipality, or any other agency
or instrumentality exercising such right for the land so taken. The legal expenses incident to the
memorandum of registration or issuance of a new certificate of title shall be for the account of the
authority taking the land or interest therein." (Emphasis supplied)

Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or patrimonial
lands. Lands of the public domain may also be registered pursuant to existing laws.

AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of the
lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA "is
not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by PEA for the
earlier reclamation and construction works performed by the CDCP under its 1973 contract with the
Republic." Whether the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA
requires PEA to "cause the issuance and delivery of the certificates of title conveying AMARI's Land Share
in the name of AMARI."107

This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private
corporations "shall not hold such alienable lands of the public domain except by lease." The transfer of title
and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands other than by lease. The
transfer of title and ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or
alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3, Article XII of the 1987
Constitution.

The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of
the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part
of the public domain and are also inalienable, unless converted pursuant to law into alienable or disposable
lands of the public domain. Historically, lands reclaimed by the government are sui generis, not available
for sale to private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential
as areas for public use or public service. Alienable lands of the public domain, increasingly becoming scarce
natural resources, are to be distributed equitably among our ever-growing population. To insure such
equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any
kind of alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of
the State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to private
corporations, do so at their own risk.

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by
certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease
these lands to private corporations but may not sell or transfer ownership of these lands to private
 corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of
the public domain until classified as alienable or disposable lands open to disposition and declared
no longer needed for public service. The government can make such classification and declaration
only after PEA has reclaimed these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural resources the government can
alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and
outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34
hectares110of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII
of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable
land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of
still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII
of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural
lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government
can classify the reclaimed lands as alienable or disposable, and further declare them no longer
needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain
to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land of the public domain.

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

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

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

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

G.R. No. 133250           July 9, 2002

FRANCISCO I. CHAVEZ, petitioner, 
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.

CARPIO, J.:

To begin with, erroneous and unsustainable is the opinion of respondent court that under RA 1899,
the term "foreshore lands" includes submerged areas. As can be gleaned from its disquisition and
rationalization aforequoted, the respondent court unduly stretched and broadened the meaning of
"foreshore lands", beyond the intentment of the law, and against the recognized legal connotation of
"foreshore lands". Well entrenched, to the point of being elementary, is the rule that when the law
speaks in clear and categorical language, there is no reason for interpretation or construction, but
only for application. 16 So also, resort to extrinsic aids, like the records of the constitutional
convention, is unwarranted, the language of the law being plain and unambiguous. 17 Then, too,
opinions of the Secretary of Justice are unavailing to supplant or rectify any mistake or omission in
the law. 18 To repeat, the term "foreshore lands" refers to:

The strip of land that lies between the high and low water marks
and that is alternately wet and dry according to the flow of the tide.
(Words and Phrases, "Foreshore")

A strip of land margining a body of water (as a lake or stream); the

part of a seashore between the low-water line usually at the
seaward margin of a low-tide terrace and the upper limit of wave
wash at high tide usually marked by a beach scarp or berm.
(Webster's Third New International Dictionary)

The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot broaden its
meaning, much less widen the coverage thereof. If the intention of Congress were to include
submerged areas, it should have  provided expressly. That Congress did not so provide could only
signify the exclusion of submerged areas from the term "foreshore lands".

Neither is there any valid ground to disregard the Resolution of this Court dated February 3, 1965
in  Ponce v. Gomez  (L-21870) and  Ponce v. City of Cebu  (L-22669) despite the enactment of Republic
Act No. 5187 ("RA 5187"), the relevant portion of which, reads:

Sec. 3. Miscellaneous Projects

x x x           x x x          x x x

m. For the construction of seawall and limited access highway

from the south boundary of the City of Manila to Cavite City, to the
south, and from the north boundary of the City of Manila to the
municipality of Mariveles, province of Bataan, to the north,
including the reclamation of the foreshore and submerged
areas:Provided, That priority in the construction of such seawalls,
highway and attendant reclamation works shell be given to any
corporation and/or corporations that may offer to undertake at its
own expense such projects, in which case the President of the
Philippines may, after competitive bidding, award contracts for the
construction of such projects, with the winning bidder shouldering
all costs thereof, the same to be paid in terms of percentage fee of
the contractor which shall not exceed fifty percent of the area
reclaimed by the contractor and shall represent full compensation
for the purpose, the provisions of the Public Land Law concerning
disposition of reclaimed and foreshore lands to the contrary
notwithstanding:Provided, finally, that the foregoing provisions
and those of other laws, executive orders, rules and regulations to
the contrary notwithstanding, existing rights, projects and/or
contracts of city or municipal governments for the reclamation of
foreshore and submerged lands shall be respected. . . . .

There is nothing in the foregoing provision of RA 5187 which can be interpreted to broaden the
scope of "foreshore lands." The said law is not amendatory to RA 1899. It is an Appropriations Act,
entitled — "AN ACT APPROPRIATING FUNDS FOR PUBLIC WORKS, SYNCHRONIZING THE SAME
WITH PREVIOUS PUBLIC WORKS APPROPRIATIONS."

All things viewed in proper perspective, we reiterate what was said in  Ponce v. Gomez (L-21870)
and  Ponce v. City of Cebu  (L-22669) that the term "foreshore" refers to "that part of the land
adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides." As
opined by this Court in said cases:
 WHEREAS, six (6) members of the Court (Justices Bautista
Angelo, Concepcion, Reyes, Barrera, Dizon and Jose P. Bengzon)
opine that said city ordinance and contracts are ultra vires and
hence, null and void, insofar as the remaining 60% of the area
aforementioned, because the term "foreshore lands" as used in
Republic Act No. 1899 should be understood in the sense attached
thereto by common parlance; (emphasis ours)

The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his opinion
dated December 22, 1966, in a case with analogous facts as the present one, to wit:

D
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2
2
,

1
9
6
6

The Secretary of Agriculture

and Natural Resources

Diliman, Quezon City

Sir:

x x x           x x x          x x x

I. Facts —

1. On January 19, 1961, pursuant to the provisions of Republic Act

No. 1899, the Municipality of Navotas enacted Ordinance No. 1
authorizing the Municipal Mayor to enter into a reclamation
contract with Mr. Chuanico.

2. On March 15, 1961, a reclamation contract was concluded

between the Municipality of Navotas, represented by the Municipal
Mayor, and Mr. Chuanico in accordance with the above ordinance.
Thereunder, Mr. Chuanico shall be the attorney-in-fact of the
Municipality in prosecuting the reclamation project and shall
advance the money needed therefor; that the actual expenses
incurred shall be deemed a loan to the Municipality; that Mr.
Chuanico shall have the irrevocable option to buy 70% of the
reclaimed area at P7.00 per square meter; that he shall have the
full and irrevocable powers to do any and all things necessary and
proper in and about the premises," including the power to hire
necessary personnel for the prosecution of the work, purchase
materials and supplies, and purchase or lease construction
machineries and equipment, but any and all contracts to be
concluded by him in behalf of the Municipality shall be submitted
to public bidding.

x x x           x x x          x x x

3. On March 16, 1961, the Municipal Council of Navotas passed

Resolution No. 22 approving and ratifying the contract.

x x x           x x x          x x x

III. Comments —

1. The above reclamation contract was concluded on the basis of

Navotas Ordinance No. 1 which, in turn, had been enacted
avowedly pursuant to Republic Act No. 1899. This being so, the
contract, in order to be valid, must conform to the provisions of
the said law.

By authorizing local governments "to execute  by

administration any reclamation work," (Republic Act No. 1899
impliedly forbids the execution of said project bycontract. Thus, in
the case or Ponce et al. vs. Gomez (February 3, 1966), five justices
of the Supreme Court voted to annul the contract between Cebu
Development Corporation and Cebu City for the reclamation of
foreshore lands because "the provisions of said . . . contract are
not . . . in accordance with the provisions of Republic Act No.
1899," as against one Justice who opined that the contract
substantially complied with the provisions of the said law. (Five
Justices expressed no opinion on this point.)

Inasmuch as the Navotas reclamation contract is substantially

similar to the Cebu reclamation contract, it is believed that the
former is likewise fatally defective.

