G.R. No.

118295 May 2, 1997

WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers;
GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as taxpayers; NICANOR
P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL ECONOMIC
PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG
KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG
KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in representation of
various taxpayers and as non-governmental organizations, petitioners, 
vs.
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO
AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA. MACAPAGAL-
ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEÑA, SANTANINA RASUL, RAMON REVILLA, RAUL
ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as members of the Philippine Senate who
concurred in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization;
SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget and Management; CARIDAD VALDEHUESA, in her
capacity as National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO
SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance;
ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as
Executive Secretary, respondents.

PANGANIBAN, J.:

The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast majority of
countries has revolutionized international business and economic relations amongst states. It has irreversibly propelled the world
towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the third-
millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere historical relics the heretofore
traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas, quantitative
restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific industries in a market-
driven and export-oriented global scenario are replacing age-old "beggar-thy-neighbor" policies that unilaterally protect weak and
inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known management guru, "Increased
participation in the world economy has become the key to domestic economic growth and prosperity."

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of three
multilateral institutions — inspired by that grand political body, the United Nations — were discussed at Dumbarton Oaks and Bretton
Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and later
developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems; and the third,
the International Trade Organization (ITO), which was to foster order and predictability in world trade and to minimize unilateral
protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons, including its non-
ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained was only GATT — the General
Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the economies of treaty adherents with no
institutionalized body administering the agreements or dependable system of dispute settlement.

After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo Round and the Uruguay
Round, the world finally gave birth to that administering body — the World Trade Organization — with the signing of the "Final Act"
in Marrakesh, Morocco and the ratification of the WTO Agreement by its members.1

Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by President
Fidel V. Ramos in two letters to the Senate (infra), of improving "Philippine access to foreign markets, especially its major trading
partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products." The President also saw in the
WTO the opening of "new opportunities for the services sector . . . , (the reduction of) costs and uncertainty associated with
exporting . . . , and (the attraction of) more investments into the country." Although the Chief Executive did not expressly mention it
in his letter, the Philippines — and this is of special interest to the legal profession — will benefit from the WTO system of dispute
settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels and (2)
Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where solutions were arrived at frequently on
the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products of member-countries on the same footing
as Filipinos and local products" and (2) that the WTO "intrudes, limits and/or impairs" the constitutional powers of both Congress and
the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the mandate of the 1987
Constitution to "develop a self-reliant and independent national economy effectively controlled by Filipinos . . . (to) give preference to
qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and locally produced goods."

Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and economic
globalization? Does it proscribe Philippine integration into a global economy that is liberalized, deregulated and privatized? These are
the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for
the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the President of the
Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of
its implementation and enforcement through the release and utilization of public funds, the assignment of public officials and
employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned
therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department of Trade and Industry (Secretary Navarro, for
brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the
Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity).

By signing the Final Act,2 Secretary Navarro on behalf of the Republic of the Philippines, agreed:

(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities,
with a view to seeking approval of the Agreement in accordance with their procedures; and

(b) to adopt the Ministerial Declarations and Decisions.

On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the President of the
Philippines,3 stating among others that "the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence pursuant to
Section 21, Article VII of the Constitution."

On August 13, 1994, the members of the Philippine Senate received another letter from the President of the Philippines4 likewise
dated August 11, 1994, which stated among others that "the Uruguay Round Final Act, the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services are hereby
submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution."

On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S. 1083, a resolution
entitled "Concurring in the Ratification of the Agreement Establishing the World Trade Organization."5

On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which "Resolved, as it is hereby resolved, that the Senate
concur, as it hereby concurs, in the ratification by the President of the Philippines of the Agreement Establishing the World Trade
Organization."6 The text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations and includes various agreements and associated legal instruments (identified in the said Agreement as
Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade Agreements, for brevity) as follows:

ANNEX 1

Annex 1A: Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing 
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of he 
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection 
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating
Measures
Agreement on Safeguards

Annex 1B: General Agreement on Trade in Services and Annexes

Annex 1C: Agreement on Trade-Related Aspects of Intellectual

Property Rights

ANNEX 2

Understanding on Rules and Procedures Governing

the Settlement of Disputes

ANNEX 3
 Trade Policy Review Mechanism

On December 16, 1994, the President of the Philippines signed7 the Instrument of Ratification, declaring:

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after
having seen and considered the aforementioned Agreement Establishing the World Trade Organization and the
agreements and associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement
which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the
same and every Article and Clause thereof.

To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement Proper and "the
associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof."

On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its integral annexes
aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the Understanding on Commitments in Financial
Services. In his Memorandum dated May 13, 1996,8 the Solicitor General describes these two latter documents as follows:

The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of matters,
such as measures in favor of least developed countries, notification procedures, relationship of WTO with the
International Monetary Fund (IMF), and agreements on technical barriers to trade and on dispute settlement.

The Understanding on Commitments in Financial Services dwell on, among other things, standstill or limitations
and qualifications of commitments to existing non-conforming measures, market access, national treatment, and
definitions of non-resident supplier of financial services, commercial presence and new financial service.

On December 29, 1994, the present petition was filed. After careful deliberation on respondents' comment and petitioners' reply
thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the parties thereafter filed their respective
memoranda. The court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations stationed in
Geneva, Switzerland, to submit a paper, hereafter referred to as "Bautista Paper,"9 for brevity, (1) providing a historical background of
and (2) summarizing the said agreements.

During the Oral Argument held on August 27, 1996, the Court directed:

(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the transcript of
proceedings/hearings in the Senate; and

(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to the
Philippine adherence to the WTO Agreement, which derogate from Philippine sovereignty and (2) copies of the
multi-volume WTO Agreement and other documents mentioned in the Final Act, as soon as possible.

After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a Compliance dated
September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume Uruguay Round of Multilateral Trade
Negotiations, and in another Compliance dated October 24, 1996, he listed the various "bilateral or multilateral treaties or international
instruments involving derogation of Philippine sovereignty." Petitioners, on the other hand, submitted their Compliance dated January
28, 1997, on January 30, 1997.

The Issues

In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows:

A. Whether the petition presents a political question or is otherwise not justiciable.

B. Whether the petitioner members of the Senate who participated in the deliberations and voting leading to the
concurrence are estopped from impugning the validity of the Agreement Establishing the World Trade Organization
or of the validity of the concurrence.

C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene the provisions
of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution.

D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and
impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine
Constitution is "vested in the Congress of the Philippines";

E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the exercise of
judicial power.

F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of
jurisdiction when they voted for concurrence in the ratification of the constitutionally-infirm Agreement
Establishing the World Trade Organization.
 G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of
jurisdiction when they concurred only in the ratification of the Agreement Establishing the World Trade
Organization, and not with the Presidential submission which included the Final Act, Ministerial Declaration and
Decisions, and the Understanding on Commitments in Financial Services.

On the other hand, the Solicitor General as counsel for respondents "synthesized the several issues raised by petitioners into the
following": 10

1. Whether or not the provisions of the "Agreement Establishing the World Trade Organization and the Agreements
and Associated Legal Instruments included in Annexes one (1), two (2) and three (3) of that agreement" cited by
petitioners directly contravene or undermine the letter, spirit and intent of Section 19, Article II and Sections 10 and
12, Article XII of the 1987 Constitution.

2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of legislative
power by Congress.

3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this Honorable Court
in promulgating the rules of evidence.

4. Whether or not the concurrence of the Senate "in the ratification by the President of the Philippines of the
Agreement establishing the World Trade Organization" implied rejection of the treaty embodied in the Final Act.

By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has effectively ignored three,
namely: (1) whether the petition presents a political question or is otherwise not justiciable; (2) whether petitioner-members of the
Senate (Wigberto E. Tañada and Anna Dominique Coseteng) are estopped from joining this suit; and (3) whether the respondent-
members of the Senate acted in grave abuse of discretion when they voted for concurrence in the ratification of the WTO Agreement.
The foregoing notwithstanding, this Court resolved to deal with these three issues thus:

(1) The "political question" issue — being very fundamental and vital, and being a matter that probes into the very jurisdiction of this
Court to hear and decide this case — was deliberated upon by the Court and will thus be ruled upon as the first issue;

(2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived it by not
pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents' favor, will not cause the petition's dismissal
as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and

(3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an integral part of the
disposition of the four issues raised by the Solicitor General.

During its deliberations on the case, the Court noted that the respondents did not question the locus standi of petitioners. Hence, they
are also deemed to have waived the benefit of such issue. They probably realized that grave constitutional issues, expenditures of
public funds and serious international commitments of the nation are involved here, and that transcendental public interest requires
that the substantive issues be met head on and decided on the merits, rather than skirted or deflected by procedural matters. 11

To recapitulate, the issues that will be ruled upon shortly are:

(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE
PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?

(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC.
19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?

(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR
THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS?

(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL
POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?

(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES
SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT,
MINISTERIAL DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN
FINANCIAL SERVICES?

The First Issue: Does the Court

Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a
justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes
not only the right but in fact the duty of the judiciary to settle the dispute. "The question thus posed is judicial rather than political. The
duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld." 12 Once a "controversy as to the application or
interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court
is bound by constitutional mandate to decide." 13

The jurisdiction of this Court to adjudicate the matters 14 raised in the petition is clearly set out in the 1987 Constitution, 15 as follows:

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government.

The foregoing text emphasizes the judicial department's duty and power to strike down grave abuse of discretion on the part of any
branch or instrumentality of government including Congress. It is an innovation in our political law. 16As explained by former Chief
Justice Roberto Concepcion, 17 "the judiciary is the final arbiter on the question of whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting
to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature."

As this Court has repeatedly and firmly emphasized in many cases, 18 it will not shirk, digress from or abandon its sacred duty and
authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed
by any officer, agency, instrumentality or department of the government.

As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in the ordinary course of
law, we have no hesitation at all in holding that this petition should be given due course and the vital questions raised therein ruled
upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies to raise
constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we have no
equivocation.

We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of the decision of the
President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade liberalization as a policy espoused by
said international body. Neither will it rule on the propriety of the government's economic policy of reducing/removing tariffs, taxes,
subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will only exercise its constitutional duty "to determine
whether or not there had been a grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in
ratifying the WTO Agreement and its three annexes.

Second Issue: The WTO Agreement

and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.

Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution mandating "economic nationalism" are violated by
the so-called "parity provisions" and "national treatment" clauses scattered in various parts not only of the WTO Agreement and its
annexes but also in the Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial Services.

Specifically, the "flagship" constitutional provisions referred to are Sec 19, Article II, and Secs. 10 and 12, Article XII, of the
Constitution, which are worded as follows:

Article II

DECLARATION OF PRINCIPLES
AND STATE POLICIES

x x x           x x x          x x x

Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.

x x x           x x x          x x x

Article XII

NATIONAL ECONOMY AND PATRIMONY

x x x           x x x          x x x

Sec. 10. . . . The Congress shall enact measures that will encourage the formation and operation of enterprises whose
capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give
preference to qualified Filipinos.

x x x           x x x          x x x
 Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced
goods, and adopt measures that help make them competitive.

Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in their
memorandum: 19

a) In the area of investment measures related to trade in goods (TRIMS, for brevity):

Article 2

National Treatment and Quantitative Restrictions.

1. Without prejudice to other rights and obligations under GATT 1994, no Member shall apply
any TRIM that is inconsistent with the provisions of Article II or Article XI of GATT 1994.

2. An illustrative list of TRIMS that are inconsistent with the obligations of general elimination of
quantitative restrictions provided for in paragraph I of Article XI of GATT 1994 is contained in
the Annex to this Agreement." (Agreement on Trade-Related Investment Measures, Vol. 27,
Uruguay Round, Legal Instruments, p. 22121, emphasis supplied).

The Annex referred to reads as follows:

ANNEX

Illustrative List

1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of
GATT 1994 include those which are mandatory or enforceable under domestic law or under administrative rulings,
or compliance with which is necessary to obtain an advantage, and which require:

(a) the purchase or use by an enterprise of products of domestic origin or from any domestic
source, whether specified in terms of particular products, in terms of volume or value of products,
or in terms of proportion of volume or value of its local production; or

(b) that an enterprise's purchases or use of imported products be limited to an amount related to the
volume or value of local products that it exports.

2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in
paragraph 1 of Article XI of GATT 1994 include those which are mandatory or enforceable under domestic laws or
under administrative rulings, or compliance with which is necessary to obtain an advantage, and which restrict:

(a) the importation by an enterprise of products used in or related to the local production that it
exports;

(b) the importation by an enterprise of products used in or related to its local production by
restricting its access to foreign exchange inflows attributable to the enterprise; or

(c) the exportation or sale for export specified in terms of particular products, in terms of volume
or value of products, or in terms of a preparation of volume or value of its local production.
(Annex to the Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round Legal
Documents, p. 22125, emphasis supplied).

The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:

The products of the territory of any contracting party imported into the territory of any other
contracting party shall be accorded treatment no less favorable than that accorded to like
products of national origin in respect of laws, regulations and requirements affecting their internal
sale, offering for sale, purchase, transportation, distribution or use, the provisions of this paragraph
shall not prevent the application of differential internal transportation charges which are based
exclusively on the economic operation of the means of transport and not on the nationality of the
product." (Article III, GATT 1947, as amended by the Protocol Modifying Part II, and Article
XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to paragraph 1(a) of the General
Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments p. 177,
emphasis supplied).

(b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity):

Each Member shall accord to the nationals of other Members treatment no less favourable than
that it accords to its own nationals with regard to the protection of intellectual property. . . (par. 1
 Article 3, Agreement on Trade-Related Aspect of Intellectual Property rights, Vol. 31, Uruguay
Round, Legal Instruments, p. 25432 (emphasis supplied)

(c) In the area of the General Agreement on Trade in Services:

National Treatment

1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out
therein, each Member shall accord to services and service suppliers of any other Member, in
respect of all measures affecting the supply of services, treatment no less favourable than it
accords to its own like services and service suppliers.

2. A Member may meet the requirement of paragraph I by according to services and service
suppliers of any other Member, either formally suppliers of any other Member, either formally
identical treatment or formally different treatment to that it accords to its own like services and
service suppliers.

3. Formally identical or formally different treatment shall be considered to be less favourable if it

modifies the conditions of completion in favour of services or service suppliers of the Member
compared to like services or service suppliers of any other Member. (Article XVII, General
Agreement on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p. 22610 emphasis
supplied).

It is petitioners' position that the foregoing "national treatment" and "parity provisions" of the WTO Agreement "place nationals and
products of member countries on the same footing as Filipinos and local products," in contravention of the "Filipino First" policy of
the Constitution. They allegedly render meaningless the phrase "effectively controlled by Filipinos." The constitutional conflict
becomes more manifest when viewed in the context of the clear duty imposed on the Philippines as a WTO member to ensure the
conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed
agreements. 20 Petitioners further argue that these provisions contravene constitutional limitations on the role exports play in national
development and negate the preferential treatment accorded to Filipino labor, domestic materials and locally produced goods.

On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not self-executing and
merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should not be read in
isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read properly, the
cited WTO clauses do not conflict with Constitution; and (4) that the WTO Agreement contains sufficient provisions to protect
developing countries like the Philippines from the harshness of sudden trade liberalization.

We shall now discuss and rule on these arguments.

Declaration of Principles
Not Self-Executing

By its very title, Article II of the Constitution is a "declaration of principles and state policies." The counterpart of this article in the
1935 Constitution 21 is called the "basic political creed of the nation" by Dean Vicente Sinco. 22 These principles in Article II are not
intended to be self-executing principles ready for enforcement through the courts. 23They are used by the judiciary as aids or as guides
in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading case
of Kilosbayan, Incorporated vs. Morato, 24 the principles and state policies enumerated in Article II and some sections of Article XII
are not "self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not embody
judicially enforceable constitutional rights but guidelines for legislation."

In the same light, we held in Basco vs. Pagcor 25 that broad constitutional principles need legislative enactments to implement the,
thus:

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role of Youth)
of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the
1987 Constitution, suffice it to state also that these are merely statements of principles and policies. As such, they
are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate such
principles.

In general, therefore, the 1935 provisions were not intended to be self-executing principles ready
for enforcement through the courts. They were rather directives addressed to the executive and to
the legislature. If the executive and the legislature failed to heed the directives of the article, the
available remedy was not judicial but political. The electorate could express their displeasure with
the failure of the executive and the legislature through the language of the ballot. (Bernas, Vol. II,
p. 2).

The reasons for denying a cause of action to an alleged infringement of board constitutional principles are sourced from basic
considerations of due process and the lack of judicial authority to wade "into the uncharted ocean of social and economic policy
making." Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa vs. Factoran, Jr., 26 explained these reasons as
follows:
 My suggestion is simply that petitioners must, before the trial court, show a more specific legal right — a right cast
in language of a significantly lower order of generality than Article II (15) of the Constitution — that is or may be
violated by the actions, or failures to act, imputed to the public respondent by petitioners so that the trial court can
validly render judgment grating all or part of the relief prayed for. To my mind, the court should be understood as
simply saying that such a more specific legal right or rights may well exist in our corpus of law, considering the
general policy principles found in the Constitution and the existence of the Philippine Environment Code, and that
the trial court should have given petitioners an effective opportunity so to demonstrate, instead of aborting the
proceedings on a motion to dismiss.

It seems to me important that the legal right which is an essential component of a cause of action be a specific,
operable legal right, rather than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the
legal right claimed to have been violated or disregarded is given specification in operational terms, defendants may
well be unable to defend themselves intelligently and effectively; in other words, there are due process dimensions
to this matter.

The second is a broader-gauge consideration — where a specific violation of law or applicable regulation is not
alleged or proved, petitioners can be expected to fall back on the expanded conception of judicial power in the
second paragraph of Section 1 of Article VIII of the Constitution which reads:

Sec. 1. . . .

Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government. (Emphasis supplied)

When substantive standards as general as "the right to a balanced and healthy ecology" and "the right to health" are
combined with remedial standards as broad ranging as "a grave abuse of discretion amounting to lack or excess of
jurisdiction," the result will be, it is respectfully submitted, to propel courts into the uncharted ocean of social and
economic policy making. At least in respect of the vast area of environmental protection and management, our
courts have no claim to special technical competence and experience and professional qualification. Where no
specific, operable norms and standards are shown to exist, then the policy making departments — the legislative and
executive departments — must be given a real and effective opportunity to fashion and promulgate those norms and
standards, and to implement them before the courts should intervene.

Economic Nationalism Should Be Read with

Other Constitutional Mandates to Attain
Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to the national economy
and patrimony, should be read and understood in relation to the other sections in said article, especially Secs. 1 and 13 thereof which
read:

Sec. 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and natural resources, and which are
competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against
unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum
opportunity to develop. . . .

xxx xxx xxx

Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements
of exchange on the basis of equality and reciprocity.

As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as follows:

1. A more equitable distribution of opportunities, income and wealth;

2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the people; and

3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged.

With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing preference in favor of
qualified Filipinos "in the grant of rights, privileges and concessions covering the national economy and patrimony" 27 and in the use
of "Filipino labor, domestic materials and locally-produced goods"; (2) by mandating the State to "adopt measures that help make
them competitive; 28 and (3) by requiring the State to "develop a self-reliant and independent national economy effectively controlled
by Filipinos." 29 In similar language, the Constitution takes into account the realities of the outside world as it requires the pursuit of "a
trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality ad
reciprocity"; 30 and speaks of industries "which are competitive in both domestic and foreign markets" as well as of the protection of
"Filipino enterprises against unfair foreign competition and trade practices."

It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al., 31 this Court held that "Sec.
10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which needs no
further guidelines or implementing laws or rule for its enforcement. From its very words the provision does not require any legislation
to put it in operation. It is per se judicially enforceable." However, as the constitutional provision itself states, it is enforceable only in
regard to "the grants of rights, privileges and concessions covering national economy and patrimony" and not to every aspect of trade
and commerce. It refers to exceptions rather than the rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-
executing or not. Rather, the issue is whether, as a rule, there are enough balancing provisions in the Constitution to allow the Senate
to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are.

All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it
recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of
Filipino enterprises only against foreign competition and trade practices that are unfair. 32 In other words, the Constitution did not
intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine
economy. While the Constitution does not encourage the unlimited entry of foreign goods, services and investments into the country,
it does not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair.

WTO Recognizes Need to

Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak and developing
economies, which comprise the vast majority of its members. Unlike in the UN where major states have permanent seats and veto
powers in the Security Council, in the WTO, decisions are made on the basis of sovereign equality, with each member's vote equal in
weight to that of any other. There is no WTO equivalent of the UN Security Council.

WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference and the General
Council shall be taken by the majority of the votes cast, except in cases of interpretation of the Agreement or waiver
of the obligation of a member which would require three fourths vote. Amendments would require two thirds vote in
general. Amendments to MFN provisions and the Amendments provision will require assent of all members. Any
member may withdraw from the Agreement upon the expiration of six months from the date of notice of
withdrawals. 33

Hence, poor countries can protect their common interests more effectively through the WTO than through one-on-one negotiations
with developed countries. Within the WTO, developing countries can form powerful blocs to push their economic agenda more
decisively than outside the Organization. This is not merely a matter of practical alliances but a negotiating strategy rooted in law.
Thus, the basic principles underlying the WTO Agreement recognize the need of developing countries like the Philippines to "share in
the growth in international trade commensurate with the needs of their economic development." These basic principles are found in the
preamble 34of the WTO Agreement as follows:

The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to
raising standards of living, ensuring full employment and a large and steadily growing volume of real income and
effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal
use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and
preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs
and concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to ensure that developing countries, and
especially the least developed among them, secure a share in the growth in international trade commensurate with
the needs of their economic development,

Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous
arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of
discriminatory treatment in international trade relations,

Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system encompassing the
General Agreement on Tariffs and Trade, the results of past trade liberalization efforts, and all of the results of the
Uruguay Round of Multilateral Trade Negotiations,

Determined to preserve the basic principles and to further the objectives underlying this multilateral trading
system, . . . (emphasis supplied.)

Specific WTO Provisos

Protect Developing Countries
So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic principles, the WTO Agreement grants
developing countries a more lenient treatment, giving their domestic industries some protection from the rush of foreign competition.
Thus, with respect to tariffs in general, preferential treatment is given to developing countries in terms of the amount of tariff
reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average tariff reduction rate
of 36% for developed countries to be effected within a period of six (6) years while developing countries — including the Philippines
— are required to effect an average tariff reduction of only 24% within ten (10) years.

In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural products by 20% over
six (6) years, as compared to only 13% for developing countries to be effected within ten (10) years.

In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their budgetary outlays for export
subsidy by 36% and export volumes receiving export subsidy by 21% within a period of six (6) years. For developing countries,
however, the reduction rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10) years within
which to effect such reduction.

Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti-dumping
measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign
competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO,
local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary,
the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that
in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of
state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of
discretion, simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the
Court in taking jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization as an economic
policy. It will only perform its constitutional duty of determining whether the Senate committed grave abuse of discretion.

Constitution Does Not

Rule Out Foreign Competition

Furthermore, the constitutional policy of a "self-reliant and independent national economy" 35 does not necessarily rule out the entry of
foreign investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy in the international
community." As explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional policy:

Economic self-reliance is a primary objective of a developing country that is keenly aware of overdependence on
external assistance for even its most basic needs. It does not mean autarky or economic seclusion; rather, it means
avoiding mendicancy in the international community. Independence refers to the freedom from undue foreign
control of the national economy, especially in such strategic industries as in the development of natural resources
and public utilities. 36

The WTO reliance on "most favored nation," "national treatment," and "trade without discrimination" cannot be struck down as
unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade
policy based on "equality and reciprocity," 37 the fundamental law encourages industries that are "competitive in both domestic and
foreign markets," thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual
development of robust industries that can compete with the best in the foreign markets. Indeed, Filipino managers and Filipino
enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs
and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy
of laissez faire.

Constitution Favors Consumers,

Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any specific
pronouncement that Filipino companies should be pampered with a total proscription of foreign competition. On the other hand,
respondents claim that WTO/GATT aims to make available to the Filipino consumer the best goods and services obtainable anywhere
in the world at the most reasonable prices. Consequently, the question boils down to whether WTO/GATT will favor the general
welfare of the public at large.

Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality?

Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will — as promised by its promoters — expand the
country's exports and generate more employment?

Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates to the Filipino public?

The responses to these questions involve "judgment calls" by our policy makers, for which they are answerable to our people during
appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial pronouncements based on grave
abuse of discretion.

Constitution Designed to Meet

Future Events and Contingencies
No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987. That does not mean
however that the Charter is necessarily flawed in the sense that its framers might not have anticipated the advent of a borderless world
of business. By the same token, the United Nations was not yet in existence when the 1935 Constitution became effective. Did that
necessarily mean that the then Constitution might not have contemplated a diminution of the absoluteness of sovereignty when the
Philippines signed the UN Charter, thereby effectively surrendering part of its control over its foreign relations to the decisions of
various UN organs like the Security Council?

It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of contemporary events. They
should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a Constitution can
withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change necessitated by unfolding
events. As one eminent political law writer and respected jurist 38explains:

The Constitution must be quintessential rather than superficial, the root and not the blossom, the base and frame-
work only of the edifice that is yet to rise. It is but the core of the dream that must take shape, not in a twinkling by
mandate of our delegates, but slowly "in the crucible of Filipino minds and hearts," where it will in time develop its
sinews and gradually gather its strength and finally achieve its substance. In fine, the Constitution cannot, like the
goddess Athena, rise full-grown from the brow of the Constitutional Convention, nor can it conjure by mere fiat an
instant Utopia. It must grow with the society it seeks to re-structure and march apace with the progress of the race,
drawing from the vicissitudes of history the dynamism and vitality that will keep it, far from becoming a petrified
rule, a pulsing, living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that "(e)ach Member shall ensure the conformity of its laws, regulations and administrative procedures
with its obligations as provided in the annexed Agreements." 39 Petitioners maintain that this undertaking "unduly limits, restricts and
impairs Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine Constitution is
vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines because this means that Congress
could not pass legislation that will be good for our national interest and general welfare if such legislation will not conform with the
WTO Agreement, which not only relates to the trade in goods . . . but also to the flow of investments and money . . . as well as to a
whole slew of agreements on socio-cultural matters . . . 40

More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the Congress. 41 And
while the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts, such authority is subject to "specified limits and . . . such limitations and restrictions" as Congress
may provide, 42 as in fact it did under Sec. 401 of the Tariff and Customs Code.

Sovereignty Limited by
International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments on this issue. However, while
sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions
and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably,
the Constitution did not envision a hermit-type isolation of the country from the rest of the world. In its Declaration of Principles and
State Policies, the Constitution "adopts the generally accepted principles of international law as part of the law of the land, and adheres
to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." 43 By the doctrine of incorporation, the
country is bound by generally accepted principles of international law, which are considered to be automatically part of our own
laws. 44 One of the oldest and most fundamental rules in international law is pacta sunt servanda — international agreements must be
performed in good faith. "A treaty engagement is not a mere moral obligation but creates a legally binding obligation on the
parties . . . A state which has contracted valid international obligations is bound to make in its legislations such modifications as may
be necessary to ensure the fulfillment of the obligations undertaken." 45

By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender
some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After all, states,
like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit
the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States concerning such
widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the regulation
of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling of claims, the laying down of
rules governing conduct in peace and the establishment of international organizations. 46 The sovereignty of a state therefore cannot in
fact and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of
membership in the family of nations and (2) limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, "Today, no
nation can build its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here." 47

UN Charter and Other Treaties

Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights
under the "concept of sovereignty as auto-limitation."47-A Under Article 2 of the UN Charter, "(a)ll members shall give the United
Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any
state against which the United Nations is taking preventive or enforcement action." Such assistance includes payment of its
corresponding share not merely in administrative expenses but also in expenditures for the peace-keeping operations of the
organization. In its advisory opinion of July 20, 1961, the International Court of Justice held that money used by the United Nations
Emergency Force in the Middle East and in the Congo were "expenses of the United Nations" under Article 17, paragraph 2, of the
UN Charter. Hence, all its members must bear their corresponding share in such expenses. In this sense, the Philippine Congress is
restricted in its power to appropriate. It is compelled to appropriate funds whether it agrees with such peace-keeping expenses or not.
So too, under Article 105 of the said Charter, the UN and its representatives enjoy diplomatic privileges and immunities, thereby
limiting again the exercise of sovereignty of members within their own territory. Another example: although "sovereign equality" and
"domestic jurisdiction" of all members are set forth as underlying principles in the UN Charter, such provisos are however subject to
enforcement measures decided by the Security Council for the maintenance of international peace and security under Chapter VII of
the Charter. A final example: under Article 103, "(i)n the event of a conflict between the obligations of the Members of the United
Nations under the present Charter and their obligations under any other international agreement, their obligation under the present
charter shall prevail," thus unquestionably denying the Philippines — as a member — the sovereign power to make a choice as to
which of conflicting obligations, if any, to honor.

Apart from the UN Treaty, the Philippines has entered into many other international pacts — both bilateral and multilateral — that
involve limitations on Philippine sovereignty. These are enumerated by the Solicitor General in his Compliance dated October 24,
1996, as follows:

(a) Bilateral convention with the United States regarding taxes on income, where the Philippines agreed, among
others, to exempt from tax, income received in the Philippines by, among others, the Federal Reserve Bank of the
United States, the Export/Import Bank of the United States, the Overseas Private Investment Corporation of the
United States. Likewise, in said convention, wages, salaries and similar remunerations paid by the United States to
its citizens for labor and personal services performed by them as employees or officials of the United States are
exempt from income tax by the Philippines.

(b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation with respect to
taxes on income.

(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation.

(d) Bilateral convention with the French Republic for the avoidance of double taxation.

(e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all customs duties,
inspection fees and other duties or taxes aircrafts of South Korea and the regular equipment, spare parts and supplies
arriving with said aircrafts.

(f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs duties, excise
taxes, inspection fees and other similar duties, taxes or charges fuel, lubricating oils, spare parts, regular equipment,
stores on board Japanese aircrafts while on Philippine soil.

(g) Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the same
privileges as those granted to Japanese and Korean air carriers under separate air service agreements.

(h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines exempted Israeli
nationals from the requirement of obtaining transit or visitor visas for a sojourn in the Philippines not exceeding 59
days.

(i) Bilateral agreement with France exempting French nationals from the requirement of obtaining transit and visitor
visa for a sojourn not exceeding 59 days.

(j) Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special Missions in
the Philippines are inviolable and its agents can not enter said premises without consent of the Head of Mission
concerned. Special Missions are also exempted from customs duties, taxes and related charges.

(k) Multilateral convention on the Law of Treaties. In this convention, the Philippines agreed to be governed by the
Vienna Convention on the Law of Treaties.

(l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the International Court of
Justice. The International Court of Justice has jurisdiction in all legal disputes concerning the interpretation of a
treaty, any question of international law, the existence of any fact which, if established, would constitute a breach
"of international obligation."

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent
domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the
other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. The same
reciprocity characterizes the Philippine commitments under WTO-GATT.

International treaties, whether relating to nuclear disarmament, human rights, the environment, the law of the sea, or
trade, constrain domestic political sovereignty through the assumption of external obligations. But unless anarchy in
international relations is preferred as an alternative, in most cases we accept that the benefits of the reciprocal
obligations involved outweigh the costs associated with any loss of political sovereignty. (T)rade treaties that
structure relations by reference to durable, well-defined substantive norms and objective dispute resolution
procedures reduce the risks of larger countries exploiting raw economic power to bully smaller countries, by
subjecting power relations to some form of legal ordering. In addition, smaller countries typically stand to gain
 disproportionately from trade liberalization. This is due to the simple fact that liberalization will provide access to a
larger set of potential new trading relationship than in case of the larger country gaining enhanced success to the
smaller country's market. 48

The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the Constitution, based
on the rationale that the Philippines "adopts the generally accepted principles of international law as part of the law of the land and
adheres to the policy of . . . cooperation and amity with all nations."

Fourth Issue: The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS) 49 intrudes on the power of the Supreme Court to promulgate rules concerning
pleading, practice and procedures. 50

To understand the scope and meaning of Article 34, TRIPS, 51 it will be fruitful to restate its full text as follows:

Article 34

Process Patents: Burden of Proof

1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in
paragraph 1 (b) of Article 28, if the subject matter of a patent is a process for obtaining a product, the judicial
authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is
different from the patented process. Therefore, Members shall provide, in at least one of the following
circumstances, that any identical product when produced without the consent of the patent owner shall, in the
absence of proof to the contrary, be deemed to have been obtained by the patented process:

(a) if the product obtained by the patented process is new;

(b) if there is a substantial likelihood that the identical product was made by the process and the
owner of the patent has been unable through reasonable efforts to determine the process actually
used.

2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on the alleged
infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the condition referred to in
subparagraph (b) is fulfilled.

3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their manufacturing
and business secrets shall be taken into account.

From the above, a WTO Member is required to provide a rule of disputable (not the words "in the absence of proof to the contrary")
presumption that a product shown to be identical to one produced with the use of a patented process shall be deemed to have been
obtained by the (illegal) use of the said patented process, (1) where such product obtained by the patented product is new, or (2) where
there is "substantial likelihood" that the identical product was made with the use of the said patented process but the owner of the
patent could not determine the exact process used in obtaining such identical product. Hence, the "burden of proof" contemplated by
Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such presumption. Such burden,
properly understood, actually refers to the "burden of evidence" (burden of going forward) placed on the producer of the identical (or
fake) product to show that his product was produced without the use of the patented process.

The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of the presumption provided under
paragraph 1 of Article 34, such owner still has to introduce evidence of the existence of the alleged identical product, the fact that it is
"identical" to the genuine one produced by the patented process and the fact of "newness" of the genuine product or the fact of
"substantial likelihood" that the identical product was made by the patented process.

The foregoing should really present no problem in changing the rules of evidence as the present law on the subject, Republic Act No.
165, as amended, otherwise known as the Patent Law, provides a similar presumption in cases of infringement of patented design or
utility model, thus:

Sec. 60. Infringement. — Infringement of a design patent or of a patent for utility model shall consist in
unauthorized copying of the patented design or utility model for the purpose of trade or industry in the article or
product and in the making, using or selling of the article or product copying the patented design or utility
model. Identity or substantial identity with the patented design or utility model shall constitute evidence of copying.
(emphasis supplied)

Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only if (1) the product
obtained by the patented process in NEW or (2) there is a substantial likelihood that the identical product was made by the process and
the process owner has not been able through reasonable effort to determine the process used. Where either of these two provisos does
not obtain, members shall be free to determine the appropriate method of implementing the provisions of TRIPS within their own
internal systems and processes.
By and large, the arguments adduced in connection with our disposition of the third issue — derogation of legislative power — will
apply to this fourth issue also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually exists.
Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due process and the concept of adversarial dispute
settlement inherent in our judicial system.

So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, the adjustment in
legislation and rules of procedure will not be substantial. 52

Fifth Issue: Concurrence Only in the WTO Agreement and

Not in Other Documents Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes — but not in the other documents referred to in
the Final Act, namely the Ministerial Declaration and Decisions and the Understanding on Commitments in Financial Services — is
defective and insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the WTO Agreement alone is
flawed because it is in effect a rejection of the Final Act, which in turn was the document signed by Secretary Navarro, in
representation of the Republic upon authority of the President. They contend that the second letter of the President to the
Senate 53 which enumerated what constitutes the Final Act should have been the subject of concurrence of the Senate.

"A final act, sometimes called protocol de cloture, is an instrument which records the winding up of the proceedings of a diplomatic
conference and usually includes a reproduction of the texts of treaties, conventions, recommendations and other acts agreed upon and
signed by the plenipotentiaries attending the conference." 54 It is not the treaty itself. It is rather a summary of the proceedings of a
protracted conference which may have taken place over several years. The text of the "Final Act Embodying the Results of the
Uruguay Round of Multilateral Trade Negotiations" is contained in just one page 55 in Vol. I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of the Republic of the Philippines
undertook:

(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities
with a view to seeking approval of the Agreement in accordance with their procedures; and

(b) to adopt the Ministerial Declarations and Decisions.

The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its signatories, namely,
concurrence of the Senate in the WTO Agreement.

The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were approved by the ministers
by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet "to give effect to those provisions
of this Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering the objectives of
this Agreement." 56

The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the Philippines. It applies
only to those 27 Members which "have indicated in their respective schedules of commitments on standstill, elimination of monopoly,
expansion of operation of existing financial service suppliers, temporary entry of personnel, free transfer and processing of
information, and national treatment with respect to access to payment, clearing systems and refinancing available in the normal course
of business."57

On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as its integral parts, 58 as
follows:

Article II

Scope of the WTO

1. The WTO shall provide the common institutional frame-work for the conduct of trade relations among its
Members in matters to the agreements and associated legal instruments included in the Annexes to this Agreement.

2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3, (hereinafter referred to as
"Multilateral Agreements") are integral parts of this Agreement, binding on all Members.

3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as "Plurilateral
Trade Agreements") are also part of this Agreement for those Members that have accepted them, and are binding on
those Members. The Plurilateral Trade Agreements do not create either obligation or rights for Members that have
not accepted them.

4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred to as "GATT
1994") is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the
Final Act adopted at the conclusion of the Second Session of the Preparatory Committee of the United Nations
Conference on Trade and Employment, as subsequently rectified, amended or modified (hereinafter referred to as
"GATT 1947").
It should be added that the Senate was well-aware of what it was concurring in as shown by the members' deliberation on August 25,
1994. After reading the letter of President Ramos dated August 11, 1994, 59 the senators 
of the Republic minutely dissected what the Senate was concurring in, as follows: 60

THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day hearing of this
Committee yesterday. Was the observation made by Senator Tañada that what was submitted to the Senate was not
the agreement on establishing the World Trade Organization by the final act of the Uruguay Round which is not the
same as the agreement establishing the World Trade Organization? And on that basis, Senator Tolentino raised a
point of order which, however, he agreed to withdraw upon understanding that his suggestion for an alternative
solution at that time was acceptable. That suggestion was to treat the proceedings of the Committee as being in the
nature of briefings for Senators until the question of the submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a new . . . is he making a new submission which
improves on the clarity of the first submission?

MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no misunderstanding, it was his
intention to clarify all matters by giving this letter.

THE CHAIRMAN: Thank you.

Can this Committee hear from Senator Tañada and later on Senator Tolentino since they were the ones that raised
this question yesterday?

Senator Tañada, please.

SEN. TAÑADA: Thank you, Mr. Chairman.

Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted to the Senate
for ratification is not the Final Act of the Uruguay Round, but rather the Agreement on the World Trade
Organization as well as the Ministerial Declarations and Decisions, and the Understanding and Commitments in
Financial Services.

I am now satisfied with the wording of the new submission of President Ramos.

SEN. TAÑADA. . . . of President Ramos, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tañada. Can we hear from Senator Tolentino? And after him Senator
Neptali Gonzales and Senator Lina.

SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but I saw the
draft of his earlier, and I think it now complies with the provisions of the Constitution, and with the Final Act
itself . The Constitution does not require us to ratify the Final Act. It requires us to ratify the Agreement which is
now being submitted. The Final Act itself specifies what is going to be submitted to with the governments of the
participants.

In paragraph 2 of the Final Act, we read and I quote:

By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO Agreement for
the consideration of the respective competent authorities with a view to seeking approval of the Agreement in
accordance with their procedures.

In other words, it is not the Final Act that was agreed to be submitted to the governments for ratification or
acceptance as whatever their constitutional procedures may provide but it is the World Trade Organization
Agreement. And if that is the one that is being submitted now, I think it satisfies both the Constitution and the Final
Act itself .

Thank you, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.

SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they had been
adequately reflected in the journal of yesterday's session and I don't see any need for repeating the same.

Now, I would consider the new submission as an act ex abudante cautela.

THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment on this?

SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales out of the abundance of
question. Then the new submission is, I believe, stating the obvious and therefore I have no further comment to
make.
 Epilogue

In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this Court's
constitutionally imposed duty "to determine whether or not there has been grave abuse of discretion amounting to lack or excess of
jurisdiction" on the part of the Senate in giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ
of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is amply
shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law.

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction. 61 Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion
of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. 62 Failure on the part of
the petitioner to show grave abuse of discretion will result in the dismissal of the petition. 63

In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two sovereign houses of
Congress and is thus entitled to great respect in its actions. It is itself a constitutional body independent and coordinate, and thus its
actions are presumed regular and done in good faith. Unless convincing proof and persuasive arguments are presented to overthrow
such presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted definition of grave abuse of
discretion and the presumption of regularity in the Senate's processes, this Court cannot find any cogent reason to impute grave abuse
of discretion to the Senate's exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the
Constitution. 64

It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an independent national economy
effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally produced
goods. But it is equally true that such principles — while serving as judicial and legislative guides — are not in themselves sources of
causes of action. Moreover, there are other equally fundamental constitutional principles relied upon by the Senate which mandate the
pursuit of a "trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality
and reciprocity" and the promotion of industries "which are competitive in both domestic and foreign markets," thereby justifying its
acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced
by the adoption of the generally accepted principles of international law as part of the law of the land and the adherence of the
Constitution to the policy of cooperation and amity with all nations.

That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement thereby
making it "a part of the law of the land" is a legitimate exercise of its sovereign duty and power. We find no "patent and gross"
arbitrariness or despotism "by reason of passion or personal hostility" in such exercise. It is not impossible to surmise that this Court,
or at least some of its members, may even agree with petitioners that it is more advantageous to the national interest to strike down
Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision.
To do so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate did was a valid
exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of judicial inquiry and review.
That is a matter between the elected policy makers and the people. As to whether the nation should join the worldwide march toward
trade liberalization and economic globalization is a matter that our people should determine in electing their policy makers. After all,
the WTO Agreement allows withdrawal of membership, should this be the political desire of a member.

The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance 65 where "the East will become
the dominant region of the world economically, politically and culturally in the next century." He refers to the "free market" espoused
by WTO as the "catalyst" in this coming Asian ascendancy. There are at present about 31 countries including China, Russia and Saudi
Arabia negotiating for membership in the WTO. Notwithstanding objections against possible limitations on national sovereignty, the
WTO remains as the only viable structure for multilateral trading and the veritable forum for the development of international trade
law. The alternative to WTO is isolation, stagnation, if not economic self-destruction. Duly enriched with original membership, keenly
aware of the advantages and disadvantages of globalization with its on-line experience, and endowed with a vision of the future, the
Philippines now straddles the crossroads of an international strategy for economic prosperity and stability in the new millennium. Let
the people, through their duly authorized elected officers, make their free choice.

WHEREFORE, the petition is DISMISSED for lack of merit.

G.R. No. 132451 December 17, 1999

CONGRESSMAN ENRIQUE T. GARCIA, petitioner, 

vs.
HON. RENATO C. CORONA, in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the
Secretary of Energy, CALTEX PHILIPPINES INC., PILIPINAS SHELL PETROLEUM CORP. and PETRON
CORP., respondents.

YNARES-SANTIAGO, J.:

On November 5, 1997, this Court in Tatad v. Secretary of the Department of Energy and Lagman, et al., v. Hon.Ruben Torres, et
al., 1 declared Republic Act No. 8180, entitled "An Act Deregulating the Downstream Oil Industry and For Other Purposes",
unconstitutional, and its implementing Executive Order No. 392 void.
R.A. 8180 was struck down as invalid because three key provisions intended to promote free competition were shown to achieve the
opposite result. More specifically, this Court ruled that its provisions on tariff differential, stocking of inventories, and predatory
pricing inhibit fair competition, encourage monopolistic power, and interfere with the free interaction of the market forces.

While R.A. 8180 contained a separability clause, it was declared unconstitutional in its entirety since the three (3) offending
provisions so permeated the law that they were so intimately the esse of the law. Thus, the whole statute had to be invalidated.

As a result of the Tatad decision, Congress enacted Republic Act No. 8479, a new deregulation law without the offending provisions
of the earlier law. Petitioner Enrique T. Garcia, a member of Congress, has now brought this petition seeking to declare Section 19
thereof, which sets the time of full deregulation, unconstitutional. After failing in his attempts to have Congress incorporate in the law
the economic theory he espouses, petitioner now asks us, in the name of upholding the Constitution, to undo a violation which he
claims Congress has committed.

The assailed Section 19 of R.A. 8479 states in full:

Sec. 19. Start of Full Deregulation. — Full deregulation of the Industry shall start five (5) months following the
effectivity of this Act: Provided, however, That when the public interest so requires, the President may accelerate
the start of full deregulation upon the recommendation of the DOE and the Department of Finance (DOF) when the
prices of crude oil and petroleum products in the world market are declining and the value of the peso in relation to
the US dollar is stable, taking into account relevant trends and prospects; Provided, further, That the foregoing
provision notwithstanding, the five (5)-month Transition Phase shall continue to apply to LPG, regular gasoline and
kerosene as socially-sensitive petroleum products and said petroleum products shall be covered by the automatic
pricing mechanism during the said period.

Upon the implementation of full deregulation as provided herein, the Transition Phase is deemed terminated and the
following laws are repealed:

a) Republic Act No. 6173, as amended;

b) Section 5 of Executive Order No. 172, as amended;

c) Letter of Instruction No. 1431, dated October 15, 1984;

d) Letter of Instruction No. 1441, dated November 20, 1984, as amended;

e) Letter of Instruction No. 1460, dated May 9, 1985;

f) Presidential Decree No. 1889; and

g) Presidential Decree No. 1956, as amended by Executive Order No. 137:

Provided, however, That in case full deregulation is started by the President in the exercise of the authority provided
in this Section, the foregoing laws shall continue to be in force and effect with respect to LPG, regular gasoline and
kerosene for the rest of the five (5)-month period.

Petitioner contends that Section 19 of R.A. 8479, which prescribes the period for the removal of price control on gasoline and other
finished products and for the full deregulation of the local downstream oil industry, is patently contrary to public interest and therefore
unconstitutional because within the short span of five months, the market is still dominated and controlled by an oligopoly of the three
(3) private respondents, namely, Shell, Caltex and Petron.

The objective of the petition is deceptively simple. It states that if the constitutional mandate against monopolies and combinations in
restraint of
trade 2 is to be obeyed, there should be indefinite and open-ended price controls on gasoline and other oil products for as long as
necessary. This will allegedly prevent the "Big 3" — Shell, Caltex and Petron — from price-fixing and overpricing. Petitioner calls the
indefinite retention of price controls as "partial deregulation".

The grounds relied upon in the petition are:

A.

Sec. 19 OF R.A. NO. 8479 WHICH PROVIDES FOR FULL DEREGULATION FIVE (5) MONTHS OR
EARLIER FOLLOWING THE EFFECTIVITY OF THE LAW, IS GLARINGLY PRO-OLIGOPOLY, ANTI-
COMPETITION AND ANTI-PEOPLE, AND IS THEREFORE PATENTLY UNCONSTITUTIONAL FOR
BEING IN GROSS AND CYNICAL CONTRAVENTION OF THE CONSTITUTIONAL POLICY AND
COMMAND EMBODIED IN ARTCLE XII, SECTION 19 OF THE 1987 CONSTITUTION AGAINST
MONOPOLIES AND COMBINATIONS IN RESTRAINT OF TRADE.

B.
 SAID SECTION 19 OF R.A. No. 8479 IS GLARINGLY PRO-OLIGOPOLY, ANTI-COMPETITION AND ANTI-
PEOPLE, FOR THE FURTHER REASON THAT IT PALPABLY AND CYNICALLY VIOLATES THE VERY
OBJECTIVE AND PURPOSE OF R.A. NO. 8479, WHICH IS TO ENSURE A TRULY COMPETITIVE
MARKET UNDER A REGIME OF FAIR PRICES.

C.

SAID SECTION 19 OF R.A. No. 8479, BEING GLARINGLY PRO-OLIGOPOLY, ANTI-COMPETITION AND
ANTI-PEOPLE, BEING PATENTLY UNCONSTITUTIONAL AND BEING PALPABLY VIOLATIVE OF THE
LAW'S POLICY AND PURPOSE OF ENSURING A TRULY COMPETITIVE MARKET UNDER A REGIME
OF FAIR PRICES, IS A VERY GRAVE AND GRIEVOUS ABUSE OF DISCRETION ON THE PART OF THE
LEGISLATIVE AND EXECUTIVE BRANCHES OF GOVERNMENT.

D.

PREMATURE FULL DEREGULATION UNDER SECTION 19 OF R.A. NO. 8479 MAY AND SHOULD
THEREFORE BE DECLARED NULL AND VOID EVEN AS THE REST OF ITS PROVISIONS REMAIN IN
FORCE, SUCH AS THE TRANSITION PHASE OR PARTIAL DEREGULATION WITH PRICE CONTROLS
THAT ENSURES THE PROTECTION OF THE PUBLIC INTEREST BY PREVENTING THE BIG 3
OLIGOPOLY'S PRICE-FIXING AND OVERPRICING. 3

The issues involved in the deregulation of the downstream oil industry are of paramount significance. The ramifications, international
and local in scope, are complex. The impact on the nation's economy is pervasive and far-reaching. The amounts involved in the oil
business are immense. Fluctuations in the supply and price of oil products have a dramatic effect on economic development and public
welfare. As pointed out in the Tatad decision, few cases carry a surpassing importance on the daily life of every Filipino. The issues
affect everybody from the poorest wage-earners and their families to the richest entrepreneurs, from industrial giants to humble
consumers.

Our decision in this case is complicated by the unstable oil prices in the world market. Even as this case is pending, the price of OPEC
oil is escalating to record levels. We have to emphasize that our decision has nothing to do with worldwide fluctuations in oil prices
and the counter-measures of Government each time a new development takes place.

The most important part of deregulation is freedom from price control. Indeed, the free play of market forces through deregulation and
when to implement it represent one option to solve the problems of the oil-consuming public. There are other considerations which
may be taken into account such as the reduction of taxes on oil products, the reinstitution of an Oil Price Stabilization Fund, the choice
between government subsidies taken from the regular taxpaying public on one hand and the increased costs being shouldered only by
users of oil products on the other, and most important, the immediate repeal of the oil deregulation law as wrong policy. Petitioner
wants the setting of prices to be done by Government instead of being determined by free market forces. His preference is continued
price control with no fixed end in sight. A simple glance at the factors surrounding the present problems besetting the oil industry
shows that they are economic in nature.

R.A. 8479, the present deregulation law, was enacted to implement Article XII, Section 19 of the Constitution which provides:

The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed.