2. The Navotas reclamation project envisages the construction of a

channel along the Manila Bay periphery of that town and the
reclamation of approximately 650 hectares of land from said
channel to a seaward distance of one kilometer. In the basic letter
it is stated that "practically, all the 650 hectares of lands proposed
to be reclaimed under the agreement" do not constitute foreshore
lands and that "the greater portion of the area . . . is in fact
navigable and presently being used as a fishing harbor by deep-
sea fishing operators as well as a fishing ground of sustenance
fisherman. Assuming the correctness of these averments, the
Navotas reclamation contract evidently transcends the authority
granted under Republic Act No. 1899, which empowers the local
governments to reclaim nothing more than "foreshore lands,  i.e.,
"that part of the land adjacent to the see which is alternately
covered and left dry by the ordinary flow of the tides." (26 C.J.
890.) It was for this reason that in the cited case Ponce case, the
Supreme Court, by a vote of 6-0 with five Justices abstaining,
declared ultra vires and void the contractual stipulation for the
reclamation of submerged lands off Cebu City, and permanently
enjoined its execution under Republic Act No. 1899.

x x x           x x x          x x x
In accordance with the foregoing, I have the honor to submit the
view that the Navotas reclamation contract is not binding and
should be disregarded for non-compliance with law.

V
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(
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 u
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The said opinion of Justice Secretary Teehankee who became Associate Justice, and later Chief
Justice, of this Court, did, in our considered view, supersede the earlier opinion of former justice
Secretary Alejo Mabanag, aforestated, as the cases, in connection with which subject opinions were
sought, were with similar facts. The said Teehankee opinion accords with RA 1899.

It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended by Ordinance
No. 158, and the Agreement under attack, have been found to be outside the intendment and scope
of RA 1899, and therefore ultra vires and null and void.

What is worse, the same Agreement was vitiated by the glaring absence of a public bidding.

Obviously, there is a complete dearth of evidence to prove that RREC had really reclaimed 55
hectares. The letter of Minister Baltazar Aquino relied upon by RREC is no proof at all that RREC had
reclaimed 55 hectares. Said letter was just referring to a tentative schedule of work to be done by
RREC, even as it required RREC to submit the pertinent papers to show its supposed
accomplishment, to secure approval by the Ministry of Public Works and Highways to the
reclamation plan, and to submit to a public bidding all contracts and sub-contracts for subject
reclamation project but RREC never complied with such requirements and conditions sine qua non.

No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the

reclamation project were presented to reflect any accomplishment. Not even any statement or
itemization of works accomplished by contractors or subcontractors or vouchers and other relevant
papers were introduced to describe the extent of RREC's accomplishment. Neither was the requisite
certification from the City Engineer concerned that "portions of the reclamation project not less than
50 hectares in area shall have been accomplished or completed" obtained and presented by RREC.

As a matter of fact, no witness ever testified on any reclamation work done by RREC, and extent
thereof, as of April 26, 1962. Not a single contractor, sub-contractor, engineer, surveyor, or any other
witness involved in the alleged reclamation work of RREC testified on the 55 hectares supposedly
reclaimed by RREC. What work was done, who did the work, where was it commenced, and when
was it completed, was never brought to light by any witness before the court. Certainly,  onus
probandi  was on RREC and Pasay City to show and point out the as yet unidentified 55 hectares
they allegedly reclaimed. But this burden of proof RREC and Pasay City miserably failed to
discharge.

So also, in the decision of the Pasay Court of First Instance dismissing the complaint of plaintiff-
appellant, now petitioner Republic of the Philippines, the lifting of the writ of Preliminary Injunction
issued on April 26, 1962 would become effective only "as soon as Defendant Republic Real Estate
Corporation and Defendant Pasay City shall have submitted the corresponding plans and
specifications to the Director of Public Work, and shall have obtained approval thereof, and as soon
as corresponding public bidding for the award to the contractor and sub-contractor that will
undertake the reclamation project shall have been effected." (Rollo, pp. 127-129, G.R. No. 103882)

From the records on hand, it is abundantly clear that RREC and Pasay City never complied with
such prerequisites for the lifting of the writ of Preliminary Injunction. Consequently, RREC had no
authority to resume its reclamation work which was stopped by said writ of preliminary injunction
issued on April 26, 1962.

From the Contract for Dredging Work, dated November 26, 1960, marked Exhibit "21-A" for RREC
before the lower court, and Exhibit "EE" for CCP before the Court of Appeals, it can be deduced that
only on November 26, 1960 did RREC contract out the dredging work to C and A Construction
Company, Inc., for the reclamation of the 55 hectares initially programmed to be reclaimed by it. But,
as stated by RREC itself in the position paper filed with this Court on July 15, 1997, with reference to
CDCP's reclamation work, mobilization of the reclamation team would take one year before a
reclamation work could actually begin. Therefore, the reclamation work undertaker by RREC could
not have started before November 26, 1961.

Considering that on April 26, 1962 RREC was enjoined from proceeding any further with its
reclamation work, it had barely five (5) months, from November, 1961 to April, 1962, to work on
subject reclamation project. It was thus physically impossible for RREC to reclaim 55 hectares, with
the stipulated specifications and elevation, in such a brief span of time. In the report of RREC
(Exhibit "DD" for CCP), it was conceded that due to the writ of preliminary injunction issued on April
26, 1962, C and A Construction Co., Inc. had suspended its dredging operation since May, 1962.

The "graphical report" on the Pasay Reclamation project, as of April 30, 1962, attached to the
Progress Report marked Exhibit "DD", is a schematic representation of the work accomplishment
referred to in such Progress Report, indicating the various elevations of the land surface it
embraced, ranging from 0.00 meters to the highest elevation of 2.5 meters above MLLW. Such
portrayal of work accomplished is crucial in our determination of whether or not RREC had actually
"reclaimed" any land as under its Contract for Dredging Work with C and A Construction Company
(Exhibit "EE", the required final elevation for a completely reclaimed land was 3.5 meters above
MLLW, as explicitly provided in said Contract for Dredging Work. So, the irresistible conclusion is —
when the work on subject RREC-Pasay City reclamation project stopped in April, 1962 in compliance
with the writ of preliminary injunction issued by the trial court of origin, no portion of the
reclamation project worked on by RREC had reached the stipulated elevation of 3.5 meters above
MLLW. The entire area it worked on was only at sea level or 0.00 meter above MLLW. In short, RREC
had not yet reclaimed any area when the writ of preliminary injunction issued in April 1962.

On this point, the testimonies of Architect Ruben M. Protacio, Architect and Managing partner of
Leandro V. Locsin and partners, Architect and City Planner Manuel T. Mañoza, Jr. of Planning
Resources and Operation System, Inc., Rose D. Cruz, Executive Assistant, Office of the President,
from 1966 to 1970, and Dr. Lucrecia Kasilag, National Artist and member of CCP Advisory
Committee, come to the fore. These credible, impartial and knowledgeable witnesses recounted on
the witness stand that when the construction of the Main Building of the Cultural Center of the
Philippines (CCP) began in 1966, the only surface land available was the site for the said building
(TSN, Sept. 29, 1997, pages 8, 14 and 50), what could be seen in front of and behind it was all water
(TSN, Sept. 29, 1997 pages 127-128). When the CCP Main Building was being constructed, from 1968
to 1969, the land above sea level thereat was only where the CCP Main Building was erected and the
rest of the surroundings were all under water, particularly the back portion fronting the bay. (TSN,
Sept. 13, 1997, pp. 181, 182, 185, 186, 188). Dr. Lucrecia R. Kasilag stressed that on April 16, 1966,
during the ground breaking for the CCP Main Building, it was water all around (TSN, Sept. 30, 1997,
pp. 320, 324, 325).

There was indeed no legal and factual basis for the Court of Appeals to order and declare that "the
requirement by the trial court on public bidding and the submission of RREC's plans and
specification to the Department of Public Works and Highways in order that RREC may continue the
implementation of the reclamation work is deleted for being moot and academic." Said requirement
has never become moot and academic. It has remained indispensable, as ever, and non-compliance
therewith restrained RREC from lawfully resuming the reclamation work under controversy,
notwithstanding the rendition below of the decision in its favor.

Verily, contrary to what the Court of Appeals found, RREC had not reclaimed any area with the
prescribed elevation of 3.5 meters above MLLW, so much so that in 1978, it (RREC) opted to file with
the former Ministry of Public Highways, a claim for compensation of P30,396,878.20, for reclamation
work allegedly done before the CDCP started working on the reclamation of the CCP grounds. On
September 7, 1979, RREC asked the Solicitor General to settle its subject claim for compensation at
the same amount of P30,396,878.20. But on June 10, 1981, guided by the cost data, work volume
accomplished and other relevant information gathered by the former Ministry of Public Highways,
the Solicitor General informed RREC that the value of what it had accomplished, based on 1962 price
levels, was only P8,344,741.29, and the expenses for mobilization of equipment amounted to
P2,581,330.00. The aforesaid evaluation made by the government, through the then Minister of
Public Highways, is factual and realistic, so much so that on June 25, 1981, RREC, in its reply letter
to the Solicitor General, stated:

We regret that we are not agreeable to the amount of

P10,926,071.29, based on 1962 cost data,  etc., as compensation
based on quantum meruit. The least we would consider is the
amount of P10,926,071.29 plus interest at the rate of 6% per annum
from 1962 to the time of payment. We feel that 6% is very much
less than the accepted rate of inflation that has supervened since
1962 to the present, and even less than the present legal rate of
12% per annum. 19

Undoubtedly, what RREC claimed for was compensation for what it had done, and for the dredge fill
of 1,558,395 cubic meters it used, on subject reclamation project.