This is so because the Government believes that deregulation will eventually prevent monopoly. The simplest form of monopoly
exists when there is only one seller or producer of a product or service for which there are no substitutes. In its more complex form,
monopoly is defined as the joint acquisition or maintenance by members of a conspiracy, formed for that purpose, of the power to
control and dominate trade and commerce in a commodity to such an extent that they are able, as a group, to exclude actual or
potential competitors from the field, accompanied with the intention and purpose to exercise such power. 4

Where two or three or a few companies act in concert to control market prices and resultant profits, the monopoly is called an
oligopoly or cartel. It is a combination in restraint of trade.

The perennial shortage of oil supply in the Philippines is exacerbated by the further fact that the importation, refining, and marketing
of this precious commodity are in the hands of a cartel, local but made up of foreign-owned corporations. Before the start of
deregulation, the three private respondents controlled the entire oil industry in the Philippines.

It bears reiterating at the outset that the deregulation of the oil industry is a policy determination of the highest order. It is
unquestionably a priority program of Government. The Department of Energy Act of 19925 expressly mandates that the development
and updating of the existing Philippine energy program "shall include a policy direction towards deregulation of the power and energy
industry."

Be that as it may, we are not concerned with whether or not there should be deregulation. This is outside our jurisdiction. The
judgment on the issue is a settled matter and only Congress can reverse it. Rather, the question that we should address here is — are
the method and the manner chosen by Government to accomplish its cherished goal offensive to the Constitution? Is indefinite price
control in the manner proposed by petitioner the only feasible and legal way to achieve it?

Petitioner has taken upon himself a most challenging task. Unquestionably, the direction towards which the nation's efforts at
economic and social upliftment should be addressed is a function of Congress and the President. In the exercise of this function,
Congress and the President have obviously determined that speedy deregulation is the answer to the acknowledged dominion by
oligopolistic forces of the oil industry. Thus, immediately after R.A. 8180 was declared unconstitutional in the Tatad case, Congress
took resolute steps to fashion new legislation towards the objective of the earlier law. Invoking the Constitution, petitioner now wants
to slow down the process.

While the Court respects the firm resolve displayed by Congress and the President, all departments of Government are equally bound
by the sovereign will expressed in the commands of the Constitution. There is a need for utmost care if this Court is to faithfully
discharge its duties as arbitral guardian of the Constitution. We cannot encroach on the policy functions of the two other great
departments of Government. But neither can we ignore any overstepping of constitutional limitations. Locating the correct balance
between legality and policy, constitutional boundaries and freedom of action, and validity and expedition is this Court's dilemma as it
resolves the legitimacy of a Government program aimed at giving every Filipino a more secure, fulfilling and abundant life.

Our ruling in Tatad is categorical that the Constitution's Article XII, Section 19, is anti-trust in history and spirit. It espouses
competition. We have stated that only competition which is fair can release the creative forces of the market. We ruled that the
principle which underlies the constitutional provision is competition. Thus:

Sec. 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability
of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair
competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle
of section 19, Article XII of our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the
observation of Prof. Gellhorn that the objective of anti-trust law is "to assure a competitive economy, based upon the
belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice
of the fewest resources. Competition among producers allows consumers to bid for goods and services, and thus
matches their desires with society's opportunity costs." He adds with appropriateness that there is a reliance upon
"the operation of the "market" system (free enterprise) to decide what shall be produced, how resources shall be
allocated in the production process, and to whom the various products will be distributed. The market system relies
on the consumer to decide what and how much shall be produced, and on competition, among producers to
determine who will manufacture it."6

In his recital of the antecedent circumstances, petitioner repeats in abbreviated form the factual findings and conclusions which led the
Court to declare R.A. 8180 unconstitutional. The foreign oligopoly or cartel formed by respondents Shell, Caltex and Petron, their
indulging in price-fixing and overpricing, their blockade tactics which effectively obstructed the entry of genuine competitors, the
dangers posed by the oil cartel to national security and economic development, and other prevailing sentiments are stated as axiomatic
truths. They are repeated in capsulized context as the current background facts of the present petition.

The empirical existence of this deplorable situation was precisely the reason why Congress enacted the oil deregulation law. The evils
arising from conspiratorial acts of monopoly are recognized as clear and present. But the enumeration of the evils by
our Tatad decision was not for the purpose of justifying continued government control, especially price control. The objective was,
rather, the opposite. The evils were emphasized to show the need for free competition in a deregulated industry. And to be sure, the
measures to address these evils are for Congress to determine, but they have to meet the test of constitutional validity.

The Court respects the legislative finding that deregulation is the policy answer to the problems. It bears stressing that R.A. 8180 was
declared invalid not because deregulation is unconstitutional. The law was struck down because, as crafted, three key provisions
plainly encouraged the continued existence if not the proliferation of the constitutionally proscribed evils of monopoly and restraint of
trade.

In sharp contrast, the present petition lacks a factual foundation specifically highlighting the need to declare the challenged provision
unconstitutional. There is a dearth of relevant, reliable, and substantial evidence to support petitioner's theory that price control must
continue even as Government is trying its best to get out of regulating the oil industry. The facts of the petition are, in the main, a
general dissertation on the evils of monopoly.

Petitioner overlooks the fact that Congress enacted the deregulation law exactly because of the monopoly evils he mentions in his
petition. Congress instituted the lifting of price controls in the belief that free and fair competition was the best remedy against
monopoly power. In other words, petitioner's facts are also the reasons why Congress lifted price controls and why the President
accelerated the process. The facts adduced in favor of continued and indefinite price control are the same facts which supported what
Congress believes is an exercise of wisdom and discretion when it chose the path of speedy deregulation and rejected Congressman
Garcia's economic theory.

The petition states that it is using the very thoughts and words of the Court in its Tatad decision. Those thoughts and words, however,
were directed against the tariff differential, the inventory requirement, and predatory pricing, not against deregulation as a policy and
not against the lifting of price controls.

A dramatic, at times expansive and grandiloquent, reiteration of the same background circumstances narrated in Tatad does not
squarely sustain petitioner's novel thesis that there can be deregulation without lifting price controls.

Petitioner may call the industry subject to price controls as deregulated. In enacting the challenged provision, Congress, on the other
hand, has declared that any industry whose prices and profits are fixed by government authority remains a highly regulated one.

Petitioner, therefore, engages in a legal paradox. He fails to show how there can be deregulation while retaining government price
control. Deregulation means the lifting of control, governance and direction through rule or regulation. It means that the regulated
industry is freed from the controls, guidance, and restrictions to which it used to be subjected. The use of the word "partial" to qualify
deregulation is sugar-coating. Petitioner is really against deregulation at this time.
Petitioner states that price control is good. He claims that it was the regulation of the importation of finished oil products which led to
the exit of competitors and the consolidation and dominion of the market by an oligopoly, not price control. Congress and the
President think otherwise.

The argument that price control is not the villain in the intrusion and growth of monopoly appears to be pure theory not validated by
experience. There can be no denying the fact that the evils mentioned in the petition arose while there was price control. The
dominance of the so-called "Big 3" became entrenched during the regime of price control. More importantly, the ascertainment of the
cause and the method of dismantling the oligopoly thus created are a matter of legislative and executive choice. The judicial process is
equipped to handle legality but not wisdom of choice and the efficacy of solutions.

Petitioner engages in another contradiction when he puts forward what he calls a self-evident truth. He states that a truly competitive
market and fair prices cannot be legislated into existence. However, the truly competitive market is not being created or fashioned by
the challenged legislation. The market is simply freed from legislative controls and allowed to grow and develop free from
government interference. R.A. 8479 actually allows the free play of supply and demand to dictate prices. Petitioner wants a
government official or board to continue performing this task. Indefinite and open-ended price control as advocated by petitioner
would be to continue a regime of legislated regulation where free competition cannot possibly flourish. Control is the antithesis of
competition. To grant the petition would mean that the Government is not keen on allowing a free market to develop. Petitioner's
"self-evident truth" thus supports the validity of the provision of law he opposes.

New players in the oil industry intervened in this case. According to them, it is the free market policy and atmosphere of deregulation
which attracted and brought the new participants, themselves included, into the market. The intervenors express their fear that this
Court would overrule legislative policy and replace it with petitioner's own legislative program.

The factual allegations of the intervenors have not been refuted and we see no reason to doubt them. Their argument that the co-
existence of many viable rivals create free market conditions induces competition in product quality and performance and makes
available to consumers an expanded range of choices cannot be seriously disputed.

On the other hand, the pleadings of public and private respondents both put forth the argument that the challenged provision is a
policy decision of Congress and that the wisdom of the provision is outside the authority of this Court to consider. We agree. As we
have ruled in Morfe v. Mutuc7:

(I)t is well to remember that this Court, in the language of Justice Laurel, "does not pass upon question or wisdom,
justice or expediency of legislation." As expressed by Justice Tuason: "It is not the province of the courts to
supervise legislation and keep it within the bounds of propriety and common sense. That is primarily and
exclusively a legislative concern." There can be no possible objection then to the observation of Justice
Montemayor: "As long as laws do not violate any Constitutional provision, the Courts merely interpret and apply
them regardless of whether or not they are wise or salutary." For they, according to Justice Labrador, "are not
supposed to override legitimate policy and . . . never inquire into the wisdom of the law."

It is thus settled, to paraphrase Chief Justice Concepcion in Gonzales v. Commission on Elections, that only
congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute
invalid. This is as it ought to be: The principle of separation of powers has in the main wisely allocated the
respective authority of each department and confined its jurisdiction to such a sphere. There would then be intrusion
not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would
substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be the courts
of justice, to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of
legal norms and prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be
objections, even if valid and cogent, on its wisdom cannot be sustained.

In this petition, Congressman Garcia seeks to revive the long settled issue of the timeliness of full deregulation, which issue he had
earlier submitted to this Court by way of a Partial Motion for Reconsideration in the Tatad case. In our Resolution dated December 3,
1997, which has long become final and executory, we stated:

We shall first resolve petitioner Garcia's linchpin contention that the full deregulation decreed by R.A. No. 8180 to
start at the end of March 1997 is unconstitutional. For prescinding from this premise, petitioner suggests that "we
simply go back to the transition period, price control will be revived through the automatic pricing mechanism based
on Singapore Posted Prices. The Energy Regulatory Board . . . would play a limited and ministerial role of
computing the monthly price ceiling of each and every petroleum fuel product, using the automatic pricing formula.
While the OPSF would return, this coverage would be limited to monthly price increases in excess of P0.50 per liter.

We are not impressed by petitioner Garcia's submission. Petitioner has no basis in condemning as
unconstitutional per se the date fixed by Congress for the beginning of the full deregulation of the downstream oil
industry. Our Decision merely faulted the Executive for factoring the depletion of OPSF in advancing the date of
full deregulation to February 1997. Nonetheless, the error of the Executive is now a non-issue for the full
deregulation set by Congress itself at the end of March 1997 has already come to pass. March 1997 is not an
arbitrary date. By that date, the transition period has ended and it was expected that the people would have adjusted
to the role of market forces in shaping the prices of petroleum and its products. The choice of March 1997 as the
date of full deregulation is a judgment of Congress and its judgment call cannot be impugned by this Court.8

Reduced to its basic arguments, it can be seen that the challenge in this petition is not against the legality of deregulation. Petitioner
does not expressly challenge deregulation. The issue, quite simply, is the timeliness or the wisdom of the date when full deregulation
should be effective.
In this regard, what constitutes reasonable time is not for judicial determination. Reasonable time involves the appraisal of a great
variety of relevant conditions, political, social and economic. They are not within the appropriate range of evidence in a court of
justice. It would be an extravagant extension of judicial authority to assert judicial notice as the basis for the determination.9

We repeat that what petitioner decries as unsuccessful is not a final result. It is only a beginning. The Court is not inclined to stifle
deregulation as enacted by Congress from its very start. We leave alone the program of deregulation at this stage. Reasonable time
will prove the wisdom or folly of the deregulation program for which Congress and not the Court is accountable.

Petitioner argues further that the public interest requires price controls while the oligopoly exists, for that is the only way the public
can be protected from monopoly or oligopoly pricing. But is indefinite price control the only feasible and legal way to enforce the
constitutional mandate against oligopolies?

Art. 186 of the Revised Penal Code, as amended, punishes as a felony the creation of monopolies and combinations in restraint of
trade. The Solicitor General, on the other hand, cites provisions of R.A. 8479 intended to prevent competition from being corrupted or
manipulated. Section 11, entitled "Anti-Trust Safeguards", defines and prohibits cartelization and predatory pricing. It penalizes the
persons and officers involved with imprisonment of three (3) to seven (7) years and fines ranging from One million to Two million
pesos. For this purpose, a Joint Task Force from the Department of Energy and Department of Justice is created under Section 14 to
investigate and order the prosecution of violations.

Sec. 8 and 9 of the Act, meanwhile, direct the Departments of Foreign Affairs, Trade and Industry, and Energy to undertake strategies,
incentives and benefits, including international information campaigns, tax holidays and various other agreements and utilizations, to
invite and encourage the entry of new participants. Section 6 provides for uniform tariffs at three percent (3%).

Sec. 13 of the Act provides for "Remedies", under which the filing of actions by government prosecutors and the investigation of
private complaints by the Task Force is provided. Sections 14 and 15 provide how the Department of Energy shall monitor and
prevent the occurrence of collusive pricing in the industry.

It can be seen, therefore, that instead of the price controls advocated by the petitioner, Congress has enacted anti-trust measures which
it believes will promote free and fair competition. Upon the other hand, the disciplined, determined, consistent and faithful execution
of the law is the function of the President. As stated by public respondents, the remedy against unreasonable price increases is not the
nullification of Section 19 of R.A. 8479 but the setting into motion of its various other provisions.

For this Court to declare unconstitutional the key provision around which the law's anti-trust measures are clustered would mean a
constitutionally interdicted distrust of the wisdom of Congress and of the determined exercise of executive power.

Having decided that deregulation is the policy to follow, Congress and the President have the duty to set up the proper and effective
machinery to ensure that it works. This is something which cannot be adjudicated into existence. This Court is only an umpire of last
resort whenever the Constitution or a law appears to have been violated. There is no showing of a constitutional violation in this case.

WHEREFORE, the petition is DISMISSED.

G.R. No. 183591             October 14, 2008

THE PROVINCE OF NORTH COTABATO, duly represented by GOVERNOR JESUS SACDALAN and/or VICE-
GOVERNOR EMMANUEL PIÑOL, for and in his own behalf, petitioners, 
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE PANEL ON ANCESTRAL DOMAIN (GRP),
represented by SEC. RODOLFO GARCIA, ATTY. LEAH ARMAMENTO, ATTY. SEDFREY CANDELARIA, MARK
RYAN SULLIVAN and/or GEN. HERMOGENES ESPERON, JR., the latter in his capacity as the present and duly-
appointed Presidential Adviser on the Peace Process (OPAPP) or the so-called Office of the Presidential Adviser on the Peace
Process, respondents.

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

G.R. No. 183752             October 14, 2008

CITY GOVERNMENT OF ZAMBOANGA, as represented by HON. CELSO L. LOBREGAT, City Mayor of Zamboanga,
and in his personal capacity as resident of the City of Zamboanga, Rep. MA. ISABELLE G. CLIMACO, District 1, and Rep.
ERICO BASILIO A. FABIAN, District 2, City of Zamboanga, petitioners, 
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL (GRP), as
represented by RODOLFO C. GARCIA, LEAH ARMAMENTO, SEDFREY CANDELARIA, MARK RYAN SULLIVAN and
HERMOGENES ESPERON, in his capacity as the Presidential Adviser on Peace Process,respondents.

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

G.R. No. 183893             October 14, 2008

THE CITY OF ILIGAN, duly represented by CITY MAYOR LAWRENCE LLUCH CRUZ, petitioner, 
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE PANEL ON ANCESTRAL DOMAIN (GRP),
represented by SEC. RODOLFO GARCIA, ATTY. LEAH ARMAMENTO, ATTY. SEDFREY CANDELARIA, MARK
RYAN SULLIVAN; GEN. HERMOGENES ESPERON, JR., in his capacity as the present and duly appointed Presidential
Adviser on the Peace Process; and/or SEC. EDUARDO ERMITA, in his capacity as Executive Secretary. respondents.

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

G.R. No. 183951             October 14, 2008

THE PROVINCIAL GOVERNMENT OF ZAMBOANGA DEL NORTE, as represented by HON. ROLANDO E. YEBES, in
his capacity as Provincial Governor, HON. FRANCIS H. OLVIS, in his capacity as Vice-Governor and Presiding Officer of
the Sangguniang Panlalawigan, HON. CECILIA JALOSJOS CARREON, Congresswoman, 1st Congressional District, HON.
CESAR G. JALOSJOS, Congressman, 3rd Congressional District, and Members of the Sangguniang Panlalawigan of the
Province of Zamboanga del Norte, namely, HON. SETH FREDERICK P. JALOSJOS, HON. FERNANDO R. CABIGON,
JR., HON. ULDARICO M. MEJORADA II, HON. EDIONAR M. ZAMORAS, HON. EDGAR J. BAGUIO, HON. CEDRIC
L. ADRIATICO, HON. FELIXBERTO C. BOLANDO, HON. JOSEPH BRENDO C. AJERO, HON. NORBIDEIRI B.
EDDING, HON. ANECITO S. DARUNDAY, HON. ANGELICA J. CARREON and HON. LUZVIMINDA E.
TORRINO, petitioners, 
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL [GRP], as
represented by HON. RODOLFO C. GARCIA and HON. HERMOGENES ESPERON, in his capacity as the Presidential
Adviser of Peace Process, respondents.

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

G.R. No. 183962             October 14, 2008

ERNESTO M. MACEDA, JEJOMAR C. BINAY, and AQUILINO L. PIMENTEL III, petitioners, 

vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE NEGOTIATING PANEL, represented by its
Chairman RODOLFO C. GARCIA, and the MORO ISLAMIC LIBERATION FRONT PEACE NEGOTIATING PANEL,
represented by its Chairman MOHAGHER IQBAL, respondents.

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

FRANKLIN M. DRILON and ADEL ABBAS TAMANO, petitioners-in-intervention.

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

SEN. MANUEL A. ROXAS, petitioners-in-intervention.

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

MUNICIPALITY OF LINAMON duly represented by its Municipal Mayor NOEL N. DEANO, petitioners-in-intervention,

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

THE CITY OF ISABELA, BASILAN PROVINCE, represented by MAYOR CHERRYLYN P. SANTOS-AKBAR,petitioners-

in-intervention.

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

THE PROVINCE OF SULTAN KUDARAT, rep. by HON. SUHARTO T. MANGUDADATU, in his capacity as Provincial
Governor and a resident of the Province of Sultan Kudarat, petitioner-in-intervention.

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

RUY ELIAS LOPEZ, for and in his own behalf and on behalf of Indigenous Peoples in Mindanao Not Belonging to the
MILF, petitioner-in-intervention.

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

CARLO B. GOMEZ, GERARDO S. DILIG, NESARIO G. AWAT, JOSELITO C. ALISUAG and RICHALEX G. JAGMIS,
as citizens and residents of Palawan, petitioners-in-intervention.

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

MARINO RIDAO and KISIN BUXANI, petitioners-in-intervention.

x--------------------------------------------x
MUSLIM LEGAL ASSISTANCE FOUNDATION, INC (MUSLAF), respondent-in-intervention.

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

MUSLIM MULTI-SECTORAL MOVEMENT FOR PEACE & DEVELOPMENT (MMMPD), respondent-in-intervention.

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

DECISION

CARPIO MORALES, J.:

Subject of these consolidated cases is the extent of the powers of the President in pursuing the peace process.While the facts
surrounding this controversy center on the armed conflict in Mindanao between the government and the Moro Islamic Liberation
Front (MILF), the legal issue involved has a bearing on all areas in the country where there has been a long-standing armed conflict.
Yet again, the Court is tasked to perform a delicate balancing act. It must uncompromisingly delineate the bounds within which the
President may lawfully exercise her discretion, but it must do so in strict adherence to the Constitution, lest its ruling unduly restricts
the freedom of action vested by that same Constitution in the Chief Executive precisely to enable her to pursue the peace process
effectively.

I. FACTUAL ANTECEDENTS OF THE PETITIONS

On August 5, 2008, the Government of the Republic of the Philippines (GRP) and the MILF, through the Chairpersons of their
respective peace negotiating panels, were scheduled to sign a Memorandum of Agreement on the Ancestral Domain (MOA-AD)
Aspect of the GRP-MILF Tripoli Agreement on Peace of 2001 in Kuala Lumpur, Malaysia.

The MILF is a rebel group which was established in March 1984 when, under the leadership of the late Salamat Hashim, it splintered
from the Moro National Liberation Front (MNLF) then headed by Nur Misuari, on the ground, among others, of what Salamat
perceived to be the manipulation of the MNLF away from an Islamic basis towards Marxist-Maoist orientations.1

The signing of the MOA-AD between the GRP and the MILF was not to materialize, however, for upon motion of petitioners,
specifically those who filed their cases before the scheduled signing of the MOA-AD, this Court issued a Temporary Restraining
Order enjoining the GRP from signing the same.

The MOA-AD was preceded by a long process of negotiation and the concluding of several prior agreements between the two parties
beginning in 1996, when the GRP-MILF peace negotiations began. On July 18, 1997, the GRP and MILF Peace Panels signed the
Agreement on General Cessation of Hostilities. The following year, they signed the General Framework of Agreement of Intent on
August 27, 1998.

The Solicitor General, who represents respondents, summarizes the MOA-AD by stating that the same contained, among others, the
commitment of the parties to pursue peace negotiations, protect and respect human rights, negotiate with sincerity in the resolution
and pacific settlement of the conflict, and refrain from the use of threat or force to attain undue advantage while the peace negotiations
on the substantive agenda are on-going.2

Early on, however, it was evident that there was not going to be any smooth sailing in the GRP-MILF peace process. Towards the end
of 1999 up to early 2000, the MILF attacked a number of municipalities in Central Mindanao and, in March 2000, it took control of
the town hall of Kauswagan, Lanao del Norte.3 In response, then President Joseph Estrada declared and carried out an "all-out-war"
against the MILF.

When President Gloria Macapagal-Arroyo assumed office, the military offensive against the MILF was suspended and the
government sought a resumption of the peace talks. The MILF, according to a leading MILF member, initially responded with deep
reservation, but when President Arroyo asked the Government of Malaysia through Prime Minister Mahathir Mohammad to help
convince the MILF to return to the negotiating table, the MILF convened its Central Committee to seriously discuss the matter and,
eventually, decided to meet with the GRP.4

The parties met in Kuala Lumpur on March 24, 2001, with the talks being facilitated by the Malaysian government, the parties signing
on the same date the Agreement on the General Framework for the Resumption of Peace Talks Between the GRP and the MILF. The
MILF thereafter suspended all its military actions.5

Formal peace talks between the parties were held in Tripoli, Libya from June 20-22, 2001, the outcome of which was the GRP-MILF
Tripoli Agreement on Peace (Tripoli Agreement 2001) containing the basic principles and agenda on the following aspects of the
negotiation: Security Aspect, Rehabilitation Aspect, and Ancestral Domain Aspect. With regard to the Ancestral Domain Aspect,
the parties in Tripoli Agreement 2001 simply agreed "that the same be discussed further by the Parties in their next meeting."

A second round of peace talks was held in Cyberjaya, Malaysia on August 5-7, 2001 which ended with the signing of
the Implementing Guidelines on the Security Aspect of the Tripoli Agreement 2001 leading to a ceasefire status between the parties.
This was followed by the Implementing Guidelines on the Humanitarian Rehabilitation and Development Aspects of the Tripoli
Agreement 2001, which was signed on May 7, 2002 at Putrajaya, Malaysia. Nonetheless, there were many incidence of violence
between government forces and the MILF from 2002 to 2003.
Meanwhile, then MILF Chairman Salamat Hashim passed away on July 13, 2003 and he was replaced by Al Haj Murad, who was
then the chief peace negotiator of the MILF. Murad's position as chief peace negotiator was taken over by Mohagher Iqbal.6

In 2005, several exploratory talks were held between the parties in Kuala Lumpur, eventually leading to the crafting of the draft
MOA-AD in its final form, which, as mentioned, was set to be signed last August 5, 2008.

II. STATEMENT OF THE PROCEEDINGS

Before the Court is what is perhaps the most contentious "consensus" ever embodied in an instrument - the MOA-AD which is
assailed principally by the present petitions bearing docket numbers 183591, 183752, 183893, 183951 and 183962.

Commonly impleaded as respondents are the GRP Peace Panel on Ancestral Domain7 and the Presidential Adviser on the Peace
Process (PAPP) Hermogenes Esperon, Jr.

On July 23, 2008, the Province of North Cotabato8 and Vice-Governor Emmanuel Piñol filed a petition, docketed as G.R. No. 183591,
for Mandamus and Prohibition with Prayer for the Issuance of Writ of Preliminary Injunction and Temporary Restraining
Order.9 Invoking the right to information on matters of public concern, petitioners seek to compel respondents to disclose and furnish
them the complete and official copies of the MOA-AD including its attachments, and to prohibit the slated signing of the MOA-AD,
pending the disclosure of the contents of the MOA-AD and the holding of a public consultation thereon. Supplementarily, petitioners
pray that the MOA-AD be declared unconstitutional.10

This initial petition was followed by another one, docketed as G.R. No. 183752, also for Mandamus and Prohibition11 filed by the City
of Zamboanga,12 Mayor Celso Lobregat, Rep. Ma. Isabelle Climaco and Rep. Erico Basilio Fabian who likewise pray for similar
injunctive reliefs. Petitioners herein moreover pray that the City of Zamboanga be excluded from the Bangsamoro Homeland and/or
Bangsamoro Juridical Entity and, in the alternative, that the MOA-AD be declared null and void.

By Resolution of August 4, 2008, the Court issued a Temporary Restraining Order commanding and directing public respondents and
their agents to cease and desist from formally signing the MOA-AD.13 The Court also required the Solicitor General to submit to the
Court and petitioners the official copy of the final draft of the MOA-AD,14 to which she complied.15

Meanwhile, the City of Iligan16 filed a petition for Injunction and/or Declaratory Relief, docketed as G.R. No. 183893, praying that
respondents be enjoined from signing the MOA-AD or, if the same had already been signed, from implementing the same, and that the
MOA-AD be declared unconstitutional. Petitioners herein additionally implead Executive Secretary Eduardo Ermita as respondent.

The Province of Zamboanga del Norte,17 Governor Rolando Yebes, Vice-Governor Francis Olvis, Rep. Cecilia Jalosjos-Carreon, Rep.
Cesar Jalosjos, and the members18 of the Sangguniang Panlalawigan of Zamboanga del Norte filed on August 15, 2008 a petition for
Certiorari, Mandamus and Prohibition,19 docketed as G.R. No. 183951. They pray, inter alia, that the MOA-AD be declared null and
void and without operative effect, and that respondents be enjoined from executing the MOA-AD.

On August 19, 2008, Ernesto Maceda, Jejomar Binay, and Aquilino Pimentel III filed a petition for Prohibition,20docketed as G.R. No.
183962, praying for a judgment prohibiting and permanently enjoining respondents from formally signing and executing the MOA-
AD and or any other agreement derived therefrom or similar thereto, and nullifying the MOA-AD for being unconstitutional and
illegal. Petitioners herein additionally implead as respondent the MILF Peace Negotiating Panel represented by its Chairman
Mohagher Iqbal.

Various parties moved to intervene and were granted leave of court to file their petitions-/comments-in-intervention. Petitioners-in-
Intervention include Senator Manuel A. Roxas, former Senate President Franklin Drilon and Atty. Adel Tamano, the City of
Isabela21 and Mayor Cherrylyn Santos-Akbar, the Province of Sultan Kudarat22 and Gov. Suharto Mangudadatu, the Municipality of
Linamon in Lanao del Norte,23 Ruy Elias Lopez of Davao City and of the Bagobo tribe, Sangguniang Panlungsod member Marino
Ridao and businessman Kisin Buxani, both of Cotabato City; and lawyers Carlo Gomez, Gerardo Dilig, Nesario Awat, Joselito
Alisuag, Richalex Jagmis, all of Palawan City. The Muslim Legal Assistance Foundation, Inc. (Muslaf) and the Muslim Multi-
Sectoral Movement for Peace and Development (MMMPD) filed their respective Comments-in-Intervention.

By subsequent Resolutions, the Court ordered the consolidation of the petitions. Respondents filed Comments on the petitions, while
some of petitioners submitted their respective Replies.

Respondents, by Manifestation and Motion of August 19, 2008, stated that the Executive Department shall thoroughly review the
MOA-AD and pursue further negotiations to address the issues hurled against it, and thus moved to dismiss the cases. In the
succeeding exchange of pleadings, respondents' motion was met with vigorous opposition from petitioners.

The cases were heard on oral argument on August 15, 22 and 29, 2008 that tackled the following principal issues:

1. Whether the petitions have become moot and academic

(i) insofar as the mandamus aspect is concerned, in view of the disclosure of official copies of the final draft of the
Memorandum of Agreement (MOA); and

(ii) insofar as the prohibition aspect involving the Local Government Units is concerned, if it is considered that
consultation has become fait accompli with the finalization of the draft;
 2. Whether the constitutionality and the legality of the MOA is ripe for adjudication;

3. Whether respondent Government of the Republic of the Philippines Peace Panel committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it negotiated and initiated the MOA vis-à-vis ISSUES Nos. 4 and 5;

4. Whether there is a violation of the people's right to information on matters of public concern (1987 Constitution, Article
III, Sec. 7) under a state policy of full disclosure of all its transactions involving public interest (1987 Constitution, Article II,
Sec. 28) including public consultation under Republic Act No. 7160 (LOCAL GOVERNMENT CODE OF 1991)[;]

If it is in the affirmative, whether prohibition under Rule 65 of the 1997 Rules of Civil Procedure is an appropriate remedy;

5. Whether by signing the MOA, the Government of the Republic of the Philippines would be BINDING itself

a) to create and recognize the Bangsamoro Juridical Entity (BJE) as a separate state, or a juridical, territorial or
political subdivision not recognized by law;

b) to revise or amend the Constitution and existing laws to conform to the MOA;

c) to concede to or recognize the claim of the Moro Islamic Liberation Front for ancestral domain in violation of
Republic Act No. 8371 (THE INDIGENOUS PEOPLES RIGHTS ACT OF 1997), particularly Section 3(g) &
Chapter VII (DELINEATION, RECOGNITION OF ANCESTRAL DOMAINS)[;]

If in the affirmative, whether the Executive Branch has the authority to so bind the Government of the Republic of the
Philippines;

6. Whether the inclusion/exclusion of the Province of North Cotabato, Cities of Zamboanga, Iligan and Isabela, and the
Municipality of Linamon, Lanao del Norte in/from the areas covered by the projected Bangsamoro Homeland is a justiciable
question; and

7. Whether desistance from signing the MOA derogates any prior valid commitments of the Government of the Republic of
the Philippines.24

The Court, thereafter, ordered the parties to submit their respective Memoranda. Most of the parties submitted their memoranda on
time.

III. OVERVIEW OF THE MOA-AD

As a necessary backdrop to the consideration of the objections raised in the subject five petitions and six petitions-in-intervention
against the MOA-AD, as well as the two comments-in-intervention in favor of the MOA-AD, the Court takes an overview of the
MOA.

The MOA-AD identifies the Parties to it as the GRP and the MILF.

Under the heading "Terms of Reference" (TOR), the MOA-AD includes not only four earlier agreements between the GRP and MILF,
but also two agreements between the GRP and the MNLF: the 1976 Tripoli Agreement, and the Final Peace Agreement on the
Implementation of the 1976 Tripoli Agreement, signed on September 2, 1996 during the administration of President Fidel Ramos.

The MOA-AD also identifies as TOR two local statutes - the organic act for the Autonomous Region in Muslim Mindanao
(ARMM)25 and the Indigenous Peoples Rights Act (IPRA),26 and several international law instruments - the ILO Convention No. 169
Concerning Indigenous and Tribal Peoples in Independent Countries in relation to the UN Declaration on the Rights of the Indigenous
Peoples, and the UN Charter, among others.

The MOA-AD includes as a final TOR the generic category of "compact rights entrenchment emanating from the regime of dar-ul-
mua'hada (or territory under compact) and dar-ul-sulh (or territory under peace agreement) that partakes the nature of a treaty device."

During the height of the Muslim Empire, early Muslim jurists tended to see the world through a simple dichotomy: there was the dar-
ul-Islam (the Abode of Islam) and dar-ul-harb (the Abode of War). The first referred to those lands where Islamic laws held sway,
while the second denoted those lands where Muslims were persecuted or where Muslim laws were outlawed or ineffective.27 This way
of viewing the world, however, became more complex through the centuries as the Islamic world became part of the international
community of nations.

As Muslim States entered into treaties with their neighbors, even with distant States and inter-governmental organizations, the
classical division of the world into dar-ul-Islam and dar-ul-harb eventually lost its meaning. New terms were drawn up to describe
novel ways of perceiving non-Muslim territories. For instance, areas like dar-ul-mua'hada (land of compact) and dar-ul-sulh (land
of treaty) referred to countries which, though under a secular regime, maintained peaceful and cooperative relations with Muslim
States, having been bound to each other by treaty or agreement. Dar-ul-aman (land of order), on the other hand, referred to countries
which, though not bound by treaty with Muslim States, maintained freedom of religion for Muslims.28

It thus appears that the "compact rights entrenchment" emanating from the regime of dar-ul-mua'hada and dar-ul-sulh simply refers to
all other agreements between the MILF and the Philippine government - the Philippines being the land of compact and peace
agreement - that partake of the nature of a treaty device, "treaty" being broadly defined as "any solemn agreement in writing that sets
out understandings, obligations, and benefits for both parties which provides for a framework that elaborates the principles declared in
the [MOA-AD]."29

The MOA-AD states that the Parties "HAVE AGREED AND ACKNOWLEDGED AS FOLLOWS," and starts with its main body.

The main body of the MOA-AD is divided into four strands, namely, Concepts and Principles, Territory, Resources, and
Governance.

A. CONCEPTS AND PRINCIPLES

This strand begins with the statement that it is "the birthright of all Moros and all Indigenous peoples of Mindanao to identify
themselves and be accepted as ‘Bangsamoros.'" It defines "Bangsamoro people" as the natives or original inhabitants of Mindanao
and its adjacent islands including Palawan and the Sulu archipelago at the time of conquest or colonization, and their
descendants whether mixed or of full blood, including their spouses.30

Thus, the concept of "Bangsamoro," as defined in this strand of the MOA-AD, includes not only "Moros" as traditionally understood
even by Muslims,31 but all indigenous peoples of Mindanao and its adjacent islands. The MOA-AD adds that the freedom of choice of
indigenous peoples shall be respected. What this freedom of choice consists in has not been specifically defined.

The MOA-AD proceeds to refer to the "Bangsamoro homeland," the ownership of which is vested exclusively in the Bangsamoro
people by virtue of their prior rights of occupation.32 Both parties to the MOA-AD acknowledge that ancestral domain does not form
part of the public domain.33

The Bangsamoro people are acknowledged as having the right to self-governance, which right is said to be rooted on ancestral
territoriality exercised originally under the suzerain authority of their sultanates and the Pat a Pangampong ku Ranaw. The sultanates
were described as states or "karajaan/kadatuan" resembling a body politic endowed with all the elements of a nation-state in the
modern sense.34

The MOA-AD thus grounds the right to self-governance of the Bangsamoro people on the past suzerain authority of the sultanates. As
gathered, the territory defined as the Bangsamoro homeland was ruled by several sultanates and, specifically in the case of the
Maranao, by the Pat a Pangampong ku Ranaw, a confederation of independent principalities (pangampong) each ruled by datus and
sultans, none of whom was supreme over the others.35

The MOA-AD goes on to describe the Bangsamoro people as "the ‘First Nation' with defined territory and with a system of
government having entered into treaties of amity and commerce with foreign nations."

The term "First Nation" is of Canadian origin referring to the indigenous peoples of that territory, particularly those known as
Indians. In Canada, each of these indigenous peoples is equally entitled to be called "First Nation," hence, all of them are usually
described collectively by the plural "First Nations."36 To that extent, the MOA-AD, by identifying the Bangsamoro people as
"the First Nation" - suggesting its exclusive entitlement to that designation - departs from the Canadian usage of the term.

The MOA-AD then mentions for the first time the "Bangsamoro Juridical Entity" (BJE) to which it grants the authority and
jurisdiction over the Ancestral Domain and Ancestral Lands of the Bangsamoro.37

B. TERRITORY

The territory of the Bangsamoro homeland is described as the land mass as well as the maritime, terrestrial, fluvial and alluvial
domains, including the aerial domain and the atmospheric space above it, embracing the Mindanao-Sulu-Palawan geographic region.38

More specifically, the core of the BJE is defined as the present geographic area of the ARMM - thus constituting the following areas:
Lanao del Sur, Maguindanao, Sulu, Tawi-Tawi, Basilan, and Marawi City. Significantly, this core also includes certain municipalities
of Lanao del Norte that voted for inclusion in the ARMM in the 2001 plebiscite.39

Outside of this core, the BJE is to cover other provinces, cities, municipalities and barangays, which are grouped into two categories,
Category A and Category B. Each of these areas is to be subjected to a plebiscite to be held on different dates, years apart from each
other. Thus, Category A areas are to be subjected to a plebiscite not later than twelve (12) months following the signing of the MOA-
AD.40 Category B areas, also called "Special Intervention Areas," on the other hand, are to be subjected to a plebiscite twenty-five (25)
years from the signing of a separate agreement - the Comprehensive Compact.41

The Parties to the MOA-AD stipulate that the BJE shall have jurisdiction over all natural resources within its "internalwaters," defined
as extending fifteen (15) kilometers from the coastline of the BJE area;42 that the BJE shall also have "territorial waters," which shall
stretch beyond the BJE internal waters up to the baselines of the Republic of the Philippines (RP) south east and south west of
mainland Mindanao; and that within these territorial waters, the BJE and the "Central Government" (used interchangeably with RP)
shall exercise joint jurisdiction, authority and management over all natural resources.43 Notably, the jurisdiction over
the internal waters is not similarly described as "joint."

The MOA-AD further provides for the sharing of minerals on the territorial waters between the Central Government and the BJE, in
favor of the latter, through production sharing and economic cooperation agreement.44 The activities which the Parties are allowed to
conduct on the territorial waters are enumerated, among which are the exploration and utilization of natural resources, regulation of
shipping and fishing activities, and the enforcement of police and safety measures.45 There is no similar provision on the sharing of
minerals and allowed activities with respect to the internal waters of the BJE.

C. RESOURCES

The MOA-AD states that the BJE is free to enter into any economic cooperation and trade relations with foreign countries and shall
have the option to establish trade missions in those countries. Such relationships and understandings, however, are not to include
aggression against the GRP. The BJE may also enter into environmental cooperation agreements.46

The external defense of the BJE is to remain the duty and obligation of the Central Government. The Central Government is also
bound to "take necessary steps to ensure the BJE's participation in international meetings and events" like those of the ASEAN and the
specialized agencies of the UN. The BJE is to be entitled to participate in Philippine official missions and delegations for the
negotiation of border agreements or protocols for environmental protection and equitable sharing of incomes and revenues involving
the bodies of water adjacent to or between the islands forming part of the ancestral domain.47

With regard to the right of exploring for, producing, and obtaining all potential sources of energy, petroleum, fossil fuel, mineral oil
and natural gas, the jurisdiction and control thereon is to be vested in the BJE "as the party having control within its territorial
jurisdiction." This right carries the proviso that, "in times of national emergency, when public interest so requires," the Central
Government may, for a fixed period and under reasonable terms as may be agreed upon by both Parties, assume or direct the operation
of such resources.48

The sharing between the Central Government and the BJE of total production pertaining to natural resources is to be 75:25 in favor of
the BJE.49

The MOA-AD provides that legitimate grievances of the Bangsamoro people arising from any unjust dispossession of their territorial
and proprietary rights, customary land tenures, or their marginalization shall be acknowledged. Whenever restoration is no longer
possible, reparation is to be in such form as mutually determined by the Parties.50

The BJE may modify or cancel the forest concessions, timber licenses, contracts or agreements, mining concessions, Mineral
Production and Sharing Agreements (MPSA), Industrial Forest Management Agreements (IFMA), and other land tenure
instruments granted by the Philippine Government, including those issued by the present ARMM.51

D. GOVERNANCE

The MOA-AD binds the Parties to invite a multinational third-party to observe and monitor the implementation of
the Comprehensive Compact. This compact is to embody the "details for the effective enforcement" and "the mechanisms and
modalities for the actual implementation" of the MOA-AD. The MOA-AD explicitly provides that the participation of the third party
shall not in any way affect the status of the relationship between the Central Government and the BJE.52

The "associative" relationship 

between the Central Government 
and the BJE

The MOA-AD describes the relationship of the Central Government and the BJE as "associative," characterized by shared authority
and responsibility. And it states that the structure of governance is to be based on executive, legislative, judicial, and administrative
institutions with defined powers and functions in the Comprehensive Compact.

The MOA-AD provides that its provisions requiring "amendments to the existing legal framework" shall take effect upon signing of
the Comprehensive Compact and upon effecting the aforesaid amendments, with due regard to the non-derogation of prior
agreements and within the stipulated timeframe to be contained in the Comprehensive Compact. As will be discussed later, much of
the present controversy hangs on the legality of this provision.

The BJE is granted the power to build, develop and maintain its own institutions inclusive of civil service, electoral, financial and
banking, education, legislation, legal, economic, police and internal security force, judicial system and correctional institutions, the
details of which shall be discussed in the negotiation of the comprehensive compact.

As stated early on, the MOA-AD was set to be signed on August 5, 2008 by Rodolfo Garcia and Mohagher Iqbal, Chairpersons of the
Peace Negotiating Panels of the GRP and the MILF, respectively. Notably, the penultimate paragraph of the MOA-AD identifies the
signatories as "the representatives of the Parties," meaning the GRP and MILF themselves, and not merely of the negotiating
panels.53 In addition, the signature page of the MOA-AD states that it is "WITNESSED BY" Datuk Othman Bin Abd Razak, Special
Adviser to the Prime Minister of Malaysia, "ENDORSED BY" Ambassador Sayed Elmasry, Adviser to Organization of the Islamic
Conference (OIC) Secretary General and Special Envoy for Peace Process in Southern Philippines, and SIGNED "IN THE
PRESENCE OF" Dr. Albert G. Romulo, Secretary of Foreign Affairs of RP and Dato' Seri Utama Dr. Rais Bin Yatim, Minister of
Foreign Affairs, Malaysia, all of whom were scheduled to sign the Agreement last August 5, 2008.

Annexed to the MOA-AD are two documents containing the respective lists cum maps of the provinces, municipalities, and barangays
under Categories A and B earlier mentioned in the discussion on the strand on TERRITORY.

IV. PROCEDURAL ISSUES

A. RIPENESS
The power of judicial review is limited to actual cases or controversies.54 Courts decline to issue advisory opinions or to resolve
hypothetical or feigned problems, or mere academic questions.55 The limitation of the power of judicial review to actual cases and
controversies defines the role assigned to the judiciary in a tripartite allocation of power, to assure that the courts will not intrude into
areas committed to the other branches of government.56

An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial resolution
as distinguished from a hypothetical or abstract difference or dispute. There must be a contrariety of legal rights that can be interpreted
and enforced on the basis of existing law and jurisprudence.57 The Court can decide the constitutionality of an act or treaty only when
a proper case between opposing parties is submitted for judicial determination.58

Related to the requirement of an actual case or controversy is the requirement of ripeness. A question is ripe for adjudication when the
act being challenged has had a direct adverse effect on the individual challenging it.59 For a case to be considered ripe for adjudication,
it is a prerequisite that something had then been accomplished or performed by either branch before a court may come into the
picture,60 and the petitioner must allege the existence of an immediate or threatened injury to itself as a result of the challenged
action.61 He must show that he has sustained or is immediately in danger of sustaining some direct injury as a result of the act
complained of.62

The Solicitor General argues that there is no justiciable controversy that is ripe for judicial review in the present petitions, reasoning
that

The unsigned MOA-AD is simply a list of consensus points subject to further negotiations and legislative enactments as well
as constitutional processes aimed at attaining a final peaceful agreement. Simply put, the MOA-AD remains to be a proposal
that does not automatically create legally demandable rights and obligations until the list of operative acts required have been
duly complied with. x x x

xxxx

In the cases at bar, it is respectfully submitted that this Honorable Court has no authority to pass upon issues based on
hypothetical or feigned constitutional problems or interests with no concrete bases. Considering the preliminary character of
the MOA-AD, there are no concrete acts that could possibly violate petitioners' and intervenors' rights since the acts
complained of are mere contemplated steps toward the formulation of a final peace agreement. Plainly, petitioners and
intervenors' perceived injury, if at all, is merely imaginary and illusory apart from being unfounded and based on mere
conjectures. (Underscoring supplied)

The Solicitor General cites63 the following provisions of the MOA-AD:

TERRITORY

xxxx

2. Toward this end, the Parties enter into the following stipulations:

xxxx

d. Without derogating from the requirements of prior agreements, the Government stipulates to conduct and deliver, using all
possible legal measures, within twelve (12) months following the signing of the MOA-AD, a plebiscite covering the areas as
enumerated in the list and depicted in the map as Category A attached herein (the "Annex"). The Annex constitutes an
integral part of this framework agreement. Toward this end, the Parties shall endeavor to complete the negotiations and
resolve all outstanding issues on the Comprehensive Compact within fifteen (15) months from the signing of the MOA-AD.

xxxx

GOVERNANCE

xxxx

7. The Parties agree that mechanisms and modalities for the actual implementation of this MOA-AD shall be spelt out in the
Comprehensive Compact to mutually take such steps to enable it to occur effectively.

Any provisions of the MOA-AD requiring amendments to the existing legal framework shall come into force upon the
signing of a Comprehensive Compact and upon effecting the necessary changes to the legal framework with due regard to
non-derogation of prior agreements and within the stipulated timeframe to be contained in the Comprehensive
Compact.64 (Underscoring supplied)

The Solicitor General's arguments fail to persuade.

Concrete acts under the MOA-AD are not necessary to render the present controversy ripe. In Pimentel, Jr. v. Aguirre,65 this Court
held:
 x x x [B]y the mere enactment of the questioned law or the approval of the challenged action, the dispute is said to have
ripened into a judicial controversy even without any other overt act. Indeed, even a singular violation of the Constitution
and/or the law is enough to awaken judicial duty.

xxxx

By the same token, when an act of the President, who in our constitutional scheme is a coequal of Congress, is seriously
alleged to have infringed the Constitution and the laws x x x settling the dispute becomes the duty and the responsibility of
the courts.66

In Santa Fe Independent School District v. Doe,67 the United States Supreme Court held that the challenge to the constitutionality of
the school's policy allowing student-led prayers and speeches before games was ripe for adjudication, even if no public prayer had yet
been led under the policy, because the policy was being challenged as unconstitutional on its face.68

That the law or act in question is not yet effective does not negate ripeness. For example, in New York v. United States,69 decided in
1992, the United States Supreme Court held that the action by the State of New York challenging the provisions of the Low-Level
Radioactive Waste Policy Act was ripe for adjudication even if the questioned provision was not to take effect until January 1, 1996,
because the parties agreed that New York had to take immediate action to avoid the provision's consequences.70

The present petitions pray for Certiorari,71 Prohibition, and Mandamus. Certiorari and Prohibition are remedies granted by law when
any tribunal, board or officer has acted, in the case of certiorari, or is proceeding, in the case of prohibition, without or in excess of its
jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.72 Mandamus is a remedy granted by law
when any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically
enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use or enjoyment of a right or
office to which such other is entitled.73 Certiorari, Mandamus and Prohibition are appropriate remedies to raise constitutional issues
and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials.74

The authority of the GRP Negotiating Panel is defined by Executive Order No. 3 (E.O. No. 3), issued on February 28, 2001.75 The said
executive order requires that "[t]he government's policy framework for peace, including the systematic approach and the
administrative structure for carrying out the comprehensive peace process x x x be governed by this Executive Order."76

The present petitions allege that respondents GRP Panel and PAPP Esperon drafted the terms of the MOA-AD without consulting the
local government units or communities affected, nor informing them of the proceedings. As will be discussed in greater detail later,
such omission, by itself, constitutes a departure by respondents from their mandate under E.O. No. 3.

Furthermore, the petitions allege that the provisions of the MOA-AD violate the Constitution. The MOA-AD provides that "any
provisions of the MOA-AD requiring amendments to the existing legal framework shall come into force upon the signing of a
Comprehensive Compact and upon effecting the necessary changes to the legal framework," implying an amendment of the
Constitution to accommodate the MOA-AD. This stipulation, in effect, guaranteed to the MILF the amendment of the
Constitution. Such act constitutes another violation of its authority. Again, these points will be discussed in more detail later.

As the petitions allege acts or omissions on the part of respondent that exceed their authority, by violating their duties under E.O.
No. 3 and the provisions of the Constitution and statutes, the petitions make a prima facie case for Certiorari, Prohibition, and
Mandamus, and an actual case or controversy ripe for adjudication exists. When an act of a branch of government is seriously
alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the
dispute.77

B. LOCUS STANDI

For a party to have locus standi, one must allege "such a personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult
constitutional questions."78

Because constitutional cases are often public actions in which the relief sought is likely to affect other persons, a preliminary question
frequently arises as to this interest in the constitutional question raised.79

When suing as a citizen, the person complaining must allege that he has been or is about to be denied some right or privilege to which
he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained
of.80 When the issue concerns a public right, it is sufficient that the petitioner is a citizen and has an interest in the execution of the
laws.81

For a taxpayer, one is allowed to sue where there is an assertion that public funds are illegally disbursed or deflected to an illegal
purpose, or that there is a wastage of public funds through the enforcement of an invalid or unconstitutional law.82 The Court retains
discretion whether or not to allow a taxpayer's suit.83

In the case of a legislator or member of Congress, an act of the Executive that injures the institution of Congress causes a derivative
but nonetheless substantial injury that can be questioned by legislators. A member of the House of Representatives has standing to
maintain inviolate the prerogatives, powers and privileges vested by the Constitution in his office.84

An organization may be granted standing to assert the rights of its members,85 but the mere invocation by the Integrated Bar of the
Philippines or any member of the legal profession of the duty to preserve the rule of law does not suffice to clothe it with standing.86
As regards a local government unit (LGU), it can seek relief in order to protect or vindicate an interest of its own, and of the other
LGUs.87

Intervenors, meanwhile, may be given legal standing upon showing of facts that satisfy the requirements of the law authorizing
intervention,88 such as a legal interest in the matter in litigation, or in the success of either of the parties.