Respondent Court likewise erred in ordering the turn-over to Pasay City of the following titled lots,
to wit:

LOT NO. BUILDING AREA OCT/TCT

42 Gloria Maris 9,516 sq.m. OCT 159 in the

Restaurant name of GSIS

3 Asean Garden 76,299 sq.m. OCT 10251 in the

name of CCP

12 Folk Arts Theater 1.7503 hec. TCT 18627 in the

and PICC parking name of CCP

space

22 landscaped with 132,924 sq.m. TCT 75676 in the

sculpture of Asean name of CCP

Artists-site of

Boom na Boom

23 open space, back 34,346 sq.m. TCT 75677 in the

of Philcite name of CCP

24 Parking space for 10,352 sq.m. TCT 75678 in the

Star City, CCP, name of CCP

Philcite

25 open space 11,323 sq.m. TCT 75679 in the

 occupied by Star name of CCP

City

28 open space, 27,689 sq.m. TCT 75684 in the

beside PICC name of CCP

29 open space, 106,067 sq.m. TCT 75681 in the

leased by El name of CCP

Shaddai

We discern no factual basis nor any legal justification therefor. In the first place, in their
answer to the Complaint and Amended Complaint below, RREC and Pasay City never
prayed for the transfer to Pasay City of subject lots, title to which had long become
indefeasible in favor of the rightful title holders, CCP and GSIS, respectively.

The annotation of a notice of lis pendens on the certificates of title covering the said lots is of no
moment. It did not vest in Pasay City and RREC any real right superior to the absolute ownership
thereover of CCP and GSIS. Besides, the nature of the action did not really warrant the issuance of a
notice of  lis pendens.

Sec. 14 of Rule 13, Revised Rules of Civil Procedure, reads:

Sec. 14. Notice of lis pendens. — In an action affecting the title or

the right of possession of real properly, the plaintiff and the
defendant, when affirmative relief is claimed in his answer, may
record in the office of the registry of deeds of the province in
which the property is situated a notice of the pendency of the
action. Said notice shall contain the names of the parties and the
object of the action or defense, and a description of the property in
that province affected thereby. Only from the time of filing such
notice for record shall a purchaser, or encumbrancer of the
property affected thereby, be deemed to have constructive notice
of the pendency of the action, and only of its pendency against the
parties designated by their real names.

The notice of lis pendens herein above mentioned may be

cancelled only upon order of the court, after proper showing that
the notice is for the purpose of molesting the adverse party, or that
it is not necessary to protect the rights of the party who caused it
to be recorded.

Under the aforecited provision of law in point, a notice of  lis pendens  is necessary when the action
is for recovery of possession or ownership of a parcel of land. In the present litigation, RREC and
Pasay City, as defendants in the main case, did not counterclaim for the turnover to Pasay City of
the titled lots aforementioned.

What is more, a torrens title cannot be collaterally attacked. The issue of validity of a torrens title,
whether fraudulently issued or not, may be posed only in an action brought to impugn or annul it.
(Halili vs. National Labor Relations Commission, 257 SCRA 174, Cimafranca vs. Intermediate
Appellate Court, 147 SCRA 611.) Unmistakable, and cannot be ignored, is the germane provision of
Section 48 of P.D. 1529, that a certificate of title can never be the subject of a collateral attack. It
cannot be altered, modified, or cancelled except in a direct proceeding instituted in accordance with
law.
Although Pasay City and RREC did not succeed in their undertaking to reclaim any area within
subject reclamation project, it appearing that something compensable was accomplished by them,
following the applicable provision of law and hearkening to the dictates of equity, that no one, not
even the government, shall unjustly enrich oneself/itself at the expense of another 20, we believe; and
so hold, that Pasay City and RREC should be paid for the said actual work done and dredge-fill
poured in, worth P10,926,071.29, as verified by the former Ministry of Public Highways, and as
claimed by RREC itself in its aforequoted letter dated June 25, 1981.

It is fervently hoped that long after the end of our sojourn in this valley of tears, the court, for its
herein historic disposition, will be exalted by the future generations of Filipinos, for the preservation
of the national patrimony and promotion of our cultural heritage. As writer Channing rightly puts it:
"Whatever expands the affections, or enlarges the sphere of our sympathies — Whatever makes us
feel our relation to the universe and all that it inherits in time and in eternity, and to the great and
beneficent cause of all, must unquestionably refine our nature, and elevate us in the scale of being."

G.R. No. 103882 November 25, 1998

REPUBLIC OF THE PHILIPPINES, petitioner, 

vs.
THE HONORABLE COURT OF APPEALS AND REPUBLIC REAL ESTATE CORPORATION,
respondents, CULTURAL CENTER OF THE PHILIPPINES, intervenor.

G.R. No. 105276 November 25, 1998

PASAY CITY AND REPUBLIC REAL ESTATE CORPORATION, petitioners, 

vs.
COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, responden

G.R. No. 133250            May 6, 2003

FRANCISCO I. CHAVEZ, petitioner, 
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.

RESOLUTION

CARPIO, J.:

For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by
respondent Amari Coastal Bay Development Corporation ("Amari" for brevity) on September 13, 2002; (2)
Motion to Set Case for Hearing on Oral Argument filed by Amari on August 20, 2002; (3) Motion for
Reconsideration and Supplement to Motion for Reconsideration filed by Amari on July 26, 2002 and August
20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion for Reconsideration filed
by respondent Public Estates Authority ("PEA" for brevity) on July 26, 2002 and August 8, 2002,
respectively; and (5) Motion for Reconsideration and/or Clarification filed by the Office of the Solicitor
General on July 25, 2002. Petitioner Francisco I. Chavez filed on November 13, 2002 his Consolidated
Opposition to the main and supplemental motions for reconsideration.

To recall, the Court’s decision of July 9, 2002 ("Decision" for brevity) on the instant case states in its
summary:

We can now summarize our conclusions as follows:

 1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by
certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease
these lands to private corporations but may not sell or transfer ownership of these lands to private
corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of
the public domain until classified as alienable or disposable lands open to disposition and declared
no longer needed for public service. The government can make such classification and declaration
only after PEA has reclaimed these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural resources the government can
alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside
the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34
hectares of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of
the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land
of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still
submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of
the 1987 Constitution which prohibits the alienation of natural resources other than agricultural
lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government
can classify the reclaimed lands as alienable or disposable, and further declare them no longer
needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain
to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under
Article 1409 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is
outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty
to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice
Carpio, before his appointment to the Court, wrote in his Manila Times column of July 1, 1997, "I have
always maintained that the law requires the public bidding of reclamation projects." Justice Carpio, then a
private law practitioner, also stated in the same column, "The Amari-PEA reclamation contract is legally
flawed because it was not bid out by the PEA." Amari claims that because of these statements Justice
Carpio should inhibit himself "on the grounds of bias and prejudgment" and that the instant case should be
"re-deliberated" after being assigned to a new ponente.

The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after
Justice Carpio had already rendered his opinion on the merits of the case. The rule is that a motion to inhibit
must be denied if filed after a member of the Court had already given an opinion on the merits of the
case,1 the rationale being that "a litigant cannot be permitted to speculate upon the action of the Court xxx
(only to) raise an objection of this sort after a decision has been rendered." Second, as can be readily
gleaned from the summary of the Decision quoted above, the absence of public bidding is not one of the
ratio decidendi of the Decision which is anchored on violation of specific provisions of the Constitution. The
absence of public bidding was not raised as an issue by the parties. The absence of public bidding was
mentioned in the Decision only to complete the discussion on the law affecting reclamation contracts for the
guidance of public officials. At any rate, the Office of the Solicitor General in its Motion for Reconsideration
concedes that the absence of public bidding in the disposition of the Freedom Islands rendered the
Amended JVA null and void.2 Third, judges and justices are not disqualified from participating in a case just
because they have written legal articles on the law involved in the case. As stated by the Court in Republic
v. Cocofed,3 -

The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not
disqualify him, in the same manner that jurists will not be disqualified just because they may have
given their opinions as textbook writers on the question involved in a case.
Besides, the subject and title of the column in question was "The CCP reclamation project" and the column
referred to the Amari-PEA contract only in passing in one sentence.