In any case, the Court has discretion to relax the procedural technicality on locus standi, given the liberal attitude it has exercised,
highlighted in the case of David v. Macapagal-Arroyo,89 where technicalities of procedure were brushed aside, the constitutional
issues raised being of paramount public interest or of transcendental importance deserving the attention of the Court in view of their
seriousness, novelty and weight as precedents.90 The Court's forbearing stance on locus standi on issues involving constitutional issues
has for its purpose the protection of fundamental rights.

In not a few cases, the Court, in keeping with its duty under the Constitution to determine whether the other branches of government
have kept themselves within the limits of the Constitution and the laws and have not abused the discretion given them, has brushed
aside technical rules of procedure.91

In the petitions at bar, petitioners Province of North Cotabato (G.R. No. 183591) Province of Zamboanga del Norte (G.R. No.
183951), City of Iligan (G.R. No. 183893) and City of Zamboanga (G.R. No. 183752) and petitioners-in-intervention Province of
Sultan Kudarat, City of Isabela and Municipality of Linamon have locus standi in view of the direct and substantial injury that
they, as LGUs, would suffer as their territories, whether in whole or in part, are to be included in the intended domain of the BJE.
These petitioners allege that they did not vote for their inclusion in the ARMM which would be expanded to form the BJE territory.
Petitioners' legal standing is thus beyond doubt.

In G.R. No. 183962, petitioners Ernesto Maceda, Jejomar Binay and Aquilino Pimentel III would have no standing as citizens and
taxpayers for their failure to specify that they would be denied some right or privilege or there would be wastage of public funds. The
fact that they are a former Senator, an incumbent mayor of Makati City, and a resident of Cagayan de Oro, respectively, is of no
consequence. Considering their invocation of the transcendental importance of the issues at hand, however, the Court grants them
standing.

Intervenors Franklin Drilon and Adel Tamano, in alleging their standing as taxpayers, assert that government funds would be
expended for the conduct of an illegal and unconstitutional plebiscite to delineate the BJE territory. On that score alone, they can be
given legal standing. Their allegation that the issues involved in these petitions are of "undeniable transcendental importance" clothes
them with added basis for their personality to intervene in these petitions.

With regard to Senator Manuel Roxas, his standing is premised on his being a member of the Senate and a citizen to enforce
compliance by respondents of the public's constitutional right to be informed of the MOA-AD, as well as on a genuine legal interest in
the matter in litigation, or in the success or failure of either of the parties. He thus possesses the requisite standing as an intervenor.

With respect to Intervenors Ruy Elias Lopez, as a former congressman of the 3rd district of Davao City, a taxpayer and a member of
the Bagobo tribe; Carlo B. Gomez, et al., as members of the IBP Palawan chapter, citizens and taxpayers; Marino Ridao, as taxpayer,
resident and member of the Sangguniang Panlungsod of Cotabato City; and Kisin Buxani, as taxpayer, they failed to allege any
proper legal interest in the present petitions. Just the same, the Court exercises its discretion to relax the procedural technicality
on locus standi given the paramount public interest in the issues at hand.

Intervening respondents Muslim Multi-Sectoral Movement for Peace and Development, an advocacy group for justice and the
attainment of peace and prosperity in Muslim Mindanao; and Muslim Legal Assistance Foundation Inc., a non-government
organization of Muslim lawyers, allege that they stand to be benefited or prejudiced, as the case may be, in the resolution of the
petitions concerning the MOA-AD, and prays for the denial of the petitions on the grounds therein stated. Such legal interest suffices
to clothe them with standing.

B. MOOTNESS

Respondents insist that the present petitions have been rendered moot with the satisfaction of all the reliefs prayed for by petitioners
and the subsequent pronouncement of the Executive Secretary that "[n]o matter what the Supreme Court ultimately decides[,] the
government will not sign the MOA."92

In lending credence to this policy decision, the Solicitor General points out that the President had already disbanded the GRP Peace
Panel.93

In David v. Macapagal-Arroyo,94 this Court held that the "moot and academic" principle not being a magical formula that
automatically dissuades courts in resolving a case, it will decide cases, otherwise moot and academic, if it finds that (a) there is a grave
violation of the Constitution;95 (b) the situation is of exceptional character and paramount public interest is involved;96 (c) the
constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public;97 and (d) the case
is capable of repetition yet evading review.98

Another exclusionary circumstance that may be considered is where there is a voluntary cessation of the activity complained of by the
defendant or doer. Thus, once a suit is filed and the doer voluntarily ceases the challenged conduct, it does not automatically deprive
the tribunal of power to hear and determine the case and does not render the case moot especially when the plaintiff seeks damages or
prays for injunctive relief against the possible recurrence of the violation.99
The present petitions fall squarely into these exceptions to thus thrust them into the domain of judicial review. The grounds cited
above in David are just as applicable in the present cases as they were, not only in David, but also in Province of Batangas v.
Romulo100 and Manalo v. Calderon101 where the Court similarly decided them on the merits, supervening events that would ordinarily
have rendered the same moot notwithstanding.

Petitions not mooted

Contrary then to the asseverations of respondents, the non-signing of the MOA-AD and the eventual dissolution of the GRP Peace
Panel did not moot the present petitions. It bears emphasis that the signing of the MOA-AD did not push through due to the Court's
issuance of a Temporary Restraining Order.

Contrary too to respondents' position, the MOA-AD cannot be considered a mere "list of consensus points," especially given
its nomenclature, the need to have it signed or initialed by all the parties concerned on August 5, 2008, and the far-reaching
Constitutional implications of these "consensus points," foremost of which is the creation of the BJE.

In fact, as what will, in the main, be discussed, there is a commitment on the part of respondents to amend and effect necessary
changes to the existing legal framework for certain provisions of the MOA-AD to take effect. Consequently, the present petitions
are not confined to the terms and provisions of the MOA-AD, but to other on-going and future negotiations and agreements necessary
for its realization. The petitions have not, therefore, been rendered moot and academic simply by the public disclosure of the MOA-
AD,102 the manifestation that it will not be signed as well as the disbanding of the GRP Panel not withstanding.

Petitions are imbued with paramount public interest

There is no gainsaying that the petitions are imbued with paramount public interest, involving a significant part of the country's
territory and the wide-ranging political modifications of affected LGUs. The assertion that the MOA-AD is subject to further legal
enactments including possible Constitutional amendments more than ever provides impetus for the Court to formulate
controlling principles to guide the bench, the bar, the public and, in this case, the government and its negotiating entity.

Respondents cite Suplico v. NEDA, et al.103 where the Court did not "pontificat[e] on issues which no longer legitimately constitute an
actual case or controversy [as this] will do more harm than good to the nation as a whole."

The present petitions must be differentiated from Suplico. Primarily, in Suplico, what was assailed and eventually cancelled was a
stand-alone government procurement contract for a national broadband network involving a one-time contractual relation between two
parties-the government and a private foreign corporation. As the issues therein involved specific government procurement policies and
standard principles on contracts, the majority opinion in Suplico found nothing exceptional therein, the factual circumstances being
peculiar only to the transactions and parties involved in the controversy.

The MOA-AD is part of a series of agreements

In the present controversy, the MOA-AD is a significant part of a series of agreements necessary to carry out the Tripoli Agreement
2001. The MOA-AD which dwells on the Ancestral Domain Aspect of said Tripoli Agreement is the third such component to be
undertaken following the implementation of the Security Aspect in August 2001 and the Humanitarian, Rehabilitation and
Development Aspect in May 2002.

Accordingly, even if the Executive Secretary, in his Memorandum of August 28, 2008 to the Solicitor General, has stated that "no
matter what the Supreme Court ultimately decides[,] the government will not sign the MOA[-AD]," mootness will not set in in light of
the terms of the Tripoli Agreement 2001.

Need to formulate principles-guidelines

Surely, the present MOA-AD can be renegotiated or another one will be drawn up to carry out the Ancestral Domain Aspect of the
Tripoli Agreement 2001, in another or in any form, which could contain similar or significantly drastic provisions. While the Court
notes the word of the Executive Secretary that the government "is committed to securing an agreement that is both constitutional and
equitable because that is the only way that long-lasting peace can be assured," it is minded to render a decision on the merits in the
present petitions to formulate controlling principles to guide the bench, the bar, the public and, most especially, the government
in negotiating with the MILF regarding Ancestral Domain.

Respondents invite the Court's attention to the separate opinion of then Chief Justice Artemio Panganiban in Sanlakas v. Reyes104 in
which he stated that the doctrine of "capable of repetition yet evading review" can override mootness, "provided the party raising it in
a proper case has been and/or continue to be prejudiced or damaged as a direct result of their issuance." They contend that the Court
must have jurisdiction over the subject matter for the doctrine to be invoked.

The present petitions all contain prayers for Prohibition over which this Court exercises original jurisdiction. While G.R. No. 183893
(City of Iligan v. GRP) is a petition for Injunction and Declaratory Relief, the Court will treat it as one for Prohibition as it has far
reaching implications and raises questions that need to be resolved.105 At all events, the Court has jurisdiction over most if not the rest
of the petitions.

Indeed, the present petitions afford a proper venue for the Court to again apply the doctrine immediately referred to as what it had
done in a number of landmark cases.106 There is a reasonable expectation that petitioners, particularly the Provinces of North Cotabato,
Zamboanga del Norte and Sultan Kudarat, the Cities of Zamboanga, Iligan and Isabela, and the Municipality of Linamon, will again
be subjected to the same problem in the future as respondents' actions are capable of repetition, in another or any form.
It is with respect to the prayers for Mandamus that the petitions have become moot, respondents having, by Compliance of August 7,
2008, provided this Court and petitioners with official copies of the final draft of the MOA-AD and its annexes. Too, intervenors have
been furnished, or have procured for themselves, copies of the MOA-AD.

V. SUBSTANTIVE ISSUES

As culled from the Petitions and Petitions-in-Intervention, there are basically two SUBSTANTIVE issues to be resolved, one relating
to the manner in which the MOA-AD was negotiated and finalized, the other relating to its provisions, viz:

1. Did respondents violate constitutional and statutory provisions on public consultation and the right to information when they
negotiated and later initialed the MOA-AD?

2. Do the contents of the MOA-AD violate the Constitution and the laws?

ON THE FIRST SUBSTANTIVE ISSUE

Petitioners invoke their constitutional right to information on matters of public concern, as provided in Section 7, Article III on the
Bill of Rights:

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.107

As early as 1948, in Subido v. Ozaeta,108 the Court has recognized the statutory right to examine and inspect public records, a right
which was eventually accorded constitutional status.

The right of access to public documents, as enshrined in both the 1973 Constitution and the 1987 Constitution, has been recognized as
a self-executory constitutional right.109

In the 1976 case of Baldoza v. Hon. Judge Dimaano,110 the Court ruled that access to public records is predicated on the right of the
people to acquire information on matters of public concern since, undoubtedly, in a democracy, the pubic has a legitimate interest in
matters of social and political significance.

x x x The incorporation of this right in the Constitution is a recognition of the fundamental role of free exchange of information in a
democracy. There can be no realistic perception by the public of the nation's problems, nor a meaningful democratic decision-making
if they are denied access to information of general interest. Information is needed to enable the members of society to cope with the
exigencies of the times. As has been aptly observed: "Maintaining the flow of such information depends on protection for both its
acquisition and its dissemination since, if either process is interrupted, the flow inevitably ceases." x x x111

In the same way that free discussion enables members of society to cope with the exigencies of their time, access to information of
general interest aids the people in democratic decision-making by giving them a better perspective of the vital issues confronting the
nation112 so that they may be able to criticize and participate in the affairs of the government in a responsible, reasonable and
effective manner. It is by ensuring an unfettered and uninhibited exchange of ideas among a well-informed public that a government
remains responsive to the changes desired by the people.113

The MOA-AD is a matter of public concern

That the subject of the information sought in the present cases is a matter of public concern114 faces no serious challenge. In
fact, respondents admit that the MOA-AD is indeed of public concern.115 In previous cases, the Court found that the regularity of real
estate transactions entered in the Register of Deeds,116 the need for adequate notice to the public of the various laws,117 the civil service
eligibility of a public employee,118 the proper management of GSIS funds allegedly used to grant loans to public officials,119 the
recovery of the Marcoses' alleged ill-gotten wealth,120 and the identity of party-list nominees,121 among others, are matters of public
concern. Undoubtedly, the MOA-AD subject of the present cases is of public concern, involving as it does the sovereignty and
territorial integrity of the State, which directly affects the lives of the public at large.

Matters of public concern covered by the right to information include steps and negotiations leading to the consummation of the
contract. In not distinguishing as to the executory nature or commercial character of agreements, the Court has categorically ruled:

x x x [T]he right to information "contemplates inclusion of negotiations leading to the consummation of the transaction."
Certainly, a consummated contract is not a requirement for the exercise of the right to information. Otherwise, the people can
never exercise the right if no contract is consummated, and if one is consummated, it may be too late for the public to expose
its defects.

Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous
to the government or even illegal, becomes fait accompli. This negates the State policy of full transparency on matters of
public concern, a situation which the framers of the Constitution could not have intended. Such a requirement will prevent
the citizenry from participating in the public discussion of any proposed contract, effectively truncating a basic right
enshrined in the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the State of its
avowed "policy of full disclosure of all its transactions involving public interest."122 (Emphasis and italics in the original)
Intended as a "splendid symmetry"123 to the right to information under the Bill of Rights is the policy of public disclosure under
Section 28, Article II of the Constitution reading:

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.124

The policy of full public disclosure enunciated in above-quoted Section 28 complements the right of access to information on matters
of public concern found in the Bill of Rights. The right to information guarantees the right of the people to demand information, while
Section 28 recognizes the duty of officialdom to give information even if nobody demands.125

The policy of public disclosure establishes a concrete ethical principle for the conduct of public affairs in a genuinely open
democracy, with the people's right to know as the centerpiece. It is a mandate of the State to be accountable by following such
policy.126 These provisions are vital to the exercise of the freedom of expression and essential to hold public officials at all times
accountable to the people.127

Whether Section 28 is self-executory, the records of the deliberations of the Constitutional Commission so disclose:

MR. SUAREZ. And since this is not self-executory, this policy will not be enunciated or will not be in force and effect until
after Congress shall have provided it.

MR. OPLE. I expect it to influence the climate of public ethics immediately but, of course, the implementing law will have to
be enacted by Congress, Mr. Presiding Officer.128

The following discourse, after Commissioner Hilario Davide, Jr., sought clarification on the issue, is enlightening.

MR. DAVIDE. I would like to get some clarifications on this. Mr. Presiding Officer, did I get the Gentleman correctly as
having said that this is not a self-executing provision? It would require a legislation by Congress to implement?

MR. OPLE. Yes. Originally, it was going to be self-executing, but I accepted an amendment from Commissioner Regalado,
so that the safeguards on national interest are modified by the clause "as may be provided by law"

MR. DAVIDE. But as worded, does it not mean that this will immediately take effect and Congress may provide for
reasonable safeguards on the sole ground national interest?

MR. OPLE. Yes. I think so, Mr. Presiding Officer, I said earlier that it should immediately influence the climate of the
conduct of public affairs but, of course, Congress here may no longer pass a law revoking it, or if this is approved, revoking
this principle, which is inconsistent with this policy.129 (Emphasis supplied)

Indubitably, the effectivity of the policy of public disclosure need not await the passing of a statute. As Congress cannot revoke
this principle, it is merely directed to provide for "reasonable safeguards." The complete and effective exercise of the right to
information necessitates that its complementary provision on public disclosure derive the same self-executory nature. Since both
provisions go hand-in-hand, it is absurd to say that the broader130 right to information on matters of public concern is already
enforceable while the correlative duty of the State to disclose its transactions involving public interest is not enforceable until there is
an enabling law. Respondents cannot thus point to the absence of an implementing legislation as an excuse in not effecting such
policy.

An essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government
and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the
government may perceive and be responsive to the people's will.131Envisioned to be corollary to the twin rights to information and
disclosure is the design for feedback mechanisms.

MS. ROSARIO BRAID. Yes. And lastly, Mr. Presiding Officer, will the people be able to participate? Will the
government provide feedback mechanisms so that the people can participate and can react where the existing media
facilities are not able to provide full feedback mechanisms to the government? I suppose this will be part of the
government implementing operational mechanisms.

MR. OPLE. Yes. I think through their elected representatives and that is how these courses take place. There is a message
and a feedback, both ways.

xxxx

MS. ROSARIO BRAID. Mr. Presiding Officer, may I just make one last sentence?

I think when we talk about the feedback network, we are not talking about public officials but also network of private
business o[r] community-based organizations that will be reacting. As a matter of fact, we will put more credence or
credibility on the private network of volunteers and voluntary community-based organizations. So I do not think we are
afraid that there will be another OMA in the making.132(Emphasis supplied)

The imperative of a public consultation, as a species of the right to information, is evident in the "marching orders" to
respondents. The mechanics for the duty to disclose information and to conduct public consultation regarding the peace agenda and
process is manifestly provided by E.O. No. 3.133 The preambulatory clause of E.O. No. 3 declares that there is a need to further
enhance the contribution of civil society to the comprehensive peace process by institutionalizing the people's participation.

One of the three underlying principles of the comprehensive peace process is that it "should be community-based, reflecting the
sentiments, values and principles important to all Filipinos" and "shall be defined not by the government alone, nor by the different
contending groups only, but by all Filipinos as one community."134 Included as a component of the comprehensive peace process is
consensus-building and empowerment for peace, which includes "continuing consultations on both national and local levels to build
consensus for a peace agenda and process, and the mobilization and facilitation of people's participation in the peace process."135

Clearly, E.O. No. 3 contemplates not just the conduct of a plebiscite to effectuate "continuing" consultations, contrary to
respondents' position that plebiscite is "more than sufficient consultation."136

Further, E.O. No. 3 enumerates the functions and responsibilities of the PAPP, one of which is to "[c]onduct regular dialogues with
the National Peace Forum (NPF) and other peace partners to seek relevant information, comments, recommendations as well as to
render appropriate and timely reports on the progress of the comprehensive peace process."137 E.O. No. 3 mandates the establishment
of the NPF to be "the principal forum for the PAPP to consult with and seek advi[c]e from the peace advocates, peace partners and
concerned sectors of society on both national and local levels, on the implementation of the comprehensive peace process, as well as
for government[-]civil society dialogue and consensus-building on peace agenda and initiatives."138

In fine, E.O. No. 3 establishes petitioners' right to be consulted on the peace agenda, as a corollary to the constitutional right to
information and disclosure.

PAPP Esperon committed grave abuse of discretion

The PAPP committed grave abuse of discretion when he failed to carry out the pertinent consultation. The furtive process by which
the MOA-AD was designed and crafted runs contrary to and in excess of the legal authority, and amounts to a whimsical,
capricious, oppressive, arbitrary and despotic exercise thereof.

The Court may not, of course, require the PAPP to conduct the consultation in a particular way or manner. It may, however, require
him to comply with the law and discharge the functions within the authority granted by the President.139

Petitioners are not claiming a seat at the negotiating table, contrary to respondents' retort in justifying the denial of petitioners' right to
be consulted. Respondents' stance manifests the manner by which they treat the salient provisions of E.O. No. 3 on people's
participation. Such disregard of the express mandate of the President is not much different from superficial conduct toward token
provisos that border on classic lip service.140 It illustrates a gross evasion of positive duty and a virtual refusal to perform the duty
enjoined.

As for respondents' invocation of the doctrine of executive privilege, it is not tenable under the premises. The argument defies sound
reason when contrasted with E.O. No. 3's explicit provisions on continuing consultation and dialogue on both national and local levels.
The executive order even recognizes the exercise of the public's right even before the GRP makes its official recommendations or
before the government proffers its definite propositions.141 It bear emphasis that E.O. No. 3 seeks to elicit relevant advice, information,
comments and recommendations from the people through dialogue.

AT ALL EVENTS, respondents effectively waived the defense of executive privilege in view of their unqualified disclosure of the
official copies of the final draft of the MOA-AD. By unconditionally complying with the Court's August 4, 2008 Resolution, without a
prayer for the document's disclosure in camera, or without a manifestation that it was complying therewith ex abundante ad cautelam.

Petitioners' assertion that the Local Government Code (LGC) of 1991 declares it a State policy to "require all national agencies and
offices to conduct periodic consultations with appropriate local government units, non-governmental and people's organizations, and
other concerned sectors of the community before any project or program is implemented in their respective jurisdictions"142 is well-
taken. The LGC chapter on intergovernmental relations puts flesh into this avowed policy:

Prior Consultations Required. - No project or program shall be implemented by government authorities unlessthe
consultations mentioned in Sections 2 (c) and 26 hereof are complied with, and prior approval of the sanggunian concerned is
obtained: Provided, That occupants in areas where such projects are to be implemented shall not be evicted unless
appropriate relocation sites have been provided, in accordance with the provisions of the Constitution.143 (Italics and
underscoring supplied)

In Lina, Jr. v. Hon. Paño,144 the Court held that the above-stated policy and above-quoted provision of the LGU apply only to national
programs or projects which are to be implemented in a particular local community. Among the programs and projects covered are
those that are critical to the environment and human ecology including those that may call for the eviction of a particular group of
people residing in the locality where these will be implemented.145 The MOA-AD is one peculiar program that unequivocally and
unilaterally vests ownership of a vast territory to the Bangsamoro people,146 which could pervasively and drastically result to
the diaspora or displacement of a great number of inhabitants from their total environment.

With respect to the indigenous cultural communities/indigenous peoples (ICCs/IPs), whose interests are represented herein by
petitioner Lopez and are adversely affected by the MOA-AD, the ICCs/IPs have, under the IPRA, the right to participate fully at all
levels of decision-making in matters which may affect their rights, lives and destinies.147 The MOA-AD, an instrument recognizing
ancestral domain, failed to justify its non-compliance with the clear-cut mechanisms ordained in said Act,148 which entails, among
other things, the observance of the free and prior informed consent of the ICCs/IPs.
Notably, the IPRA does not grant the Executive Department or any government agency the power to delineate and recognize an
ancestral domain claim by mere agreement or compromise. The recognition of the ancestral domain is the raison d'etre of the MOA-
AD, without which all other stipulations or "consensus points" necessarily must fail. In proceeding to make a sweeping declaration on
ancestral domain, without complying with the IPRA, which is cited as one of the TOR of the MOA-AD, respondents clearly
transcended the boundaries of their authority. As it seems, even the heart of the MOA-AD is still subject to necessary changes to
the legal framework. While paragraph 7 on Governance suspends the effectivity of all provisions requiring changes to the legal
framework, such clause is itself invalid, as will be discussed in the following section.

Indeed, ours is an open society, with all the acts of the government subject to public scrutiny and available always to public
cognizance. This has to be so if the country is to remain democratic, with sovereignty residing in the people and all government
authority emanating from them.149

ON THE SECOND SUBSTANTIVE ISSUE

With regard to the provisions of the MOA-AD, there can be no question that they cannot all be accommodated under the present
Constitution and laws. Respondents have admitted as much in the oral arguments before this Court, and the MOA-AD itself
recognizes the need to amend the existing legal framework to render effective at least some of its provisions. Respondents,
nonetheless, counter that the MOA-AD is free of any legal infirmity because any provisions therein which are inconsistent with the
present legal framework will not be effective until the necessary changes to that framework are made. The validity of this argument
will be considered later. For now, the Court shall pass upon how

The MOA-AD is inconsistent with the Constitution and laws as presently worded.

In general, the objections against the MOA-AD center on the extent of the powers conceded therein to the BJE. Petitioners assert that
the powers granted to the BJE exceed those granted to any local government under present laws, and even go beyond those of the
present ARMM. Before assessing some of the specific powers that would have been vested in the BJE, however, it would be useful to
turn first to a general idea that serves as a unifying link to the different provisions of the MOA-AD, namely, the international
law concept of association. Significantly, the MOA-AD explicitly alludes to this concept, indicating that the Parties actually framed
its provisions with it in mind.

Association is referred to in paragraph 3 on TERRITORY, paragraph 11 on RESOURCES, and paragraph 4 on GOVERNANCE. It is

in the last mentioned provision, however, that the MOA-AD most clearly uses it to describe the envisioned relationship between the
BJE and the Central Government.

4. The relationship between the Central Government and the Bangsamoro juridical entity shall be associative
characterized by shared authority and responsibility with a structure of governance based on executive, legislative,
judicial and administrative institutions with defined powers and functions in the comprehensive compact. A period of
transition shall be established in a comprehensive peace compact specifying the relationship between the Central Government
and the BJE. (Emphasis and underscoring supplied)

The nature of the "associative" relationship may have been intended to be defined more precisely in the still to be forged
Comprehensive Compact. Nonetheless, given that there is a concept of "association" in international law, and the MOA-AD - by its
inclusion of international law instruments in its TOR- placed itself in an international legal context, that concept of association may be
brought to bear in understanding the use of the term "associative" in the MOA-AD.

Keitner and Reisman state that

[a]n association is formed when two states of unequal power voluntarily establish durable links. In the basic model, one
state, the associate, delegates certain responsibilities to the other, the principal, while maintaining its international
status as a state. Free associations represent a middle ground between integration and independence. x x
x150 (Emphasis and underscoring supplied)

For purposes of illustration, the Republic of the Marshall Islands and the Federated States of Micronesia (FSM), formerly part of the
U.S.-administered Trust Territory of the Pacific Islands,151 are associated states of the U.S. pursuant to a Compact of Free Association.
The currency in these countries is the U.S. dollar, indicating their very close ties with the U.S., yet they issue their own travel
documents, which is a mark of their statehood. Their international legal status as states was confirmed by the UN Security Council and
by their admission to UN membership.