Amari’s motion to set the case for oral argument must also be denied since the pleadings of the parties have
discussed exhaustively the issues involved in the case.

The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall
consider in this Resolution only the new arguments raised by respondents.

In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply
prospectively, not retroactively to cover the Amended JVA. Amari argues that the existence of a statute or
executive order prior to its being adjudged void is an operative fact to which legal consequences are
attached, citing De Agbayani v. PNB,4 thus:

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

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to
such a determination [of unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, -
with respect to particular relations, individual and corporate, and particular conduct, private and
official." This language has been quoted with approval in a resolution in Araneta v. Hill and the
decision in Manila Motor Co., Inc. v. Flores. x x x.

xxx

x x x That before the decision they were not constitutionally infirm was admitted expressly. There is
all the more reason then to yield assent to the now prevailing principle that the existence of a
statute or executive order prior to its being adjudged void is an operative fact to which legal
consequences are attached.

Amari now claims that "assuming arguendo that Presidential Decree Nos. 1084 and 1085, and
Executive Order Nos. 525 and 654 are inconsistent with the 1987 Constitution, the limitation
imposed by the Decision on these decrees and executive orders should only be applied
prospectively from the finality of the Decision."

Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested
rights. Amari maintains that the new doctrine embodied in the Decision cannot apply retroactively on those
who relied on the old doctrine in good faith, citing Spouses Benzonan v. Court of Appeals,5 thus:

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that
enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the
DBP are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions
applying or interpreting the laws or the Constitution shall form a part of the legal system of the
Philippines." But while our decisions form part of the law of the land, they are also subject to Article
4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is
provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks
forward not backward. The rationale against retroactivity is easy to perceive. The retroactive
 application of a law usually divests rights that have already become vested or impairs the
obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).

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

There may be special cases where weighty considerations of equity and social justice will warrant a
retroactive application of doctrine to temper the harshness of statutory law as it applies to poor farmers or
their widows and orphans. In the present petitions, however, we find no such equitable considerations. Not
only did the private respondent apply for free agricultural land when he did not need it and he had no
intentions of applying it to the noble purposes behind the law, he would now repurchase for
only P327,995.00, the property purchased by the petitioners in good faith for P1,650,000.00 in 1979 and
which, because of improvements and the appreciating value of land must be worth more than that amount
now.

The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they
purchased the property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases,
the period to repurchase the disputed lot given to respondent Pe expired on June 18, 1982. He failed to
exercise his right. His lost right cannot be revived by relying on the 1988 case of Belisario. The right of
petitioners over the subject lot had already become vested as of that time and cannot be impaired by the
retroactive application of the Belisario ruling.

Amari’s reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the
prevailing law or doctrine at the time of the signing of the Amended JVA was that a private corporation could
acquire alienable lands of the public domain, and the Decision annulled the law or reversed this doctrine.
Obviously, this is not the case here.

Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public
domain. But since the effectivity of the 1973 Constitution, private corporations were banned from holding,
except by lease, alienable lands of the public domain. The 1987 Constitution continued this constitutional
prohibition. The prevailing law before, during and after the signing of the Amended JVA is that private
corporations cannot hold, except by lease, alienable lands of the public domain. The Decision has not
annulled or in any way changed the law on this matter. The Decision, whether made retroactive or not, does
not change the law since the Decision merely reiterates the law that prevailed since the effectivity of the
1973 Constitution. Thus, De Agbayani, which refers to a law that is invalidated by a decision of the Court,
has no application to the instant case.

Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by
a subsequent decision which adopts a new doctrine. In the instant case, there is no previous doctrine that is
overruled by the Decision. Since the case of Manila Electric Company v. Judge Castro-Bartolome,6 decided
on June 29, 1982, the Court has applied consistently the constitutional provision that private corporations
cannot hold, except by lease, alienable lands of the public domain. The Court reiterated this in numerous
cases, and the only dispute in the application of this constitutional provision is whether the land in question
had already become private property before the effectivity of the 1973 Constitution.7 If the land was already
private land before the 1973 Constitution because the corporation had possessed it openly, continuously,
exclusively and adversely for at least thirty years since June 12, 1945 or earlier, then the corporation could
apply for judicial confirmation of its imperfect title. But if the land remained public land upon the effectivity of
the 1973 Constitution, then the corporation could never hold, except by lease, such public land. Indisputably,
the Decision does not overrule any previous doctrine of the Court.

The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations
cannot hold, except by lease, alienable lands of the public domain. This is one of the two main reasons why
the Decision annulled the Amended JVA. The other main reason is that submerged areas of Manila Bay,
being part of the sea, are inalienable and beyond the commerce of man, a doctrine that has remained
immutable since the Spanish Law on Waters of 1886. Clearly, the Decision merely reiterates, and does not
overrule, any existing judicial doctrine.
Even on the characterization of foreshore lands reclaimed by the government, the Decision does not
overrule existing law or doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and
its foreshore areas have always been part of the public domain. And since the enactment of Act No. 1654 on
May 18, 1907 until the effectivity of the 1973 Constitution, statutory law never allowed foreshore lands
reclaimed by the government to be sold to private corporations. The 1973 and 1987 Constitution enshrined
and expanded the ban to include any alienable land of the public domain.

There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution,
hold that the sale or transfer of the land may no longer be invalidated because of "weighty considerations of
equity and social justice."8 The invalidation of the sale or transfer may also be superfluous if the purpose of
the statutory or constitutional ban has been achieved. But none of these cases apply to Amari.

Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the
land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen.9 Similarly,
where the alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since
the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved.10 In short, the
law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently
transferred to a qualified party, or the buyer himself becomes a qualified party. In the instant case, however,
Amari has not transferred the Freedom Islands, or any portion of it, to any qualified party. In fact, Amari
admits that title to the Freedom Islands still remains with PEA.11

The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under
the principle of res judicata, provided the requisites for res judicata are present.12 Under this principle, the
courts and the parties are bound by a prior final decision, otherwise there will be no end to litigation. As the
Court declared in Toledo-Banaga v. Court of Appeals,13 "once a judgement has become final and executory,
it can no longer be disturbed no matter how erroneous it may be." In the instant case, there is no prior final
decision adjudicating the Freedom Islands to Amari.

There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari
cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner
had already filed the instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire
the Freedom Islands. Even before the filing of this petition, two Senate Committees14 had already approved
on September 16, 1997 Senate Committee Report No. 560. This Report concluded, after a well-publicized
investigation into PEA’s sale of the Freedom Islands to Amari, that the Freedom Islands are inalienable
lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant
risks, including the annulment of the Amended JVA.

Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom
Islands. Amari states that it has paid PEA only P300,000,000.0015 out of the P1,894,129,200.00 total
reimbursement cost agreed upon in the Amended JVA. Moreover, Amari does not claim to have even
initiated the reclamation of the 592.15 hectares of submerged areas covered in the Amended JVA, or to
have started to construct any permanent infrastructure on the Freedom Islands. In short, Amari does not
claim to have introduced any physical improvement or development on the reclamation project that is the
subject of the Amended JVA. And yet Amari claims that it had already spent a
"whopping P9,876,108,638.00" as its total development cost as of June 30, 2002.16 Amari does not explain
how it spent the rest of the P9,876,108,638.00 total project cost after paying PEA P300,000,000.00.
Certainly, Amari cannot claim to be an innocent purchaser in good faith and for value.

In its Supplement to Motion for Reconsideration, PEA claims that it is "similarly situated" as the Bases
Conversion Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro
Manila military camps and other military reservations. PEA’s comparison is incorrect. The Decision states as
follows:

As the central implementing agency tasked to undertake reclamation projects nationwide, with
authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged
with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or
sold by PEA are not private lands, in the same manner that DENR, when it disposes of other
alienable lands, does not dispose of private lands but alienable lands of the public domain. Only
when qualified private parties acquire these lands will the lands become private lands. In the hands
 of the government agency tasked and authorized to dispose of alienable or disposable lands of the
public domain, these lands are still public, not private lands.

PEA is the central implementing agency tasked to undertake reclamation projects nationwide.

PEA took the place of Department of Environment and Natural Resources ("DENR" for brevity) as
the government agency charged with leasing or selling all reclaimed lands of the public domain. In
the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed
foreshore lands are public lands in the same manner that these same lands would have
been public lands in the hands of DENR. BCDA is an entirely different government entity. BCDA
is authorized by law to sell specific government lands that have long been declared by presidential
proclamations as military reservations for use by the different services of the armed forces under
the Department of National Defense. BCDA’s mandate is specific and limited in area, while PEA’s
mandate is general and national. BCDA holds government lands that have been granted to end-
user government entities – the military services of the armed forces. In contrast, under Executive
Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as the
government agency "primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government."

In Laurel v. Garcia,17 cited in the Decision, the Court ruled that land devoted to public use by the Department
of Foreign Affairs, when no longer needed for public use, may be declared patrimonial property for sale to
private parties provided there is a law authorizing such act. Well-settled is the doctrine that public land
granted to an end-user government agency for a specific public use may subsequently be withdrawn by
Congress from public use and declared patrimonial property to be sold to private parties. R.A. No. 7227
creating the BCDA is a law that declares specific military reservations no longer needed for defense or
military purposes and reclassifies such lands as patrimonial property for sale to private parties.

Government owned lands, as long they are patrimonial property, can be sold to private parties, whether
Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the
government under Act No. 1120 are patrimonial property18 which even private corporations can acquire by
purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or
municipal corporation for a monetary consideration become patrimonial property in the hands of the public or
municipal corporation. Once converted to patrimonial property, the land may be sold by the public or
municipal corporation to private parties, whether Filipino citizens or qualified private corporations.

We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR
with respect to reclaimed foreshore lands, thus:

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private
lands will sanction a gross violation of the constitutional ban on private corporations from acquiring
any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done
under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to
be reclaimed lands to a single private corporation in only one transaction. This scheme will
effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was
intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos,
now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA
can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even
individuals acquiring hundreds, if not thousands, of hectares of alienable lands of the public domain under
the guise that in the hands of PEA these lands are private lands. This will result in corporations amassing
huge landholdings never before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional development in this
country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of
public lands. The 1973 Constitution prohibited private corporations from acquiring any kind of public land,
and the 1987 Constitution has unequivocally reiterated this prohibition.

Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged
areas is "enormous" and "it would be difficult for PEA to accomplish such project without the participation of
private corporations."19 The Decision does not bar private corporations from participating in reclamation
projects and being paid for their services in reclaiming lands. What the Decision prohibits, following the
explicit constitutional mandate, is for private corporations to acquire reclaimed lands of the public domain.
There is no prohibition on the directors, officers and stockholders of private corporations, if they are Filipino
citizens, from acquiring at public auction reclaimed alienable lands of the public domain. They can acquire
not more than 12 hectares per individual, and the land thus acquired becomes private land.

Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper
proceedings, on a quantum meruit basis, whatever Amari may have incurred in implementing the Amended
JVA prior to its declaration of nullity.

WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED
with FINALITY. The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral
Argument are likewise DENIED.

We find the cited Ponce Cases inapplicable to the instant case.

First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit
that "submerged lands still belong to the National Government."9 The correct formulation, however, is
that submerged lands are owned by the State and are inalienable. Section 2, Article XII of the 1987
Constitution provides:

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

Submerged lands, like the waters (sea or bay) above them, are part of the State’s inalienable natural
resources. Submerged lands are property of public dominion, absolutely inalienable and outside the
commerce of man.10 This is also true with respect to foreshore lands. Any sale of submerged or foreshore
lands is void being contrary to the Constitution.11

This is why the Cebu City ordinance merely granted Essel, Inc. an "irrevocable option" to purchase the
foreshore lands after the reclamation and did not actually sell to Essel, Inc. the still to be reclaimed
foreshore lands. Clearly, in the Ponce Cases the option to purchase referred to reclaimed lands, and not to
foreshore lands which are inalienable. Reclaimed lands are no longer foreshore or submerged lands, and
thus may qualify as alienable agricultural lands of the public domain provided the requirements of public land
laws are met.

In the instant case, the bulk of the lands subject of the Amended JVA are still submerged lands even to this
very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject of the
Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under the
waters of Manila Bay. Under the Amended JVA, the PEA conveyed to Amari the submerged lands even
before their actual reclamation, although the documentation of the deed of transfer and issuance of the
certificates of title would be made only after actual reclamation.

The Amended JVA states that the PEA "hereby contributes to the Joint Venture its rights and
privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation
Area."12 The Amended JVA further states that "the sharing of the Joint Venture Proceeds shall be based on
the ratio of thirty percent (30%) for PEA and seventy percent (70%) for AMARI."13 The Amended JVA also
provides that the PEA "hereby designates AMARI to perform PEA’s rights and privileges to reclaim, own and
develop the Reclamation Area."14 In short, under the Amended JVA the PEA contributed its rights,
privileges and ownership over the Reclamation Area to the Joint Venture which is 70% owned by
Amari. Moreover, the PEA delegated to Amari the right and privilege to reclaim the submerged
lands.

The Amended JVA mandates that the PEA had "the duty to execute without delay the necessary deed of
transfer or conveyance of the title pertaining to AMARI’s Land share based on the Land Allocation
Plan."15 The Amended JVA also provides that "PEA, when requested in writing by AMARI, shall then cause
the issuance and delivery of the proper certificates of title covering AMARI’s Land Share in the name of
AMARI, x x x."16

In the Ponce Cases, the City of Cebu retained ownership of the reclaimed foreshore lands and Essel, Inc.
only had an "irrevocable option" to purchase portions of the foreshore lands once actually reclaimed. In
sharp contrast, in the instant case ownership of the reclamation area, including the submerged lands, was
immediately transferred to the joint venture. Amari immediately acquired the absolute right to own 70%
percent of the reclamation area, with the deeds of transfer to be documented and the certificates of title to
be issued upon actual reclamation. Amari’s right to own the submerged lands is immediately effective upon
the approval of the Amended JVA and not merely an option to be exercised in the future if and when the
reclamation is actually realized. The submerged lands, being inalienable and outside the commerce of man,
could not be the subject of the commercial transactions specified in the Amended JVA.

Second, in the Ponce Cases the Cebu City ordinance granted Essel, Inc. an "irrevocable option" to purchase
from Cebu City not more than 70% of the reclaimed lands. The ownership of the reclaimed lands remained
with Cebu City until Essel, Inc. exercised its option to purchase. With the subsequent enactment of the
Government Auditing Code (Presidential Decree No. 1445) on 11 June 1978, any sale of government land
must be made only through public bidding. Thus, such an "irrevocable option" to purchase government land
would now be void being contrary to the requirement of public bidding expressly required in Section 7917 of
PD No. 1445. This requirement of public bidding is reiterated in Section 37918 of the 1991 Local Government
Code.19 Obviously, the ingenious reclamation scheme adopted in the Cebu City ordinance can no longer be
followed in view of the requirement of public bidding in the sale of government lands. In the instant case, the
Amended JVA is a negotiated contract which clearly contravenes Section 79 of PD No. 1445.

Third, Republic Act No. 1899 authorized municipalities and chartered cities to reclaim foreshore lands. The
two Resolutions in the Ponce Cases upheld the Cebu City ordinance only with respect to foreshore areas,
and nullified the same with respect to submerged areas. Thus, the 27 June 1965 Resolution made the
injunction of the trial court against the City of Cebu "permanent insofar x x x as the area outside or beyond
the foreshore land proper is concerned."

As we held in the 1998 case of Republic Real Estate Corporation v. Court of Appeals,20 citing the
Ponce Cases, RA No. 1899 applies only to foreshore lands, not to submerged lands. In his concurring
opinion in Republic Real Estate Corporation, Justice Reynato S. Puno stated that under Commonwealth
Act No. 141, "foreshore and lands under water were not to be alienated and sold to private parties," and that
such lands "remained property of the State." Justice Puno emphasized that "Commonwealth Act No. 141
has remained in effect at present." The instant case involves principally submerged lands within Manila Bay.
On this score, the Ponce Cases, which were decided based on RA No. 1899, are not applicable to the
instant case.

Fourth, the Ponce Cases involve the authority of the City of Cebu to reclaim foreshore areas pursuant to a
general law, RA No. 1899. The City of Cebu is a public corporation and is qualified, under the 1935, 1973,
and 1987 Constitutions, to hold alienable or even inalienable lands of the public domain. There is no dispute
that a public corporation is not covered by the constitutional ban on acquisition of alienable public lands.
Both the 9 July 2002 Decision and the 6 May 2003 Resolution of this Court in the instant case expressly
recognize this.

Cebu City is an end user government agency, just like the Bases Conversion and Development Authority or
the Department of Foreign Affairs.21 Thus, Congress may by law transfer public lands to the City of Cebu to
be used for municipal purposes, which may be public or patrimonial. Lands thus acquired by the City of
Cebu for a public purpose may not be sold to private parties. However, lands so acquired by the City of
Cebu for a patrimonial purpose may be sold to private parties, including private corporations.