According to their compacts of free association, the Marshall Islands and the FSM generally have the capacity to conduct foreign
affairs in their own name and right, such capacity extending to matters such as the law of the sea, marine resources, trade, banking,
postal, civil aviation, and cultural relations. The U.S. government, when conducting its foreign affairs, is obligated to consult with the
governments of the Marshall Islands or the FSM on matters which it (U.S. government) regards as relating to or affecting either
government.

In the event of attacks or threats against the Marshall Islands or the FSM, the U.S. government has the authority and obligation to
defend them as if they were part of U.S. territory. The U.S. government, moreover, has the option of establishing and using military
areas and facilities within these associated states and has the right to bar the military personnel of any third country from having
access to these territories for military purposes.

It bears noting that in U.S. constitutional and international practice, free association is understood as an international association
between sovereigns. The Compact of Free Association is a treaty which is subordinate to the associated nation's national constitution,
and each party may terminate the association consistent with the right of independence. It has been said that, with the admission of the
U.S.-associated states to the UN in 1990, the UN recognized that the American model of free association is actually based on an
underlying status of independence.152

In international practice, the "associated state" arrangement has usually been used as a transitional device of former colonies on their
way to full independence. Examples of states that have passed through the status of associated states as a transitional phase are
Antigua, St. Kitts-Nevis-Anguilla, Dominica, St. Lucia, St. Vincent and Grenada. All have since become independent states.153

Back to the MOA-AD, it contains many provisions which are consistent with the international legal concept of association,
specifically the following: the BJE's capacity to enter into economic and trade relations with foreign countries, the commitment of the
Central Government to ensure the BJE's participation in meetings and events in the ASEAN and the specialized UN agencies, and the
continuing responsibility of the Central Government over external defense. Moreover, the BJE's right to participate in Philippine
official missions bearing on negotiation of border agreements, environmental protection, and sharing of revenues pertaining to the
bodies of water adjacent to or between the islands forming part of the ancestral domain, resembles the right of the governments of
FSM and the Marshall Islands to be consulted by the U.S. government on any foreign affairs matter affecting them.

These provisions of the MOA indicate, among other things, that the Parties aimed to vest in the BJE the status of an associated
state or, at any rate, a status closely approximating it.

The concept of association is not recognized under the present Constitution

No province, city, or municipality, not even the ARMM, is recognized under our laws as having an "associative" relationship with the
national government. Indeed, the concept implies powers that go beyond anything ever granted by the Constitution to any local or
regional government. It also implies the recognition of the associated entity as a state. The Constitution, however, does not
contemplate any state in this jurisdiction other than the Philippine State, much less does it provide for a transitory status that aims to
prepare any part of Philippine territory for independence.

Even the mere concept animating many of the MOA-AD's provisions, therefore, already requires for its validity the amendment of
constitutional provisions, specifically the following provisions of Article X:

SECTION 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities,
municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as hereinafter
provided.

SECTION 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of
provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural heritage,
economic and social structures, and other relevant characteristics within the framework of this Constitution and the
national sovereignty as well as territorial integrity of the Republic of the Philippines.

The BJE is a far more powerful 

entity than the autonomous region 
recognized in the Constitution

It is not merely an expanded version of the ARMM, the status of its relationship with the national government being fundamentally
different from that of the ARMM. Indeed, BJE is a state in all but name as it meets the criteria of a state laid down in the
Montevideo Convention,154 namely, a permanent population, a defined territory, a government, and a capacity to enter into relations
with other states.

Even assuming arguendo that the MOA-AD would not necessarily sever any portion of Philippine territory, the spirit animating it -
which has betrayed itself by its use of the concept of association - runs counter to the national sovereignty and territorial integrity
of the Republic.

The defining concept underlying the relationship between the national government and the BJE being itself contrary to the
present Constitution, it is not surprising that many of the specific provisions of the MOA-AD on the formation and powers of
the BJE are in conflict with the Constitution and the laws.

Article X, Section 18 of the Constitution provides that "[t]he creation of the autonomous region shall be effective when approved by a
majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and
geographic areas voting favorably in such plebiscite shall be included in the autonomous region." (Emphasis supplied)

As reflected above, the BJE is more of a state than an autonomous region. But even assuming that it is covered by the term
"autonomous region" in the constitutional provision just quoted, the MOA-AD would still be in conflict with it. Under paragraph 2(c)
on TERRITORY in relation to 2(d) and 2(e), the present geographic area of the ARMM and, in addition, the municipalities of Lanao
del Norte which voted for inclusion in the ARMM during the 2001 plebiscite - Baloi, Munai, Nunungan, Pantar, Tagoloan and
Tangkal - are automatically part of the BJE without need of another plebiscite, in contrast to the areas under Categories A and B
mentioned earlier in the overview. That the present components of the ARMM and the above-mentioned municipalities voted for
inclusion therein in 2001, however, does not render another plebiscite unnecessary under the Constitution, precisely because what
these areas voted for then was their inclusion in the ARMM, not the BJE.
The MOA-AD, moreover, would not
comply with Article X, Section 20 of 
the Constitution

since that provision defines the powers of autonomous regions as follows:

SECTION 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the
organic act of autonomous regions shall provide for legislative powers over:

(1) Administrative organization;

(2) Creation of sources of revenues;

(3) Ancestral domain and natural resources;

(4) Personal, family, and property relations;

(5) Regional urban and rural planning development;

(6) Economic, social, and tourism development;

(7) Educational policies;

(8) Preservation and development of the cultural heritage; and

(9) Such other matters as may be authorized by law for the promotion of the general welfare of the people of the region.
(Underscoring supplied)

Again on the premise that the BJE may be regarded as an autonomous region, the MOA-AD would require an amendment that would
expand the above-quoted provision. The mere passage of new legislation pursuant to sub-paragraph No. 9 of said constitutional
provision would not suffice, since any new law that might vest in the BJE the powers found in the MOA-AD must, itself, comply with
other provisions of the Constitution. It would not do, for instance, to merely pass legislation vesting the BJE with treaty-making power
in order to accommodate paragraph 4 of the strand on RESOURCES which states: "The BJE is free to enter into any economic
cooperation and trade relations with foreign countries: provided, however, that such relationships and understandings do not include
aggression against the Government of the Republic of the Philippines x x x." Under our constitutional system, it is only the President
who has that power. Pimentel v. Executive Secretary155 instructs:

In our system of government, the President, being the head of state, is regarded as the sole organ and authority in external
relations and is the country's sole representative with foreign nations. As the chief architect of foreign policy, the
President acts as the country's mouthpiece with respect to international affairs. Hence, the President is vested with the
authority to deal with foreign states and governments, extend or withhold recognition, maintain diplomatic relations,
enter into treaties, and otherwise transact the business of foreign relations. In the realm of treaty-making, the
President has the sole authority to negotiate with other states. (Emphasis and underscoring supplied)

Article II, Section 22 of the Constitution must also be amended if the scheme envisioned in the MOA-AD is to be effected. That
constitutional provision states: "The State recognizes and promotes the rights of indigenous cultural communities within the
framework of national unity and development." (Underscoring supplied) An associative arrangement does not uphold national unity.
While there may be a semblance of unity because of the associative ties between the BJE and the national government, the act of
placing a portion of Philippine territory in a status which, in international practice, has generally been a preparation for independence,
is certainly not conducive to national unity.

Besides being irreconcilable with the Constitution, the MOA-AD is also inconsistent with prevailing statutory law, among which
are R.A. No. 9054156 or the Organic Act of the ARMM, and the IPRA.157

Article X, Section 3 of the Organic Act of the ARMM is a bar to the adoption of the definition of "Bangsamoro people" used in
the MOA-AD. Paragraph 1 on Concepts and Principles states:

1. It is the birthright of all Moros and all Indigenous peoples of Mindanao to identify themselves and be accepted as
"Bangsamoros". The Bangsamoro people refers to those who are natives or original inhabitants of Mindanao and its
adjacent islands including Palawan and the Sulu archipelago at the time of conquest or colonization of its descendants
whether mixed or of full blood. Spouses and their descendants are classified as Bangsamoro. The freedom of choice of the
Indigenous people shall be respected. (Emphasis and underscoring supplied)

This use of the term Bangsamoro sharply contrasts with that found in the Article X, Section 3 of the Organic Act, which, rather than
lumping together the identities of the Bangsamoro and other indigenous peoples living in Mindanao, clearly distinguishes between
Bangsamoro people and Tribal peoples, as follows:

"As used in this Organic Act, the phrase "indigenous cultural community" refers to Filipino citizens residing in the
autonomous region who are:
 (a) Tribal peoples. These are citizens whose social, cultural and economic conditions distinguish them from other sectors of
the national community; and

(b) Bangsa Moro people. These are citizens who are believers in Islam and who have retained some or all of their own
social, economic, cultural, and political institutions."

Respecting the IPRA, it lays down the prevailing procedure for the delineation and recognition of ancestral domains. The MOA-AD's
manner of delineating the ancestral domain of the Bangsamoro people is a clear departure from that procedure. By paragraph 1 of
Territory, the Parties simply agree that, subject to the delimitations in the agreed Schedules, "[t]he Bangsamoro homeland and historic
territory refer to the land mass as well as the maritime, terrestrial, fluvial and alluvial domains, and the aerial domain, the atmospheric
space above it, embracing the Mindanao-Sulu-Palawan geographic region."

Chapter VIII of the IPRA, on the other hand, lays down a detailed procedure, as illustrated in the following provisions thereof:

SECTION 52. Delineation Process. - The identification and delineation of ancestral domains shall be done in accordance
with the following procedures:

xxxx

b) Petition for Delineation. - The process of delineating a specific perimeter may be initiated by the NCIP with the consent of
the ICC/IP concerned, or through a Petition for Delineation filed with the NCIP, by a majority of the members of the
ICCs/IPs;

c) Delineation Proper. - The official delineation of ancestral domain boundaries including census of all community members
therein, shall be immediately undertaken by the Ancestral Domains Office upon filing of the application by the ICCs/IPs
concerned. Delineation will be done in coordination with the community concerned and shall at all times include genuine
involvement and participation by the members of the communities concerned;

d) Proof Required. - Proof of Ancestral Domain Claims shall include the testimony of elders or community under oath, and
other documents directly or indirectly attesting to the possession or occupation of the area since time immemorial by such
ICCs/IPs in the concept of owners which shall be any one (1) of the following authentic documents:

1) Written accounts of the ICCs/IPs customs and traditions;

2) Written accounts of the ICCs/IPs political structure and institution;

3) Pictures showing long term occupation such as those of old improvements, burial grounds, sacred places and old
villages;

4) Historical accounts, including pacts and agreements concerning boundaries entered into by the ICCs/IPs
concerned with other ICCs/IPs;

5) Survey plans and sketch maps;

6) Anthropological data;

7) Genealogical surveys;

8) Pictures and descriptive histories of traditional communal forests and hunting grounds;

9) Pictures and descriptive histories of traditional landmarks such as mountains, rivers, creeks, ridges, hills, terraces
and the like; and

10) Write-ups of names and places derived from the native dialect of the community.

e) Preparation of Maps. - On the basis of such investigation and the findings of fact based thereon, the Ancestral Domains
Office of the NCIP shall prepare a perimeter map, complete with technical descriptions, and a description of the natural
features and landmarks embraced therein;

f) Report of Investigation and Other Documents. - A complete copy of the preliminary census and a report of investigation,
shall be prepared by the Ancestral Domains Office of the NCIP;

g) Notice and Publication. - A copy of each document, including a translation in the native language of the ICCs/IPs
concerned shall be posted in a prominent place therein for at least fifteen (15) days. A copy of the document shall also be
posted at the local, provincial and regional offices of the NCIP, and shall be published in a newspaper of general circulation
once a week for two (2) consecutive weeks to allow other claimants to file opposition thereto within fifteen (15) days from
date of such publication: Provided, That in areas where no such newspaper exists, broadcasting in a radio station will be a
valid substitute: Provided, further, That mere posting shall be deemed sufficient if both newspaper and radio station are not
available;
 h) Endorsement to NCIP. - Within fifteen (15) days from publication, and of the inspection process, the Ancestral Domains
Office shall prepare a report to the NCIP endorsing a favorable action upon a claim that is deemed to have sufficient proof.
However, if the proof is deemed insufficient, the Ancestral Domains Office shall require the submission of additional
evidence: Provided, That the Ancestral Domains Office shall reject any claim that is deemed patently false or fraudulent after
inspection and verification: Provided, further, That in case of rejection, the Ancestral Domains Office shall give the applicant
due notice, copy furnished all concerned, containing the grounds for denial. The denial shall be appealable to the NCIP:
Provided, furthermore, That in cases where there are conflicting claims among ICCs/IPs on the boundaries of ancestral
domain claims, the Ancestral Domains Office shall cause the contending parties to meet and assist them in coming up with a
preliminary resolution of the conflict, without prejudice to its full adjudication according to the section below.

xxxx

To remove all doubts about the irreconcilability of the MOA-AD with the present legal system, a discussion of not only the
Constitution and domestic statutes, but also of international law is in order, for

Article II, Section 2 of the Constitution states that the Philippines "adopts the generally accepted principles of international
law as part of the law of the land."

Applying this provision of the Constitution, the Court, in Mejoff v. Director of Prisons,158 held that the Universal Declaration of
Human Rights is part of the law of the land on account of which it ordered the release on bail of a detained alien of Russian descent
whose deportation order had not been executed even after two years. Similarly, the Court in Agustin v. Edu159 applied the aforesaid
constitutional provision to the 1968 Vienna Convention on Road Signs and Signals.

International law has long recognized the right to self-determination of "peoples," understood not merely as the entire population of a
State but also a portion thereof. In considering the question of whether the people of Quebec had a right to unilaterally secede from
Canada, the Canadian Supreme Court in REFERENCE RE SECESSION OF QUEBEC160 had occasion to acknowledge that "the right
of a people to self-determination is now so widely recognized in international conventions that the principle has acquired a status
beyond ‘convention' and is considered a general principle of international law."

Among the conventions referred to are the International Covenant on Civil and Political Rights161 and the International Covenant on
Economic, Social and Cultural Rights162 which state, in Article 1 of both covenants, that all peoples, by virtue of the right of self-
determination, "freely determine their political status and freely pursue their economic, social, and cultural development."

The people's right to self-determination should not, however, be understood as extending to a unilateral right of secession. A
distinction should be made between the right of internal and external self-determination. REFERENCE RE SECESSION OF
QUEBEC is again instructive:

"(ii) Scope of the Right to Self-determination

126. The recognized sources of international law establish that the right to self-determination of a people is normally
fulfilled through internal self-determination - a people's pursuit of its political, economic, social and cultural
development within the framework of an existing state. A right to external self-determination (which in this case
potentially takes the form of the assertion of a right to unilateral secession) arises in only the most extreme of cases
and, even then, under carefully defined circumstances. x x x

External self-determination can be defined as in the following statement from the Declaration on Friendly Relations,
supra, as

The establishment of a sovereign and independent State, the free association or integration with an independent State
or the emergence into any other political status freely determined by a peopleconstitute modes of implementing the right
of self-determination by that people. (Emphasis added)

127. The international law principle of self-determination has evolved within a framework of respect for the
territorial integrity of existing states. The various international documents that support the existence of a people's right to
self-determination also contain parallel statements supportive of the conclusion that the exercise of such a right must be
sufficiently limited to prevent threats to an existing state's territorial integrity or the stability of relations between sovereign
states.

x x x x (Emphasis, italics and underscoring supplied)

The Canadian Court went on to discuss the exceptional cases in which the right to external self-determination can arise, namely, where
a people is under colonial rule, is subject to foreign domination or exploitation outside a colonial context, and - less definitely but
asserted by a number of commentators - is blocked from the meaningful exercise of its right to internal self-determination. The Court
ultimately held that the population of Quebec had no right to secession, as the same is not under colonial rule or foreign domination,
nor is it being deprived of the freedom to make political choices and pursue economic, social and cultural development, citing that
Quebec is equitably represented in legislative, executive and judicial institutions within Canada, even occupying prominent positions
therein.

The exceptional nature of the right of secession is further exemplified in the REPORT OF THE INTERNATIONAL COMMITTEE
OF JURISTS ON THE LEGAL ASPECTS OF THE AALAND ISLANDS QUESTION.163 There, Sweden presented to the Council of
the League of Nations the question of whether the inhabitants of the Aaland Islands should be authorized to determine by plebiscite if
the archipelago should remain under Finnish sovereignty or be incorporated in the kingdom of Sweden. The Council, before resolving
the question, appointed an International Committee composed of three jurists to submit an opinion on the preliminary issue of whether
the dispute should, based on international law, be entirely left to the domestic jurisdiction of Finland. The Committee stated the rule as
follows:

x x x [I]n the absence of express provisions in international treaties, the right of disposing of national territory is
essentially an attribute of the sovereignty of every State. Positive International Law does not recognize the right of
national groups, as such, to separate themselves from the State of which they form part by the simple expression of a
wish, any more than it recognizes the right of other States to claim such a separation. Generally speaking, the grant or
refusal of the right to a portion of its population of determining its own political fate by plebiscite or by some other
method, is, exclusively, an attribute of the sovereignty of every State which is definitively constituted. A dispute
between two States concerning such a question, under normal conditions therefore, bears upon a question which International
Law leaves entirely to the domestic jurisdiction of one of the States concerned. Any other solution would amount to an
infringement of sovereign rights of a State and would involve the risk of creating difficulties and a lack of stability which
would not only be contrary to the very idea embodied in term "State," but would also endanger the interests of the
international community. If this right is not possessed by a large or small section of a nation, neither can it be held by the
State to which the national group wishes to be attached, nor by any other State. (Emphasis and underscoring supplied)

The Committee held that the dispute concerning the Aaland Islands did not refer to a question which is left by international law to the
domestic jurisdiction of Finland, thereby applying the exception rather than the rule elucidated above. Its ground for departing from
the general rule, however, was a very narrow one, namely, the Aaland Islands agitation originated at a time when Finland was
undergoing drastic political transformation. The internal situation of Finland was, according to the Committee, so abnormal that, for a
considerable time, the conditions required for the formation of a sovereign State did not exist. In the midst of revolution, anarchy, and
civil war, the legitimacy of the Finnish national government was disputed by a large section of the people, and it had, in fact, been
chased from the capital and forcibly prevented from carrying out its duties. The armed camps and the police were divided into two
opposing forces. In light of these circumstances, Finland was not, during the relevant time period, a "definitively constituted"
sovereign state. The Committee, therefore, found that Finland did not possess the right to withhold from a portion of its population the
option to separate itself - a right which sovereign nations generally have with respect to their own populations.

Turning now to the more specific category of indigenous peoples, this term has been used, in scholarship as well as international,
regional, and state practices, to refer to groups with distinct cultures, histories, and connections to land (spiritual and otherwise) that
have been forcibly incorporated into a larger governing society. These groups are regarded as "indigenous" since they are the living
descendants of pre-invasion inhabitants of lands now dominated by others. Otherwise stated, indigenous peoples, nations, or
communities are culturally distinctive groups that find themselves engulfed by settler societies born of the forces of empire and
conquest.164 Examples of groups who have been regarded as indigenous peoples are the Maori of New Zealand and the aboriginal
peoples of Canada.

As with the broader category of "peoples," indigenous peoples situated within states do not have a general right to independence or
secession from those states under international law,165 but they do have rights amounting to what was discussed above as the right
to internal self-determination.

In a historic development last September 13, 2007, the UN General Assembly adopted the United Nations Declaration on the Rights of
Indigenous Peoples (UN DRIP) through General Assembly Resolution 61/295. The vote was 143 to 4, the Philippines being
included among those in favor, and the four voting against being Australia, Canada, New Zealand, and the U.S. The Declaration
clearly recognized the right of indigenous peoples to self-determination, encompassing the right to autonomy or self-
government, to wit:

Article 3

Indigenous peoples have the right to self-determination. By virtue of that right they freely determine their political status
and freely pursue their economic, social and cultural development.

Article 4

Indigenous peoples, in exercising their right to self-determination, have the right to autonomy or self-government in

matters relating to their internal and local affairs, as well as ways and means for financing their autonomous functions.

Article 5

Indigenous peoples have the right to maintain and strengthen their distinct political, legal, economic, social and cultural
institutions, while retaining their right to participate fully, if they so choose, in the political, economic, social and cultural life
of the State.

Self-government, as used in international legal discourse pertaining to indigenous peoples, has been understood as equivalent to
"internal self-determination."166 The extent of self-determination provided for in the UN DRIP is more particularly defined in its
subsequent articles, some of which are quoted hereunder:

Article 8

1. Indigenous peoples and individuals have the right not to be subjected to forced assimilation or destruction of their culture.
2. States shall provide effective mechanisms for prevention of, and redress for:

(a) Any action which has the aim or effect of depriving them of their integrity as distinct peoples, or of their cultural
values or ethnic identities;

(b) Any action which has the aim or effect of dispossessing them of their lands, territories or resources;

(c) Any form of forced population transfer which has the aim or effect of violating or undermining any of their rights;

(d) Any form of forced assimilation or integration;

(e) Any form of propaganda designed to promote or incite racial or ethnic discrimination directed against them.

Article 21

1. Indigenous peoples have the right, without discrimination, to the improvement of their economic and social conditions,
including, inter alia, in the areas of education, employment, vocational training and retraining, housing, sanitation, health and
social security.

2. States shall take effective measures and, where appropriate, special measures to ensure continuing improvement of their
economic and social conditions. Particular attention shall be paid to the rights and special needs of indigenous elders, women,
youth, children and persons with disabilities.

Article 26

1. Indigenous peoples have the right to the lands, territories and resources which they have traditionally owned,
occupied or otherwise used or acquired.

2. Indigenous peoples have the right to own, use, develop and control the lands, territories and resources that they possess by
reason of traditional ownership or other traditional occupation or use, as well as those which they have otherwise acquired.

3. States shall give legal recognition and protection to these lands, territories and resources. Such recognition shall be
conducted with due respect to the customs, traditions and land tenure systems of the indigenous peoples concerned.

Article 30

1. Military activities shall not take place in the lands or territories of indigenous peoples, unless justified by a relevant public
interest or otherwise freely agreed with or requested by the indigenous peoples concerned.

2. States shall undertake effective consultations with the indigenous peoples concerned, through appropriate procedures and
in particular through their representative institutions, prior to using their lands or territories for military activities.

Article 32

1. Indigenous peoples have the right to determine and develop priorities and strategies for the development or use of their
lands or territories and other resources.

2. States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative
institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or
territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water
or other resources.

3. States shall provide effective mechanisms for just and fair redress for any such activities, and appropriate measures shall
be taken to mitigate adverse environmental, economic, social, cultural or spiritual impact.

Article 37

1. Indigenous peoples have the right to the recognition, observance and enforcement of treaties, agreements and other
constructive arrangements concluded with States or their successors and to have States honour and respect such treaties,
agreements and other constructive arrangements.

2. Nothing in this Declaration may be interpreted as diminishing or eliminating the rights of indigenous peoples contained in
treaties, agreements and other constructive arrangements.

Article 38

States in consultation and cooperation with indigenous peoples, shall take the appropriate measures, including legislative
measures, to achieve the ends of this Declaration.
Assuming that the UN DRIP, like the Universal Declaration on Human Rights, must now be regarded as embodying customary
international law - a question which the Court need not definitively resolve here - the obligations enumerated therein do not strictly
require the Republic to grant the Bangsamoro people, through the instrumentality of the BJE, the particular rights and powers
provided for in the MOA-AD. Even the more specific provisions of the UN DRIP are general in scope, allowing for flexibility in its
application by the different States.

There is, for instance, no requirement in the UN DRIP that States now guarantee indigenous peoples their own police and internal
security force. Indeed, Article 8 presupposes that it is the State which will provide protection for indigenous peoples against acts like
the forced dispossession of their lands - a function that is normally performed by police officers. If the protection of a right so essential
to indigenous people's identity is acknowledged to be the responsibility of the State, then surely the protection of rights less significant
to them as such peoples would also be the duty of States. Nor is there in the UN DRIP an acknowledgement of the right of indigenous
peoples to the aerial domain and atmospheric space. What it upholds, in Article 26 thereof, is the right of indigenous peoples to the
lands, territories and resources which they have traditionally owned, occupied or otherwise used or acquired.

Moreover, the UN DRIP, while upholding the right of indigenous peoples to autonomy, does not obligate States to grant indigenous
peoples the near-independent status of an associated state. All the rights recognized in that document are qualified in Article 46 as
follows:

1. Nothing in this Declaration may be interpreted as implying for any State, people, group or person any right to engage in
any activity or to perform any act contrary to the Charter of the United Nations or construed as authorizing or
encouraging any action which would dismember or impair, totally or in part, the territorial integrity or political
unity of sovereign and independent States.

Even if the UN DRIP were considered as part of the law of the land pursuant to Article II, Section 2 of the Constitution, it would not
suffice to uphold the validity of the MOA-AD so as to render its compliance with other laws unnecessary.

It is, therefore, clear that the MOA-AD contains numerous provisions that cannot be reconciled with the Constitution and the
laws as presently worded. Respondents proffer, however, that the signing of the MOA-AD alone would not have entailed any
violation of law or grave abuse of discretion on their part, precisely because it stipulates that the provisions thereof inconsistent with
the laws shall not take effect until these laws are amended. They cite paragraph 7 of the MOA-AD strand on GOVERNANCE quoted
earlier, but which is reproduced below for convenience:

7. The Parties agree that the mechanisms and modalities for the actual implementation of this MOA-AD shall be spelt out in
the Comprehensive Compact to mutually take such steps to enable it to occur effectively.