However, in the instant case the PEA is not an end user agency with respect to the reclaimed lands under
the Amended JVA. As we explained in the 6 May 2003 Resolution:

PEA is the central implementing agency tasked to undertake reclamation

projects nationwide. PEA took the place of the Department of Environment and Natural Resources
("DENR" for brevity) as the government agency charged with leasing or selling all reclaimed lands
of the public domain. In the hands of PEA, which took over the leasing and selling functions
 of DENR, reclaimed foreshore (or submerged lands) lands are public lands in the same
manner that these same lands would have been public lands in the hands of
DENR. (Emphasis supplied)

Our 9 July 2002 Decision explained the rationale for treating the PEA in the same manner as the DENR with
respect to reclaimed foreshore or submerged lands in this wise:

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private
lands will sanction a gross violation of the constitutional ban on private corporations from acquiring
any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now
done under the Amended JVA,and transfer several hundreds of hectares of these reclaimed and
still to be reclaimed lands to a single private corporation in only one transaction. This scheme will
effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was
intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos,
now numbering over 80 million strong. (Emphasis supplied)

Finally, the Ponce Cases were decided under the 1935 Constitution which allowed private corporations to
acquire alienable lands of the public domain. However, the 1973 Constitution prohibited private corporations
from acquiring alienable lands of the public domain, and the 1987 Constitution reiterated this prohibition.
Obviously, the Ponce Cases cannot serve as authority for a private corporation to acquire alienable public
lands, much less submerged lands, since under the present Constitution a private corporation like Amari is
barred from acquiring alienable lands of the public domain.

Clearly, the facts in the Ponce Cases are different from the facts in the instant case. Moreover, the
governing constitutional and statutory provisions have changed since the Ponce Cases were disposed of in
1965 and 1966 through minute Resolutions of a divided (6 to 5) Court.

This Resolution does not prejudice any innocent third party purchaser of the reclaimed lands covered by the
Amended JVA. Neither the PEA nor Amari has sold any portion of the reclaimed lands to third parties. Title
to the reclaimed lands remains with the PEA. As we stated in our 9 July 2002 Decision:

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a
wholly government owned corporation performing public as well as proprietary functions. No patent
or certificate of title has been issued to any private party. No one is asking the Director of Lands to
cancel PEA’s patent or certificates of title. In fact, the thrust of the instant petition is that PEA’s
certificates of title should remain with PEA, and the land covered by these certificates, being
alienable lands of the public domain, should not be sold to a private corporation.

As we held in our 9 July 2002 Decision, the Amended JVA "violates glaringly Sections 2 and 3, Article XII of
the 1987 Constitution." In our 6 May 2003 Resolution, we DENIED with FINALITY respondents’ Motions for
Reconsideration. Litigations must end some time. It is now time to write finis to this "Grandmother of All
Scams."

WHEREFORE, the second Motions for Reconsideration filed by Public Estates Authority and Amari Coastal
Bay Development Corporation are DENIED for being prohibited pleadings. In any event, these Motions for
Reconsideration have no merit. No further pleadings shall be allowed from any of the parties.

G.R. No. 133250             November 11, 2003

FRANCISCO I. CHAVEZ, petitioner, 
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.

We find the position of respondents bereft of merit.

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

Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the
facts needed to decide the instant petition are well established from the admissions of the parties in their
pleadings55 and those derived from the documents appended to said submissions. Indeed, the core facts
which are the subject matter of the numerous issues raised in this petition are undisputed.

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

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

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

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

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

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

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

(4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA and
AMARI.1avvphi1 In this NHA case, the JVA and subsequent amendments were already
substantially implemented. Subsequently, the Project was terminated through a MOA signed on
August 27, 2003. Almost one year later on August 5, 2004, the Chavez petition was filed;

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

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

(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a government
entity tasked to dispose of public lands under Executive Order No. (EO) 525.56 In the NHA case, the
reclaimed lands were transferred to NHA, a government entity NOT tasked to dispose of public
land and therefore said alienable lands were converted to patrimonial lands upon their transfer to
NHA.57

Thus the PEA Decision58 cannot be considered an authority or precedent to the instant case. The principle of
stare decisis59 has no application to the different factual setting of the instant case.
We will now dwell on the substantive issues raised by petitioner. After a perusal of the grounds raised in this
petition, we find that most of these issues are moored on our PEA Decision which, as earlier discussed, has
no application to the instant petition. For this reason alone, the petition can already be rejected.
Nevertheless, on the premise of the applicability of said decision to the case at bar, we will proceed to
resolve said issues.

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

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

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

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

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

Petitioner’s contention has no merit.

EO 525 reads:

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

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

(1) approval by the President;

(2) favorable recommendation of PEA; and

(3) undertaken by any of the following:

a. by PEA

b. by any person or entity pursuant to a contract it executed with PEA

 c. by the National Government agency or entity authorized under its charter to reclaim
lands subject to consultation with PEA

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

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

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

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

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

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

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

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

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

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

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

3. The third element was also present—the reclamation was undertaken either by PEA or any person or
entity under contract with PEA or by the National Government agency or entity authorized under its charter
to reclaim lands subject to consultation with PEA. It cannot be disputed that the reclamation phase was not
done by PEA or any person or entity under contract with PEA. However, the reclamation was implemented
by the NHA, a national government agency whose authority to reclaim lands under consultation with PEA is
derived from its charter—PD 727 and other pertinent laws—RA 727962 and RA 6957 as amended by RA
7718.

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

Basic in administrative law is the doctrine that a government agency or office has express and implied
powers based on its charter and other pertinent statutes. Express powers are those powers granted,
allocated, and delegated to a government agency or office by express provisions of law. On the other hand,
implied powers are those that can be inferred or are implicit in the wordings of the law63 or conferred by
necessary or fair implication in the enabling act.64 In Angara v. Electoral Commission, the Court clarified and
stressed that when a general grant of power is conferred or duty enjoined, every particular power necessary
for the exercise of the one or the performance of the other is also conferred by necessary implication.65 It
was also explicated that when the statute does not specify the particular method to be followed or used by a
government agency in the exercise of the power vested in it by law, said agency has the authority to adopt
any reasonable method to carry out its functions.66

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

1. NHA’s power to reclaim derived from PD 757 provisions:

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

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

xxxx

b) To undertake housing, development, resettlement or other activities as would enhance the

provision of housing to every Filipino;

c) To harness and promote private participation in housing ventures in terms of capital

expenditures, land, expertise, financing and other facilities for the sustained growth of the housing
industry. (Emphasis supplied.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sec. 6. Powers and functions of the Authority.—The Authority shall have the following powers and functions
to be exercised by the Board in accordance with its established national human settlements plan prepared
by the Human Settlements Commission:
(a) Develop and implement the comprehensive and integrated housing program provided for in Section
hereof;

xxxx

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

xxxx

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

xxxx

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

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

xxxx

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

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

2. NHA’s implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHA’s mandate to "[d]evelop and undertake housing development and/or resettlement
projects through joint ventures or other arrangements with public and private entities."

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

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

xxxx

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The power of the National Government through the President over reclamation of areas, that is, underwater
whether foreshore or inland, was made clear in EO 54369 which took effect on June 24, 2006. Under EO
543, PEA was renamed the Philippine Reclamation Authority (PRA) and was granted the authority to
approve reclamation projects, a power previously reposed in the President under EO 525. EO 543 reads:

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

Section 2. Nothing in the Order shall be construed as diminishing the President’s authority to modify, amend
or nullify PRA’s action.

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

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

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

Second Issue: Whether respondents NHA and RBI were given the

power and authority by DENR to reclaim foreshore and submerged

lands

Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim,
they were not authorized to do so by the DENR.

Again, reliance is made on our ruling in PEA where it was held that the DENR’s authority is necessary in
order for the government to validly reclaim foreshore and submerged lands. In PEA, we expounded in this
manner:

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

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

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

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

Notwithstanding the need for DENR permission, we nevertheless find petitioner’s position bereft of merit.

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

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

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

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

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

Moreover, the power to order the reclamation of lands of public domain is reposed first in the Philippine
President. The Revised Administrative Code of 1987 grants authority to the President to reserve lands of
public domain for settlement for any specific purpose, thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of the Government.—(1) The
President shall have the power to reserve for settlement or public use, and for specific public purposes, any
of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall
thereafter remain subject to the specific public purpose indicated until otherwise provided by law or
proclamation. (Emphasis supplied.)

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

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

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

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

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

Third Issue: Whether respondent RBI can acquire reclaimed

foreshore and submerged lands considered as inalienable and

outside the commerce of man

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

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

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

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

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

Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and they
cannot be alienated except for alienable agricultural lands of the public domain. One of the State’s natural
resources are lands of public domain which include reclaimed lands.

Petitioner contends that for these reclaimed lands to be alienable, there must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable and disposable and open to disposition
or concession. Absent such law or proclamation, the reclaimed lands cannot be the enabling component or
consideration to be paid to RBI as these are beyond the commerce of man.

We are not convinced of petitioner’s postulation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Petitioner’s contention is not well-taken.

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

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

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

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

As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:

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

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

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

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

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

Fourth Issue: Whether respondent RBI can acquire reclaimed

lands when there was no declaration that said lands are no

longer needed for public use

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

We are not moved by petitioner’s submission.

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

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

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

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

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

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

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

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

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

Fifth Issue: Whether there is a law authorizing sale of

reclaimed lands

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

This position is misplaced.

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

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

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

In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under the
law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the following powers and
functions to be exercised by the Boards in accordance with the established national human settlements plan
prepared by the Human Settlements Commission:

xxxx

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

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

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

Sixth Issue: Whether the transfer of reclaimed lands to RBI

was done by public bidding

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

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

xxxx

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

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

This stand is devoid of merit.

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

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

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

Petitioner’s theory is incorrect.

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

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

Determining Factors in the Disposal of Unserviceable Property

 Property, which can no longer be repaired or reconditioned;

 Property whose maintenance costs of repair more than outweigh the benefits and services that will
be derived from its continued use;
 Property that has become obsolete or outmoded because of changes in technology;
 Serviceable property that has been rendered unnecessary due to change in the agency’s function
or mandate;
 Unused supplies, materials and spare parts that were procured in excess of requirements; and
 Unused supplies and materials that [have] become dangerous to use because of long storage or
use of which is determined to be hazardous.85

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

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

Seventh Issue: Whether RBI, being a private corporation,

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

Petitioner’s proposition has no legal mooring for the following reasons:

1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid "a portion as
percentage of the reclaimed land" subject to the constitutional requirement that only Filipino
citizens or corporations with at least 60% Filipino equity can acquire the same. It cannot be denied
that RBI is a private corporation, where Filipino citizens own at least 60% of the stocks. Thus, the
transfer to RBI is valid and constitutional.

2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said
proclamations were converted to alienable and disposable lands of public domain. When the titles
to the reclaimed lands were transferred to the NHA, said alienable and disposable lands of public
domain were automatically classified as lands of the private domain or patrimonial properties of the
State because the NHA is an agency NOT tasked to dispose of alienable or disposable lands of
public domain. The only way it can transfer the reclaimed land in conjunction with its projects and to
attain its goals is when it is automatically converted to patrimonial properties of the State. Being
patrimonial or private properties of the State, then it has the power to sell the same to any qualified
person—under the Constitution, Filipino citizens as private corporations, 60% of which is owned by
Filipino citizens like RBI.

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

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

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

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

The foregoing Resolution makes it clear that the SMDRP was a program adopted by the Government under
Republic Act No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes), as amended by RA 7718, which is a
special law similar to RA 7227. Moreover, since the implementation was assigned to the NHA, an end-user
agency under PD 757 and RA 7279, the reclaimed lands registered under the NHA are automatically
classified as patrimonial lands ready for disposition to qualified beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private corporation,
is disqualified from being a transferee of public land. What was transferred to HCPTI is a 10-hectare lot
which is already classified as patrimonial property in the hands of the NHA. HCPTI, being a qualified
corporation under the 1987 Constitution, the transfer of the subject lot to it is valid and constitutional.

Eighth Issue: Whether respondents can be compelled to disclose

all information related to the SMDRP

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

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

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

This relief must be granted.

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

ARTICLE II

xxxx

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

ARTICLE III

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

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

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

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

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

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

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

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

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

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

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

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

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

The argument of the Solicitor General is meritorious.

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

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

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

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

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

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

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

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

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

In the May 6, 2003 Resolution in Chavez v. PEA,93 we ruled that De Agbayani94 is not applicable to the case
considering that the prevailing law did not authorize private corporations from owning land. The prevailing
law at the time was the 1935 Constitution as no statute dealt with the same issue.

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

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

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

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

The Court’s Dispositions

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

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

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

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

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

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

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

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

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

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

WHEREFORE, the petition is partially granted.

The prayer for a writ of prohibition is DENIED for lack of merit.

The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner
to all public documents and official records relative to the SMDRP—including, but not limited to, the March
19, 1993 JVA between the NHA and RBI and subsequent agreements related to the JVA, the revisions over
the original plan, and the additional works incurred on and the transactions made with respect to the Project.

G.R. No. 164527               August 15, 2007

FRANCISCO I. CHAVEZ, Petitioner, 
vs.
NATIONAL HOUSING AUTHORITY, R-II BUILDERS, INC., R-II HOLDINGS, INC., HARBOUR CENTRE
PORT TERMINAL, INC., and MR. REGHIS ROMERO II, Respondents.
THE COURT’S RULING

The Court finds merit in the petition.

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a GOCC as follows:

SEC. 2. General Terms Defined. – x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs whether governmental or proprietary in nature,
and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at least fifty-one

(51) percent of its capital stock: x x x.

On the other hand, Section 2(10) of the Introductory Provisions of the Administrative Code defines a
government "instrumentality" as follows:

SEC. 2. General Terms Defined. –– x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x

From the above definitions, it is clear that a GOCC must be "organized as a stock or non-stock corporation"
while an instrumentality is vested by law with corporate powers. Likewise, when the law makes a
government instrumentality operationally autonomous, the instrumentality remains part of the National
Government machinery although not integrated with the department framework.

When the law vests in a government instrumentality corporate powers, the instrumentality does not
necessarily become a corporation. Unless the government instrumentality is organized as a stock or non-
stock corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers.

Many government instrumentalities are vested with corporate powers but they do not become stock or non-
stock corporations, which is a necessary condition before an agency or instrumentality is deemed a GOCC.
Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the
Philippines, and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate
powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the
Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes
loosely called government corporate entities. They are not, however, GOCCs in the strict sense as
understood under the Administrative Code, which is the governing law defining the legal relationship and
status of government entities.2

Correlatively, Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is
divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." Section
87 thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends
to its members, trustees or officers." Further, Section 88 provides that non-stock corporations are "organized
for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social,
civil service, or similar purposes, like trade, industry, agriculture and like chambers."

Two requisites must concur before one may be classified as a stock corporation, namely: (1) that it has
capital stock divided into shares; and (2) that it is authorized to distribute dividends and allotments of surplus
and profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock
corporation. As for non-stock corporations, they must have members and must not distribute any part of their
income to said members.3

In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot
be considered as a stock corporation because although it has a capital stock divided into no par value
shares as provided in Section 74 of P.D. No. 1084, it is not authorized to distribute dividends, surplus
allotments or profits to stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the
subsequent executive issuances pertaining to PRA, particularly, E.O. No. 525,5 E.O. No. 6546 and EO No.
7987 that authorizes PRA to distribute dividends, surplus allotments or profits to its stockholders.

PRA cannot be considered a non-stock corporation either because it does not have members. A non-stock
corporation must have members.8 Moreover, it was not organized for any of the purposes mentioned in
Section 88 of the Corporation Code. Specifically, it was created to manage all government reclamation
projects.

Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16, Article XII
of the 1987 Constitution provides as follows:

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.

The fundamental provision above authorizes Congress to create GOCCs through special charters on two
conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must meet the test of
economic viability. In this case, PRA may have passed the first condition of common good but failed the
second one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic
or commercial activities. Neither was it created to compete in the market place considering that there were
no other competing reclamation companies being operated by the private sector. As mentioned earlier, PRA
was created essentially to perform a public service considering that it was primarily responsible for a
coordinated, economical and efficient reclamation, administration and operation of lands belonging to the
government with the object of maximizing their utilization and hastening their development consistent with
the public interest. Sections 2 and 4 of P.D. No. 1084 reads, as follows:

Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical
and efficient reclamation of lands, and the administration and operation of lands belonging to, managed
and/or operated by the government, with the object of maximizing their utilization and hastening their
development consistent with the public interest.

Section 4. Purposes. The Authority is hereby created for the following purposes:

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

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

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

The twin requirement of common good and economic viability was lengthily discussed in the case of Manila
International Airport Authority v. Court of Appeals,9 the pertinent portion of which reads:

Third, the government-owned or controlled corporations created through special charters are those that
meet the two conditions prescribed in Section 16, Article XII of the Constitution.
The first condition is that the government-owned or controlled corporation must be established for the
common good. The second condition is that the government-owned or controlled corporation must meet the
test of economic viability. Section 16, Article XII of the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.