Any provisions of the MOA-AD requiring amendments to the existing legal framework shall come into force upon signing of
a Comprehensive Compact and upon effecting the necessary changes to the legal framework with due regard to non
derogation of prior agreements and within the stipulated timeframe to be contained in the Comprehensive Compact.

Indeed, the foregoing stipulation keeps many controversial provisions of the MOA-AD from coming into force until the necessary
changes to the legal framework are effected. While the word "Constitution" is not mentioned in the provision now under
consideration or anywhere else in the MOA-AD, the term "legal framework" is certainly broad enough to include the
Constitution.

Notwithstanding the suspensive clause, however, respondents, by their mere act of incorporating in the MOA-AD the provisions
thereof regarding the associative relationship between the BJE and the Central Government, have already violated the Memorandum
of Instructions From The President dated March 1, 2001, which states that the "negotiations shall be conducted in accordance with x x
x the principles of the sovereignty and territorial integrityof the Republic of the Philippines." (Emphasis supplied) Establishing an
associative relationship between the BJE and the Central Government is, for the reasons already discussed, a preparation for
independence, or worse, an implicit acknowledgment of an independent status already prevailing.

Even apart from the above-mentioned Memorandum, however, the MOA-AD is defective because the suspensive clause is invalid, as
discussed below.

The authority of the GRP Peace Negotiating Panel to negotiate with the MILF is founded on E.O. No. 3, Section 5(c), which states
that there shall be established Government Peace Negotiating Panels for negotiations with different rebel groups to be "appointed by
the President as her official emissaries to conduct negotiations, dialogues, and face-to-face discussions with rebel groups." These
negotiating panels are to report to the President, through the PAPP on the conduct and progress of the negotiations.

It bears noting that the GRP Peace Panel, in exploring lasting solutions to the Moro Problem through its negotiations with the MILF,
was not restricted by E.O. No. 3 only to those options available under the laws as they presently stand. One of the components of a
comprehensive peace process, which E.O. No. 3 collectively refers to as the "Paths to Peace," is the pursuit of social, economic, and
political reforms which may require new legislation or even constitutional amendments. Sec. 4(a) of E.O. No. 3, which reiterates
Section 3(a), of E.O. No. 125,167 states:

SECTION 4. The Six Paths to Peace. - The components of the comprehensive peace process comprise the processes known
as the "Paths to Peace". These component processes are interrelated and not mutually exclusive, and must therefore be
pursued simultaneously in a coordinated and integrated fashion. They shall include, but may not be limited to, the following:

a. PURSUIT OF SOCIAL, ECONOMIC AND POLITICAL REFORMS. This component involves the vigorous
implementation of various policies, reforms, programs and projects aimed at addressing the root causes of internal
 armed conflicts and social unrest. This may require administrative action, new legislation or even constitutional
amendments.

x x x x (Emphasis supplied)

The MOA-AD, therefore, may reasonably be perceived as an attempt of respondents to address, pursuant to this provision of E.O. No.
3, the root causes of the armed conflict in Mindanao. The E.O. authorized them to "think outside the box," so to speak. Hence, they
negotiated and were set on signing the MOA-AD that included various social, economic, and political reforms which cannot, however,
all be accommodated within the present legal framework, and which thus would require new legislation and constitutional
amendments.

The inquiry on the legality of the "suspensive clause," however, cannot stop here, because it must be asked whether the President
herself may exercise the power delegated to the GRP Peace Panel under E.O. No. 3, Sec. 4(a).

The President cannot delegate a power that she herself does not possess. May the President, in the course of peace negotiations, agree
to pursue reforms that would require new legislation and constitutional amendments, or should the reforms be restricted only to those
solutions which the present laws allow? The answer to this question requires a discussion of the extent of the President's power to
conduct peace negotiations.

That the authority of the President to conduct peace negotiations with rebel groups is not explicitly mentioned in the Constitution does
not mean that she has no such authority. In Sanlakas v. Executive Secretary,168 in issue was the authority of the President to declare a
state of rebellion - an authority which is not expressly provided for in the Constitution. The Court held thus:

"In her ponencia in Marcos v. Manglapus, Justice Cortes put her thesis into jurisprudence. There, the Court, by a slim 8-7
margin, upheld the President's power to forbid the return of her exiled predecessor. The rationale for the majority's ruling
rested on the President's

. . . unstated residual powers which are implied from the grant of executive power and which are necessary
for her to comply with her duties under the Constitution. The powers of the President are not limited to what
are expressly enumerated in the article on the Executive Department and in scattered provisions of the
Constitution. This is so, notwithstanding the avowed intent of the members of the Constitutional Commission of
1986 to limit the powers of the President as a reaction to the abuses under the regime of Mr. Marcos, for the result
was a limitation of specific powers of the President, particularly those relating to the commander-in-chief clause, but
not a diminution of the general grant of executive power.

Thus, the President's authority to declare a state of rebellion springs in the main from her powers as chief executive
and, at the same time, draws strength from her Commander-in-Chief powers. x x x (Emphasis and underscoring
supplied)

Similarly, the President's power to conduct peace negotiations is implicitly included in her powers as Chief Executive and
Commander-in-Chief. As Chief Executive, the President has the general responsibility to promote public peace, and as Commander-
in-Chief, she has the more specific duty to prevent and suppress rebellion and lawless violence.169

As the experience of nations which have similarly gone through internal armed conflict will show, however, peace is rarely attained by
simply pursuing a military solution. Oftentimes, changes as far-reaching as a fundamental reconfiguration of the nation's constitutional
structure is required. The observations of Dr. Kirsti Samuels are enlightening, to wit:

x x x [T]he fact remains that a successful political and governance transition must form the core of any post-conflict peace-
building mission. As we have observed in Liberia and Haiti over the last ten years, conflict cessation without modification of
the political environment, even where state-building is undertaken through technical electoral assistance and institution- or
capacity-building, is unlikely to succeed. On average, more than 50 percent of states emerging from conflict return to
conflict. Moreover, a substantial proportion of transitions have resulted in weak or limited democracies.

The design of a constitution and its constitution-making process can play an important role in the political and governance
transition. Constitution-making after conflict is an opportunity to create a common vision of the future of a state and a road
map on how to get there. The constitution can be partly a peace agreement and partly a framework setting up the rules by
which the new democracy will operate.170

In the same vein, Professor Christine Bell, in her article on the nature and legal status of peace agreements, observed that the typical
way that peace agreements establish or confirm mechanisms for demilitarization and demobilization is by linking them to new
constitutional structures addressing governance, elections, and legal and human rights institutions.171

In the Philippine experience, the link between peace agreements and constitution-making has been recognized by no less than the
framers of the Constitution. Behind the provisions of the Constitution on autonomous regions172 is the framers' intention to implement
a particular peace agreement, namely, the Tripoli Agreement of 1976 between the GRP and the MNLF, signed by then Undersecretary
of National Defense Carmelo Z. Barbero and then MNLF Chairman Nur Misuari.

MR. ROMULO. There are other speakers; so, although I have some more questions, I will reserve my right to ask them if
they are not covered by the other speakers. I have only two questions.
 I heard one of the Commissioners say that local autonomy already exists in the Muslim region; it is working very well;
it has, in fact, diminished a great deal of the problems. So, my question is: since that already exists, why do we have to go
into something new?

MR. OPLE. May I answer that on behalf of Chairman Nolledo. Commissioner Yusup Abubakar is right that certain definite
steps have been taken to implement the provisions of the Tripoli Agreement with respect to an autonomous region in
Mindanao. This is a good first step, but there is no question that this is merely a partial response to the Tripoli
Agreement itself and to the fuller standard of regional autonomy contemplated in that agreement, and now by state
policy.173(Emphasis supplied)

The constitutional provisions on autonomy and the statutes enacted pursuant to them have, to the credit of their drafters, been partly
successful. Nonetheless, the Filipino people are still faced with the reality of an on-going conflict between the Government and the
MILF. If the President is to be expected to find means for bringing this conflict to an end and to achieve lasting peace in Mindanao,
then she must be given the leeway to explore, in the course of peace negotiations, solutions that may require changes to the
Constitution for their implementation. Being uniquely vested with the power to conduct peace negotiations with rebel groups, the
President is in a singular position to know the precise nature of their grievances which, if resolved, may bring an end to hostilities.

The President may not, of course, unilaterally implement the solutions that she considers viable, but she may not be prevented from
submitting them as recommendations to Congress, which could then, if it is minded, act upon them pursuant to the legal procedures
for constitutional amendment and revision. In particular, Congress would have the option, pursuant to Article XVII, Sections 1 and 3
of the Constitution, to propose the recommended amendments or revision to the people, call a constitutional convention, or submit to
the electorate the question of calling such a convention.

While the President does not possess constituent powers - as those powers may be exercised only by Congress, a Constitutional
Convention, or the people through initiative and referendum - she may submit proposals for constitutional change to Congress in a
manner that does not involve the arrogation of constituent powers.

In Sanidad v. COMELEC,174 in issue was the legality of then President Marcos' act of directly submitting proposals for constitutional
amendments to a referendum, bypassing the interim National Assembly which was the body vested by the 1973 Constitution with the
power to propose such amendments. President Marcos, it will be recalled, never convened the interim National Assembly. The
majority upheld the President's act, holding that "the urges of absolute necessity" compelled the President as the agent of the people to
act as he did, there being no interim National Assembly to propose constitutional amendments. Against this ruling, Justices Teehankee
and Muñoz Palma vigorously dissented. The Court's concern at present, however, is not with regard to the point on which it was then
divided in that controversial case, but on that which was not disputed by either side.

Justice Teehankee's dissent,175 in particular, bears noting. While he disagreed that the President may directly submit proposed
constitutional amendments to a referendum, implicit in his opinion is a recognition that he would have upheld the President's action
along with the majority had the President convened the interim National Assembly and coursed his proposals through it. Thus Justice
Teehankee opined:

"Since the Constitution provides for the organization of the essential departments of government, defines and delimits the
powers of each and prescribes the manner of the exercise of such powers, and the constituent power has not been granted to
but has been withheld from the President or Prime Minister, it follows that the President's questioned decrees proposing and
submitting constitutional amendments directly to the people (without the intervention of the interim National Assembly in
whom the power is expressly vested) are devoid of constitutional and legal basis."176 (Emphasis supplied)

From the foregoing discussion, the principle may be inferred that the President - in the course of conducting peace negotiations - may
validly consider implementing even those policies that require changes to the Constitution, but she may not unilaterally implement
them without the intervention of Congress, or act in any way as if the assent of that body were assumed as a certainty.

Since, under the present Constitution, the people also have the power to directly propose amendments through initiative and
referendum, the President may also submit her recommendations to the people, not as a formal proposal to be voted on in a plebiscite
similar to what President Marcos did in Sanidad, but for their independent consideration of whether these recommendations merit
being formally proposed through initiative.

These recommendations, however, may amount to nothing more than the President's suggestions to the people, for any further
involvement in the process of initiative by the Chief Executive may vitiate its character as a genuine "people's initiative." The only
initiative recognized by the Constitution is that which truly proceeds from the people. As the Court stated in Lambino v.
COMELEC:177

"The Lambino Group claims that their initiative is the ‘people's voice.' However, the Lambino Group unabashedly states in
ULAP Resolution No. 2006-02, in the verification of their petition with the COMELEC, that ‘ULAP maintains its
unqualified support to the agenda of Her Excellency President Gloria Macapagal-Arroyo for constitutional reforms.' The
Lambino Group thus admits that their ‘people's' initiative is an ‘unqualified support to the agenda' of the incumbent
President to change the Constitution. This forewarns the Court to be wary of incantations of ‘people's voice' or ‘sovereign
will' in the present initiative."

It will be observed that the President has authority, as stated in her oath of office,178 only to preserve and defend the Constitution. Such
presidential power does not, however, extend to allowing her to change the Constitution, but simply to recommend proposed
amendments or revision. As long as she limits herself to recommending these changes and submits to the proper procedure for
constitutional amendments and revision, her mere recommendation need not be construed as an unconstitutional act.
The foregoing discussion focused on the President's authority to propose constitutional amendments, since her authority to propose
new legislation is not in controversy. It has been an accepted practice for Presidents in this jurisdiction to propose new legislation.
One of the more prominent instances the practice is usually done is in the yearly State of the Nation Address of the President to
Congress. Moreover, the annual general appropriations bill has always been based on the budget prepared by the President, which - for
all intents and purposes - is a proposal for new legislation coming from the President.179

The "suspensive clause" in the MOA-AD viewed in light of the above-discussed standards

Given the limited nature of the President's authority to propose constitutional amendments, she cannot guaranteeto any third party
that the required amendments will eventually be put in place, nor even be submitted to a plebiscite. The most she could do is submit
these proposals as recommendations either to Congress or the people, in whom constituent powers are vested.

Paragraph 7 on Governance of the MOA-AD states, however, that all provisions thereof which cannot be reconciled with the present
Constitution and laws "shall come into force upon signing of a Comprehensive Compact and upon effecting the necessary changes to
the legal framework." This stipulation does not bear the marks of a suspensive condition - defined in civil law as a future
and uncertain event - but of a term. It is not a question of whether the necessary changes to the legal framework will be effected,
but when. That there is no uncertainty being contemplated is plain from what follows, for the paragraph goes on to state that the
contemplated changes shall be "with due regard to non derogation of prior agreements and within the stipulated timeframe to be
contained in the Comprehensive Compact."

Pursuant to this stipulation, therefore, it is mandatory for the GRP to effect the changes to the legal framework contemplated in the
MOA-AD - which changes would include constitutional amendments, as discussed earlier. It bears noting that,

By the time these changes are put in place, the MOA-AD itself would be counted among the "prior agreements" from which
there could be no derogation.

What remains for discussion in the Comprehensive Compact would merely be the implementing details for these "consensus points"
and, notably, the deadline for effecting the contemplated changes to the legal framework.

Plainly, stipulation-paragraph 7 on GOVERNANCE is inconsistent with the limits of the President's authority to propose
constitutional amendments, it being a virtual guarantee that the Constitution and the laws of the Republic of the Philippines will
certainly be adjusted to conform to all the "consensus points" found in the MOA-AD. Hence, it must be struck down
as unconstitutional.

A comparison between the "suspensive clause" of the MOA-AD with a similar provision appearing in the 1996 final peace agreement
between the MNLF and the GRP is most instructive.

As a backdrop, the parties to the 1996 Agreement stipulated that it would be implemented in two phases. Phase Icovered a three-year
transitional period involving the putting up of new administrative structures through Executive Order, such as the Special Zone of
Peace and Development (SZOPAD) and the Southern Philippines Council for Peace and Development (SPCPD), while Phase
II covered the establishment of the new regional autonomous government through amendment or repeal of R.A. No. 6734, which was
then the Organic Act of the ARMM.

The stipulations on Phase II consisted of specific agreements on the structure of the expanded autonomous region envisioned by the
parties. To that extent, they are similar to the provisions of the MOA-AD. There is, however, a crucial difference between the two
agreements. While the MOA-AD virtually guarantees that the "necessary changes to the legal framework" will be put in
place, the GRP-MNLF final peace agreement states thus: "Accordingly, these provisions [on Phase II] shall be recommended by the
GRP to Congress for incorporation in the amendatory or repealing law."

Concerns have been raised that the MOA-AD would have given rise to a binding international law obligation on the part of the
Philippines to change its Constitution in conformity thereto, on the ground that it may be considered either as a binding agreement
under international law, or a unilateral declaration of the Philippine government to the international community that it would grant to
the Bangsamoro people all the concessions therein stated. Neither ground finds sufficient support in international law, however.

The MOA-AD, as earlier mentioned in the overview thereof, would have included foreign dignitaries as signatories. In addition,
representatives of other nations were invited to witness its signing in Kuala Lumpur. These circumstances readily lead one to surmise
that the MOA-AD would have had the status of a binding international agreement had it been signed. An examination of the prevailing
principles in international law, however, leads to the contrary conclusion.

The Decision on Challenge to Jurisdiction: Lomé Accord Amnesty180 (the Lomé Accord case) of the Special Court of Sierra Leone is
enlightening. The Lomé Accord was a peace agreement signed on July 7, 1999 between the Government of Sierra Leone and the
Revolutionary United Front (RUF), a rebel group with which the Sierra Leone Government had been in armed conflict for around
eight years at the time of signing. There were non-contracting signatories to the agreement, among which were the Government of the
Togolese Republic, the Economic Community of West African States, and the UN.

On January 16, 2002, after a successful negotiation between the UN Secretary-General and the Sierra Leone Government, another
agreement was entered into by the UN and that Government whereby the Special Court of Sierra Leone was established. The sole
purpose of the Special Court, an international court, was to try persons who bore the greatest responsibility for serious violations of
international humanitarian law and Sierra Leonean law committed in the territory of Sierra Leone since November 30, 1996.
Among the stipulations of the Lomé Accord was a provision for the full pardon of the members of the RUF with respect to anything
done by them in pursuit of their objectives as members of that organization since the conflict began.

In the Lomé Accord case, the Defence argued that the Accord created an internationally binding obligation not to prosecute the
beneficiaries of the amnesty provided therein, citing, among other things, the participation of foreign dignitaries and international
organizations in the finalization of that agreement. The Special Court, however, rejected this argument, ruling that the Lome Accord
is not a treaty and that it can only create binding obligations and rights between the parties in municipal law, not in international law.
Hence, the Special Court held, it is ineffective in depriving an international court like it of jurisdiction.

"37. In regard to the nature of a negotiated settlement of an internal armed conflict it is easy to assume and to argue with
some degree of plausibility, as Defence counsel for the defendants seem to have done, that the mere fact that in
addition to the parties to the conflict, the document formalizing the settlement is signed by foreign heads of state or
their representatives and representatives of international organizations, means the agreement of the parties is
internationalized so as to create obligations in international law.

xxxx

40. Almost every conflict resolution will involve the parties to the conflict and the mediator or facilitator of the settlement, or
persons or bodies under whose auspices the settlement took place but who are not at all parties to the conflict, are not
contracting parties and who do not claim any obligation from the contracting parties or incur any obligation from the
settlement.

41. In this case, the parties to the conflict are the lawful authority of the State and the RUF which has no status of
statehood and is to all intents and purposes a faction within the state. The non-contracting signatories of the Lomé
Agreement were moral guarantors of the principle that, in the terms of Article XXXIV of the Agreement, "this peace
agreement is implemented with integrity and in good faith by both parties". The moral guarantors assumed no legal
obligation. It is recalled that the UN by its representative appended, presumably for avoidance of doubt, an understanding of
the extent of the agreement to be implemented as not including certain international crimes.

42. An international agreement in the nature of a treaty must create rights and obligations regulated by international law so
that a breach of its terms will be a breach determined under international law which will also provide principle means of
enforcement. The Lomé Agreement created neither rights nor obligations capable of being regulated by international
law. An agreement such as the Lomé Agreement which brings to an end an internal armed conflict no doubt creates a
factual situation of restoration of peace that the international community acting through the Security Council may
take note of. That, however, will not convert it to an international agreement which creates an obligation enforceable
in international, as distinguished from municipal, law. A breach of the terms of such a peace agreement resulting in
resumption of internal armed conflict or creating a threat to peace in the determination of the Security Council may indicate a
reversal of the factual situation of peace to be visited with possible legal consequences arising from the new situation of
conflict created. Such consequences such as action by the Security Council pursuant to Chapter VII arise from the situation
and not from the agreement, nor from the obligation imposed by it. Such action cannot be regarded as a remedy for the
breach. A peace agreement which settles an internal armed conflict cannot be ascribed the same status as one which
settles an international armed conflict which, essentially, must be between two or more warring States. The Lomé
Agreement cannot be characterised as an international instrument. x x x" (Emphasis, italics and underscoring supplied)

Similarly, that the MOA-AD would have been signed by representatives of States and international organizations not parties to the
Agreement would not have sufficed to vest in it a binding character under international law.

In another vein, concern has been raised that the MOA-AD would amount to a unilateral declaration of the Philippine State, binding
under international law, that it would comply with all the stipulations stated therein, with the result that it would have to amend its
Constitution accordingly regardless of the true will of the people. Cited as authority for this view is Australia v. France,181 also known
as the Nuclear Tests Case, decided by the International Court of Justice (ICJ).

In the Nuclear Tests Case, Australia challenged before the ICJ the legality of France's nuclear tests in the South Pacific. France
refused to appear in the case, but public statements from its President, and similar statements from other French officials including its
Minister of Defence, that its 1974 series of atmospheric tests would be its last, persuaded the ICJ to dismiss the case.182 Those
statements, the ICJ held, amounted to a legal undertaking addressed to the international community, which required no acceptance
from other States for it to become effective.

Essential to the ICJ ruling is its finding that the French government intended to be bound to the international community in issuing its
public statements, viz:

43. It is well recognized that declarations made by way of unilateral acts, concerning legal or factual situations, may have the
effect of creating legal obligations. Declarations of this kind may be, and often are, very specific. When it is the intention of
the State making the declaration that it should become bound according to its terms, that intention confers on the
declaration the character of a legal undertaking, the State being thenceforth legally required to follow a course of
conduct consistent with the declaration. An undertaking of this kind, if given publicly, and with an intent to be bound, even
though not made within the context of international negotiations, is binding. In these circumstances, nothing in the nature of a
quid pro quo nor any subsequent acceptance of the declaration, nor even any reply or reaction from other States, is required
for the declaration to take effect, since such a requirement would be inconsistent with the strictly unilateral nature of the
juridical act by which the pronouncement by the State was made.
 44. Of course, not all unilateral acts imply obligation; but a State may choose to take up a certain position in relation
to a particular matter with the intention of being bound-the intention is to be ascertained by interpretation of the
act. When States make statements by which their freedom of action is to be limited, a restrictive interpretation is called for.

xxxx

51. In announcing that the 1974 series of atmospheric tests would be the last, the French Government conveyed to the
world at large, including the Applicant, its intention effectively to terminate these tests. It was bound to assume that
other States might take note of these statements and rely on their being effective. The validity of these statements and
their legal consequences must be considered within the general framework of the security of international intercourse,
and the confidence and trust which are so essential in the relations among States. It is from the actual substance of these
statements, and from the circumstances attending their making, that the legal implications of the unilateral act must
be deduced. The objects of these statements are clear and they were addressed to the international community as a
whole, and the Court holds that they constitute an undertaking possessing legal effect. The Court considers *270 that the
President of the Republic, in deciding upon the effective cessation of atmospheric tests, gave an undertaking to the
international community to which his words were addressed. x x x (Emphasis and underscoring supplied)

As gathered from the above-quoted ruling of the ICJ, public statements of a state representative may be construed as a unilateral
declaration only when the following conditions are present: the statements were clearly addressed to the international community, the
state intended to be bound to that community by its statements, and that not to give legal effect to those statements would be
detrimental to the security of international intercourse. Plainly, unilateral declarations arise only in peculiar circumstances.

The limited applicability of the Nuclear Tests Case ruling was recognized in a later case decided by the ICJ entitled Burkina Faso v.
Mali,183 also known as the Case Concerning the Frontier Dispute. The public declaration subject of that case was a statement made by
the President of Mali, in an interview by a foreign press agency, that Mali would abide by the decision to be issued by a commission
of the Organization of African Unity on a frontier dispute then pending between Mali and Burkina Faso.

Unlike in the Nuclear Tests Case, the ICJ held that the statement of Mali's President was not a unilateral act with legal implications. It
clarified that its ruling in the Nuclear Tests case rested on the peculiar circumstances surrounding the French declaration subject
thereof, to wit:

40. In order to assess the intentions of the author of a unilateral act, account must be taken of all the factual circumstances in
which the act occurred. For example, in the Nuclear Tests cases, the Court took the view that since the applicant States
were not the only ones concerned at the possible continuance of atmospheric testing by the French Government, that
Government's unilateral declarations had ‘conveyed to the world at large, including the Applicant, its intention
effectively to terminate these tests‘ (I.C.J. Reports 1974, p. 269, para. 51; p. 474, para. 53). In the particular
circumstances of those cases, the French Government could not express an intention to be bound otherwise than by
unilateral declarations. It is difficult to see how it could have accepted the terms of a negotiated solution with each of
the applicants without thereby jeopardizing its contention that its conduct was lawful. The circumstances of the
present case are radically different. Here, there was nothing to hinder the Parties from manifesting an intention to
accept the binding character of the conclusions of the Organization of African Unity Mediation Commission by the
normal method: a formal agreement on the basis of reciprocity. Since no agreement of this kind was concluded between
the Parties, the Chamber finds that there are no grounds to interpret the declaration made by Mali's head of State on 11 April
1975 as a unilateral act with legal implications in regard to the present case. (Emphasis and underscoring supplied)

Assessing the MOA-AD in light of the above criteria, it would not have amounted to a unilateral declaration on the part of the
Philippine State to the international community. The Philippine panel did not draft the same with the clear intention of being bound
thereby to the international community as a whole or to any State, but only to the MILF. While there were States and international
organizations involved, one way or another, in the negotiation and projected signing of the MOA-AD, they participated merely as
witnesses or, in the case of Malaysia, as facilitator. As held in the Lomé Accord case, the mere fact that in addition to the parties to the
conflict, the peace settlement is signed by representatives of states and international organizations does not mean that the agreement is
internationalized so as to create obligations in international law.