The Constitution expressly authorizes the legislature to create "government-owned or controlled

corporations" through special charters only if these entities are required to meet the twin conditions of
common good and economic viability. In other words, Congress has no power to create government-owned
or controlled corporations with special charters unless they are made to comply with the two conditions of
common good and economic viability. The test of economic viability applies only to government-owned or
controlled corporations that perform economic or commercial activities and need to compete in the market
place. Being essentially economic vehicles of the State for the common good — meaning for economic
development purposes — these government-owned or controlled corporations with special charters are
usually organized as stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing governmental or
public functions need not meet the test of economic viability. These instrumentalities perform essential
public services for the common good, services that every modern State must provide its citizens. These
instrumentalities need not be economically viable since the government may even subsidize their entire
operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in
Section 16, Article XII of the 1987 Constitution.

Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities
vested with corporate powers but performing essential governmental or public functions. Congress has
plenary authority to create government instrumentalities vested with corporate powers provided these
instrumentalities perform essential government functions or public services. However, when the legislature
creates through special charters corporations that perform economic or commercial activities, such entities
— known as "government-owned or controlled corporations" — must meet the test of economic viability
because they compete in the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and
similar government-owned or controlled corporations, which derive their incometo meet operating expenses
solely from commercial transactions in competition with the private sector. The intent of the Constitution is to
prevent the creation of government-owned or controlled corporations that cannot survive on their own in the
market place and thus merely drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation loses, then it makes its
claim upon the taxpayers' money through new equity infusions from the government and what is always
invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire
government, about P28 billion of this will go into equity infusions to support a few government financial
institutions. And this is all taxpayers' money which could have been relocated to agrarian reform, to social
services like health and education, to augment the salaries of grossly underpaid public employees. And yet
this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this
becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of
meeting the market test so that they become viable. And so, Madam President, I reiterate, for the
committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion
of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common
good.1âwphi1
Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The
1987 Constitution of the Republic of the Philippines: A Commentary:

The second sentence was added by the 1986 Constitutional Commission. The significant addition, however,
is the phrase "in the interest of the common good and subject to the test of economic viability." The addition
includes the ideas that they must show capacity to function efficiently in business and that they should not
go into activities which the private sector can do better. Moreover, economic viability is more than financial
viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.

Clearly, the test of economic viability does not apply to government entities vested with corporate powers
and performing essential public services. The State is obligated to render essential public services
regardless of the economic viability of providing such service. The non-economic viability of rendering such
essential public service does not excuse the State from withholding such essential services from the public.

However, government-owned or controlled corporations with special charters, organized essentially for
economic or commercial objectives, must meet the test of economic viability. These are the government-
owned or controlled corporations that are usually organized under their special charters as stock
corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are
the government-owned or controlled corporations, along with government-owned or controlled corporations
organized under the Corporation Code, that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code. [Emphases supplied]

This Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory Provisions of
the Administrative Code or under Section 16, Article XII of the 1987 Constitution. The facts, the evidence on
record and jurisprudence on the issue support the position that PRA was not organized either as a stock or a
non-stock corporation. Neither was it created by Congress to operate commercially and compete in the
private market. Instead, PRA is a government instrumentality vested with corporate powers and performing
an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative
Code. Being an incorporated government instrumentality, it is exempt from payment of real property tax.

Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by PRA. On
the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA from paying realty
taxes and protects it from the taxing powers of local government units.

Sections 234(a) and 133(o) of the LGC provide, as follows:

SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real
property tax:

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

xxxx

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:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and
local government units. [Emphasis supplied]

It is clear from Section 234 that real property owned by the Republic of the Philippines (the Republic) is
exempt from real property tax unless the beneficial use thereof has been granted to a taxable person. In this
case, there is no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity.
There is no showing on record either that PRA leased the subject reclaimed properties to a private taxable
entity.
This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local
governments from imposing "taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities x x x." The Administrative Code allows real property owned by the Republic to be titled
in the name of agencies or instrumentalities of the national government. Such real properties remain owned
by the Republic and continue to be exempt from real estate tax.

Indeed, the Republic grants the beneficial use of its real property to an agency or instrumentality of the
national government. This happens when the title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement does not
result in the loss of the tax exemption, unless "the beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person."10

The rationale behind Section 133(o) has also been explained in the case of the Manila International Airport
Authority,11 to wit:

Section 133(o) recognizes the basic principle that local governments cannot tax the national government,
which historically merely delegated to local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local governments may only exercise such
power "subject to such guidelines and limitations as the Congress may provide."

When local governments invoke the power to tax on national government instrumentalities, such power is
construed strictly against local governments. The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is
resolved against taxation. This rule applies with greater force when local governments seek to tax national
government instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption.
However, when Congress grants an exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government instrumentality. As this Court
declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the government
itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of
money that has to be handled by government in the course of its operations. For these reasons, provisions
granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such
agencies.

There is, moreover, no point in national and local governments taxing each other, unless a sound and
compelling policy requires such transfer of public funds from one government pocket to another.

There is also no reason for local governments to tax national government instrumentalities for rendering
essential public services to inhabitants of local governments. The only exception is when the legislature
clearly intended to tax government instrumentalities for the delivery of essential public services for sound
and compelling policy considerations. There must be express language in the law empowering local
governments to tax national government instrumentalities. Any doubt whether such power exists is resolved
against local governments.

Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local
governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal
government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the
part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson
v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140,
emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation." (U.S. v. Sanchez, 340 US 42)

The power to tax which was called by Justice Marshall as the "power to destroy" (McCulloch v. Maryland,
supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent
power to wield it. [Emphases supplied]

The Court agrees with PRA that the subject reclaimed lands are still part of the public domain, owned by the
State and, therefore, exempt from payment of real estate taxes.

Section 2, Article XII of the 1987 Constitution reads in part, as follows:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the State. With the exception of agricultural lands, all other natural resources shall not be
alienated. The exploration, development, and utilization of natural resources shall be under the full control
and supervision of the State. The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or
associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be
for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such
terms and conditions as may provided by law. In cases of water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of waterpower, beneficial use may be the measure and limit of
the grant.

Similarly, Article 420 of the Civil Code enumerates properties belonging to the State:

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

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

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

Here, the subject lands are reclaimed lands, specifically portions of the foreshore and offshore areas of
Manila Bay. As such, these lands remain public lands and form part of the public domain. In the case of
Chavez v. Public Estates Authority and AMARI Coastal Development Corporation,12 the Court held that
foreshore and submerged areas irrefutably belonged to the public domain and were inalienable unless
reclaimed, classified as alienable lands open to disposition and further declared no longer needed for public
service. The fact that alienable lands of the public domain were transferred to the PEA (now PRA) and
issued land patents or certificates of title in PEA’s name did not automatically make such lands private. This
Court also held therein that reclaimed lands retained their inherent potential as areas for public use or public
service.

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to
sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling
reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private
lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private
lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will
the lands become private lands. In the hands of the government agency tasked and authorized to dispose of
alienable of disposable lands of the public domain, these lands are still public, not private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any
and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact
that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land
patents or certificates of title in PEA's name does not automatically make such lands private.13

Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987,
thus:

SEC 14. Power to Reserve Lands of the Public and Private Dominion of the Government.-

(1)The President shall have the power to reserve for settlement or public use, and for specific public
purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The
reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided
by law or proclamation.

Reclaimed lands such as the subject lands in issue are reserved lands for public use. They are properties of
public dominion. The ownership of such lands remains with the State unless they are withdrawn by law or
presidential proclamation from public use.

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

As the Court has repeatedly ruled, properties of public dominion are not subject to execution or foreclosure
sale.14Thus, the assessment, levy and foreclosure made on the subject reclaimed lands by respondent, as
well as the issuances of certificates of title in favor of respondent, are without basis.

WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the Regional Trial Court, Branch
195, Parañaque City, is REVERSED and SET ASIDE. All reclaimed properties owned by the Philippine
Reclamation Authority are hereby declared EXEMPT from real estate taxes. All real estate tax assessments,
including the final notices of real estate tax delinquencies, issued by the City of Parañaque on the subject
reclaimed properties; the assailed auction sale, dated April 7, 2003; and the Certificates of Sale
subsequently issued by the Parañaque City Treasurer in favor of the City of Parañaque, are all declared
VOID.

G.R. No. 191109               July 18, 2012

REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE RECLAMATION AUTHORITY

(PRA),Petitioner,
vs.
CITY OF PARANAQUE, Respondent.

REPUBLIC V. HEIRS OF IGNACIO DAQUER GR 193657 Sept 4, 2018