Since the commitments in the MOA-AD were not addressed to States, not to give legal effect to such commitments would not be
detrimental to the security of international intercourse - to the trust and confidence essential in the relations among States.

In one important respect, the circumstances surrounding the MOA-AD are closer to that of Burkina Faso wherein, as already
discussed, the Mali President's statement was not held to be a binding unilateral declaration by the ICJ. As in that case, there was also
nothing to hinder the Philippine panel, had it really been its intention to be bound to other States, to manifest that intention by formal
agreement. Here, that formal agreement would have come about by the inclusion in the MOA-AD of a clear commitment to be legally
bound to the international community, not just the MILF, and by an equally clear indication that the signatures of the participating
states-representatives would constitute an acceptance of that commitment. Entering into such a formal agreement would not have
resulted in a loss of face for the Philippine government before the international community, which was one of the difficulties that
prevented the French Government from entering into a formal agreement with other countries. That the Philippine panel did not enter
into such a formal agreement suggests that it had no intention to be bound to the international community. On that ground, the MOA-
AD may not be considered a unilateral declaration under international law.

The MOA-AD not being a document that can bind the Philippines under international law notwithstanding, respondents' almost
consummated act of guaranteeing amendments to the legal framework is, by itself, sufficient to constitute grave abuse of
discretion. The grave abuse lies not in the fact that they considered, as a solution to the Moro Problem, the creation of a state within a
state, but in their brazen willingness to guarantee that Congress and the sovereign Filipino people would give their imprimatur
to their solution. Upholding such an act would amount to authorizing a usurpation of the constituent powers vested only in Congress,
a Constitutional Convention, or the people themselves through the process of initiative, for the only way that the Executive can ensure
the outcome of the amendment process is through an undue influence or interference with that process.

The sovereign people may, if it so desired, go to the extent of giving up a portion of its own territory to the Moros for the sake of
peace, for it can change the Constitution in any it wants, so long as the change is not inconsistent with what, in international law, is
known as Jus Cogens.184 Respondents, however, may not preempt it in that decision.

SUMMARY

The petitions are ripe for adjudication. The failure of respondents to consult the local government units or communities affected
constitutes a departure by respondents from their mandate under E.O. No. 3. Moreover, respondents exceeded their authority by the
mere act of guaranteeing amendments to the Constitution. Any alleged violation of the Constitution by any branch of government is a
proper matter for judicial review.

As the petitions involve constitutional issues which are of paramount public interest or of transcendental importance, the Court grants
the petitioners, petitioners-in-intervention and intervening respondents the requisite locus standi in keeping with the liberal stance
adopted in David v. Macapagal-Arroyo.

Contrary to the assertion of respondents that the non-signing of the MOA-AD and the eventual dissolution of the GRP Peace Panel
mooted the present petitions, the Court finds that the present petitions provide an exception to the "moot and academic" principle in
view of (a) the grave violation of the Constitution involved; (b) the exceptional character of the situation and paramount public
interest; (c) the need to formulate controlling principles to guide the bench, the bar, and the public; and (d) the fact that the case is
capable of repetition yet evading review.

The MOA-AD is a significant part of a series of agreements necessary to carry out the GRP-MILF Tripoli Agreement on Peace signed
by the government and the MILF back in June 2001. Hence, the present MOA-AD can be renegotiated or another one drawn up that
could contain similar or significantly dissimilar provisions compared to the original.

The Court, however, finds that the prayers for mandamus have been rendered moot in view of the respondents' action in providing the
Court and the petitioners with the official copy of the final draft of the MOA-AD and its annexes.

The people's right to information on matters of public concern under Sec. 7, Article III of the Constitution is in splendid
symmetry with the state policy of full public disclosure of all its transactions involving public interest under Sec. 28, Article II of the
Constitution. The right to information guarantees the right of the people to demand information, while Section 28 recognizes the duty
of officialdom to give information even if nobody demands. The complete and effective exercise of the right to information
necessitates that its complementary provision on public disclosure derive the same self-executory nature, subject only to reasonable
safeguards or limitations as may be provided by law.

The contents of the MOA-AD is a matter of paramount public concern involving public interest in the highest order. In declaring that
the right to information contemplates steps and negotiations leading to the consummation of the contract, jurisprudence finds no
distinction as to the executory nature or commercial character of the agreement.

An essential element of these twin freedoms is to keep a continuing dialogue or process of communication between the government
and the people. Corollary to these twin rights is the design for feedback mechanisms. The right to public consultation was envisioned
to be a species of these public rights.

At least three pertinent laws animate these constitutional imperatives and justify the exercise of the people's right to be consulted on
relevant matters relating to the peace agenda.

One, E.O. No. 3 itself is replete with mechanics for continuing consultations on both national and local levels and for a principal
forum for consensus-building. In fact, it is the duty of the Presidential Adviser on the Peace Process to conduct regular dialogues to
seek relevant information, comments, advice, and recommendations from peace partners and concerned sectors of society.

Two, Republic Act No. 7160 or the Local Government Code of 1991 requires all national offices to conduct consultations before any
project or program critical to the environment and human ecology including those that may call for the eviction of a particular group
of people residing in such locality, is implemented therein. The MOA-AD is one peculiar program that unequivocally and unilaterally
vests ownership of a vast territory to the Bangsamoro people, which could pervasively and drastically result to the diaspora or
displacement of a great number of inhabitants from their total environment.

Three, Republic Act No. 8371 or the Indigenous Peoples Rights Act of 1997 provides for clear-cut procedure for the recognition and
delineation of ancestral domain, which entails, among other things, the observance of the free and prior informed consent of the
Indigenous Cultural Communities/Indigenous Peoples. Notably, the statute does not grant the Executive Department or any
government agency the power to delineate and recognize an ancestral domain claim by mere agreement or compromise.

The invocation of the doctrine of executive privilege as a defense to the general right to information or the specific right to
consultation is untenable. The various explicit legal provisions fly in the face of executive secrecy. In any event, respondents
effectively waived such defense after it unconditionally disclosed the official copies of the final draft of the MOA-AD, for judicial
compliance and public scrutiny.

In sum, the Presidential Adviser on the Peace Process committed grave abuse of discretion when he failed to carry out the pertinent
consultation process, as mandated by E.O. No. 3, Republic Act No. 7160, and Republic Act No. 8371. The furtive process by which
the MOA-AD was designed and crafted runs contrary to and in excess of the legal authority, and amounts to a whimsical, capricious,
oppressive, arbitrary and despotic exercise thereof. It illustrates a gross evasion of positive duty and a virtual refusal to perform the
duty enjoined.

The MOA-AD cannot be reconciled with the present Constitution and laws. Not only its specific provisions but the very concept
underlying them, namely, the associative relationship envisioned between the GRP and the BJE, are unconstitutional, for the concept
presupposes that the associated entity is a state and implies that the same is on its way to independence.

While there is a clause in the MOA-AD stating that the provisions thereof inconsistent with the present legal framework will not be
effective until that framework is amended, the same does not cure its defect. The inclusion of provisions in the MOA-AD establishing
an associative relationship between the BJE and the Central Government is, itself, a violation of the Memorandum of Instructions
From The President dated March 1, 2001, addressed to the government peace panel. Moreover, as the clause is worded, it virtually
guarantees that the necessary amendments to the Constitution and the laws will eventually be put in place. Neither the GRP Peace
Panel nor the President herself is authorized to make such a guarantee. Upholding such an act would amount to authorizing a
usurpation of the constituent powers vested only in Congress, a Constitutional Convention, or the people themselves through the
process of initiative, for the only way that the Executive can ensure the outcome of the amendment process is through an undue
influence or interference with that process.

While the MOA-AD would not amount to an international agreement or unilateral declaration binding on the Philippines under
international law, respondents' act of guaranteeing amendments is, by itself, already a constitutional violation that renders the MOA-
AD fatally defective.

WHEREFORE, respondents' motion to dismiss is DENIED. The main and intervening petitions are GIVEN DUE COURSE and
hereby GRANTED.

The Memorandum of Agreement on the Ancestral Domain Aspect of the GRP-MILF Tripoli Agreement on Peace of 2001 is declared
contrary to law and the Constitution.

G.R. No. 133250           July 9, 2002

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

CARPIO, J.:

This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary restraining order. The
petition seeks to compel the Public Estates Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations
with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The petition further
seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation.

The Facts

On November 20, 1973, the government, through the Commissioner of Public Highways, signed a contract with the Construction and
Development Corporation of the Philippines ("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The
contract also included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the
works in consideration of fifty percent of the total reclaimed land.

On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked
PEA "to reclaim land, including foreshore and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and all
kinds of lands."1 On the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands
reclaimed in the foreshore and offshore of the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP).

On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that "[A]ll
future works in MCCRRP x x x shall be funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of
Agreement dated December 29, 1981, which stated:

"(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be agreed upon by the
parties, to be paid according to progress of works on a unit price/lump sum basis for items of work to be agreed upon, subject
to price escalation, retention and other terms and conditions provided for in Presidential Decree No. 1594. All the financing
required for such works shall be provided by PEA.

xxx

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

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

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

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

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

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

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

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

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

In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties to file their respective
memoranda.

On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA," for brevity). On May 28,
1999, the Office of the President under the administration of then President Joseph E. Estrada approved the Amended JVA.

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

The Issues

The issues raised by petitioner, PEA15 and AMARI16 are as follows:

I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND ACADEMIC
BECAUSE OF SUBSEQUENT EVENTS;
 II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE GOVERNING
THE HIERARCHY OF COURTS;

III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;

IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;

V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-

GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;

VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO
AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987
CONSTITUTION; AND

VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER THE AMENDED
JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.

The Court's Ruling

First issue: whether the principal reliefs prayed for in the petition are moot and academic because of subsequent events.

The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations for a new agreement." The
petition also prays that the Court enjoin PEA from "privately entering into, perfecting and/or executing any new agreement with
AMARI."

PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on June 21, 1999 a copy of the
signed Amended JVA containing the terms and conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's
prayer for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now
moot because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office of the President has
approved the Amended JVA on May 28, 1999.

Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the signing and approval of the
Amended JVA before the Court could act on the issue. Presidential approval does not resolve the constitutional issue or remove it
from the ambit of judicial review.

We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot operate to moot the
petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the
signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA
and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its
violation of Section 3, Article XII of the Constitution, which prohibits the government from alienating lands of the public domain to
private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and
if already implemented, to annul the effects of such unconstitutional contract.

The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to 367.5 hectares of
reclaimed lands and submerged areas of Manila Bay to a single private corporation. It now becomes more compelling for the Court
to resolve the issue to insure the government itself does not violate a provision of the Constitution intended to safeguard the national
patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave
violation of the Constitution. In the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent the
transfer of title and ownership of alienable lands of the public domain in the name of AMARI. Even in cases where supervening
events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling
principles to guide the bench, bar, and the public.17

Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section 3, Article XII of the 1987
Constitution, or its counterpart provision in the 1973 Constitution,18 covered agricultural lands sold to private corporations which
acquired the lands from private parties. The transferors of the private corporations claimed or could claim the right to judicial
confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case,
AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas for non-agricultural purposes
by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended
JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because the
lands covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of agricultural lands of the public domain for at least thirty years since June 12, 1945
or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title expired on December 31, 1987.20

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

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

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

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information without first asking
PEA the needed information. PEA claims petitioner's direct resort to the Court violates the principle of exhaustion of administrative
remedies. It also violates the rule that mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary
course of law.

PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted the petition for mandamus even if the petitioners
there did not initially demand from the Office of the President the publication of the presidential decrees. PEA points out that in
Tañada, the Executive Department had an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of
Commonwealth Act No. 63825 to publish the presidential decrees. There was, therefore, no need for the petitioners in Tañada to make
an initial demand from the Office of the President. In the instant case, PEA claims it has no affirmative statutory duty to disclose
publicly information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of
administrative remedies to the instant case in view of the failure of petitioner here to demand initially from PEA the needed
information.

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

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

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

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

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

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

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

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

xxx

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

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

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

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

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

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

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

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

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

"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public
disclosure of all its transactions involving public interest." (Emphasis supplied)

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

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

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

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

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

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

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

Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
 Mr. Suarez: Thank you."32 (Emphasis supplied)

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

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

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

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

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood that the right to
information "contemplates inclusion of negotiations leading to the consummation of the transaction."Certainly, a consummated
contract is not a requirement for the exercise of the right to information. Otherwise, the people can never exercise the right if no
contract is consummated, and if one is consummated, it may be too late for the public to expose its defects.1âwphi1.nêt

Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous to the
government or even illegal, becomes a fait accompli. This negates the State policy of full transparency on matters of public concern, a
situation which the framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from
participating in the public discussion of any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We
can allow neither an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its
transactions involving public interest."

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

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

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

There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers.
The information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings
which, like internal deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house of
Congress,38 are recognized as confidential. This kind of information cannot be pried open by a co-equal branch of government. A
frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to
protect the independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial power.39 This is not the
situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information on on-going negotiationsbefore a final
contract. The information, however, must constitute definite propositions by the government and should not cover recognized
exceptions like privileged information, military and diplomatic secrets and similar matters affecting national security and public
order.40 Congress has also prescribed other limitations on the right to information in several legislations.41

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

The Regalian Doctrine

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

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

Ownership and Disposition of Reclaimed Lands

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

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

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

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

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

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

"Art. 339. Property of public dominion is –

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

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

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

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

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

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

This provision, however, was not self-executing. The legislature, or the executive department pursuant to law, must declare the
property no longer needed for public use or territorial defense before the government could lease or alienate the property to private
parties.45
Act No. 1654 of the Philippine Commission

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

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

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

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

xxx

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

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

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

Act No. 2874 of the Philippine Legislature

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

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

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

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

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

xxx

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

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

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

(b) Foreshore;

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

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

 x x x.

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

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

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

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

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

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

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

Dispositions under the 1935 Constitution

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

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

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

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

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

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

Commonwealth Act No. 141 of the Philippine National Assembly

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

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

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

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

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

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

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

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

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

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

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

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

(b) Foreshore;

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

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

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

Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to private parties by lease
only and not otherwise, as soon as the President, upon recommendation by the Secretary of Agriculture, shall declare that
the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class
(d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874 prohibiting the sale of
government reclaimed, foreshore and marshy disposable lands of the public domain. All these lands are intended for residential,
commercial, industrial or other non-agricultural purposes. As before, Section 61 allowed only the lease of such lands to private parties.
The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural
purposes not classified as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands,
however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to qualified private parties.

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

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

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

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

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

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

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

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

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

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

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

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

"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands
shall ask the Secretary of Agriculture and Commerce (now the Secretary of Natural Resources) for authority to dispose of the
same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as
in the case of leases or sales of agricultural public land, x x x.
 Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the highest bidder. x x x."
(Emphasis supplied)

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

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

The Civil Code of 1950

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

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

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

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

x x x.

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

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

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

Dispositions under the 1973 Constitution

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

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

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

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

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

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

PD No. 1084 Creating the Public Estates Authority

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

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

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

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

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

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

(a)To prescribe its by-laws.

xxx

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

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

xxx

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

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

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

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

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

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

Dispositions under the 1987 Constitution

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

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

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

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

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

The Rationale behind the Constitutional Ban

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

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

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

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

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

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

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

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

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

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

In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring more than the allowed
area of alienable lands of the public domain. Without the constitutional ban, individuals who already acquired the maximum area of
alienable lands of the public domain could easily set up corporations to acquire more alienable public lands. An individual could own
as many corporations as his means would allow him. An individual could even hide his ownership of a corporation by putting his
nominees as stockholders of the corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on
acquisition by individuals of alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area of alienable land of the
public domain to a qualified individual. This constitutional intent is safeguarded by the provision prohibiting corporations from
acquiring alienable lands of the public domain, since the vehicle to circumvent the constitutional intent is removed. The available
alienable public lands are gradually decreasing in the face of an ever-growing population. The most effective way to insure faithful
adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to individuals. This, it would seem,
is the practical benefit arising from the constitutional ban.

The Amended Joint Venture Agreement

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

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

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

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

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

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

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

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

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

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

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

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

The Threshold Issue

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

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

xxx

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

Classification of Reclaimed Foreshore and Submerged Areas

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

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

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

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

x x x.'" (Emphasis supplied)

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

"D. Conclusion

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

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

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

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

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

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

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

At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom Islands although
subsequently there were partial erosions on some areas. The government had also completed the necessary surveys on these islands.
Thus, the Freedom Islands were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution
classifies lands of the public domain into "agricultural, forest or timber, mineral lands, and national parks." Being neither timber,
mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the
public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural resources that the State may
alienate to qualified private parties. All other natural resources, such as the seas or bays, are "waters x x x owned by the State" forming
part of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.

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

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

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

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

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

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

x x x."

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

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

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

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

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

G.R. No. 201031, December 14, 2017

TOMAS R. LEONIDAS, Petitioner, v. TANCREDO VARGAS AND REPUBLIC OF THE PHILIPPINES, Respondents.

DECISION

DEL CASTILLO, J.:

Assailed in this Petition for Review on Certiorari1 are the August 13, 2009 Decision2 and February 22, 2012 Resolution3 of the Court
of Appeals (CA) in CA-G.R. CV No. 02296, which affirmed with modification the March 19, 2007 Decision4 of the Regional Trial
Court (RTC) of Barotac Viejo, Iloilo, Branch 66, in LRC Case No. 02-195.

Factual Antecedents

On February 2, 2002, Tomas R. Leonidas (herein petitioner) filed an application for land registration5(Application) covering Lot 566
and Lot 1677 which are both situated in Concepcion, Iloilo (collectively, subject lots).

Petitioner alleged that he inherited the subject lots from his parents, Ponciano Leonidas, Jr. (Ponciano) and Asuncion Roxas de
Leonidas (Asuncion); that as evidenced by the May 17, 1937 Certificate of Sale issued by the Provincial Treasurer of Iloilo, the
subject lots, then covered by Tax Declaration (TD) No. 722, were purchased by Asuncion when auctioned due to delinquency in the
payment of real property taxes by the original owners, the heirs of Inis Luching; that Asuncion immediately took possession of the
subject lots and exercised dominical rights thereover notoriously, continuously, and exclusively; that upon Asuncion�s death in 1986,
Ponciano succeeded to the ownership and possession of the subject lots; that after Ponciano's death in 1991, the subject lots became
his (petitioner's) own exclusive property; that he permitted and tolerated the occupation of some portions of the subject lots by Juanito
Tisolan, Pancing Guevarra, Carmencita Guevarra, Delia Aspera-Ecleo, Victorino Mosqueda, Nora Bi�as, Crisanto Amangas
(Amangas),6 Rosana Vasquez, Henry Asturias, Ronnie Astorias, Antonio Asturias, and Jacob Narciso; that as far as known to him
(petitioner), the following are the owners of all adjoining properties, i.e. the owners of Lot 564, Lot 565, Lot 1578, and Lot 1677,
Mansueto Sicad, Francisco Aspero, Brigido Celestial, and Eugenio Bondoc, Jr. who are all from Poblacion, Concepcion, Iloilo, and
Carmen Paoli of unknown address; that Lot 566 is bounded on the west by the provincial road and he (petitioner) does not claim any
portion thereof; that the latest assessed value of the subject lots is P51,660.00 as certified by the Provincial Treasurer of Iloilo; that to
the best of his knowledge and belief, there is no mortgage or encumbrance of any kind whatsoever affecting the subject lots except for
taxes due thereon; that a certain Tomas Varga(Tomas), however, had declared a portion of the subject lots in his name for taxation
purposes but that Tomas died shortly after the end of the Second World War, and the whereabouts of his heirs, if any, are unknown,
despite his diligent search to locate them in Concepcion, Iloilo, and elsewhere.

Petitioner also alleged that he was 77 years old, Filipino, a resident of No. 55 Chestnut St., West Fairview, Quezon City and married
to Ofelia Gustilo Leonidas (Ofelia); that attached to his Application were the original Survey Plans with two photographic copies
each, the Tracing Cloth Plan (Sepia), a certificate of unavailability issued by the Chief, Records Section, Land Management Services,
Department of Environment and Natural Resources (DENR), Region VI, Iloilo City, in lieu of the surveyor's certificate, Technical
Descriptions with photographic copies, the Certificate in quadruplicate of the Provincial Treasurer showing the latest assessed value of
the subject lots, and a copy of the muniment of title to prove ownership of the subject lots, with the original to be presented at the trial.

Petitioner thus prayed that the subject lots be brought under the operation of the Property Registration Decree7 (PD 1529) and that the
titles thereto be registered and confirmed in his name.

The Republic of the Philippines (Republic), represented by the Office of the Solicitor General (OSG), opposed the said Application.
The Republic claimed that neither the petitioner nor his predecessors-in-interest had been in continuous, exclusive, and notorious
possession and occupation of the subject lots since June 12, 1945, or prior thereto, as required by Section 48 of Commonwealth Act
(CA) No. 141, as amended by PD 1073; that the petitioner's muniment/s of title, tax declarations, and tax payment receipts did not
constitute competent and sufficient evidence of either a bona fide acquisition of the subject lots, and neither did the petitioner's bare
claim of open, continuous, exclusive, and notorious possession and occupation thereof in the concept of owner since June 12, 1945, or
prior thereto, amount to convincing proof of his claim of possession and ownership over the subject lots; that, although the petitioner's
muniments of title might appear genuine, the tax declarations and/or tax payments showing the pretended possession were, in fact, of
recent vintage; that the claim of ownership in fee simple on the basis of a Spanish title or grant could no longer be availed of by
petitioner who had failed to file an appropriate application therefor within the period of six months from February 16, 1976, as
required by PD 892; and that the subject lots are portions of the public domain belonging to the Republic which are not subject to
private appropriation. Thus, the Republic prayed that the petitioner's Application be denied and that the subject lots be declared part of
the public domain.

On March 11, 2003, Tancredo Vargas (Tancredo) also filed an Opposition8 to the Application. Tancredo averred that he is Tomas'
legitimate son and compulsory heir; that during Tomas's lifetime, the latter was the absolute and exclusive owner of a certain parcel of
land located at Loong, Concepcion, Iloilo, which parcel of land is bounded on the north by the seashore, on the south by Severino
Asturias (Asturias),9 on the east by the seashore, and on the west by Asturias and Braulio Celestial; that this parcel of land had an area
of 36,237 square meters and was covered by TD No. 3549 in Tomas's name; that the petitioner does not exclusively own Lot 1677
since it had been split into two, viz. Lot 1677-A and Lot 1677-B; that he (Tancredo) is the owner of Lot 1677-A; that Lot 566 was also
not exclusively owned by the petitioner, as this Lot 566 had also been divided into two lots, viz. Lot 566-A and Lot 566-B; that he
(Tancredo) is the owner of Lot 566-A as shown in the RPTA Tax Mapping project in the Municipality of Concepcion, Iloilo; that the
petitioner's allegation that the owners of the property covered by TD 772 became delinquent in the payment of the tax due thereon, for
which reason the Provincial Treasurer of Iloilo allegedly sold the same to Asuncion, was not at all true; that the property covered by
TD 772 was not sold at public auction because the forfeiture was lifted prior to the public auction sale; and that the fact that the Office
of the Provincial Treasurer of Iloilo did not have a copy of the Certificate of Sale dated May 17, 1937 bolstered the argument that
petitioner's allegation is questionable. Tancredo thus prayed that the petitioner's Application be denied insofar as the portions covered
by the TDs in the name of Tomas (disputed portions) are concerned.

On March 21, 2003, another Opposition10 to the Application was filed by Moncerat A. Sicad-De Julian, Gil A. Sicad, represented by
his wife, Elizabeth Sicad, Teresita A. Sicad-Bayuran, Villaluz Sicad-Zarriz, Eden A. Sicad, and Melchor Sicad, represented by his
wife, Elena D. Sicad, (Elena; collectively, the Sicads) all represented by their attorney-in-fact, Elena.11 These oppositors claimed that
they are the heirs of the late Mansueto Sicad (Mansueto) who was the owner of a portion of the subject lots (Sicads's contested
portion); that the Sicads's contested portion was bought by Mansueto from Asturias as evidenced by the Deed of Definite Sale of a
Parcel of Land described as Doc. No. 75, Page No. 35, Book No. 1, Series of 1950 of the notarial register of notary public Crespo
Celestial; that the Sicads's contested portion had been in the possession of Mansueto during the latter's lifetime; that they had been in
possession of the Sicads's contested portion since Mansueto's death; that part of the Sicads's contested portion had already been
registered under Original Certificate of Title (OCT) No. F-36795; and that the petitioner had never been in possession of the lots
subject of his Application. The Sicads thus prayed that the petitioner's Application be dismissed, insofar as it concerned the Sicads's
contested portion as set forth in the aforesaid Deed of Definite Sale; and that the Sicads's contested portion be registered instead in
their names.

At the trial, the petitioner presented himself and Geronimo C. Pe�aflorida (Pe�aflorida), Land Management Inspector, DENR,
Community Environment and Natural Resources Office (CENRO), at Sara, Iloilo as witnesses.12 On the other hand, Catalino Guinez,
Emeliana Isturias Matulac, and Elena testified for the Sicads.13 For his part, Tancredo presented himself and a former overseer or
tenant of the Vargas familv,14 Jose Etchona (Etchona).15 Then on August 8, 2003, the petitioner filed his Formal Offer of
Evidence16 wherein he submitted the Certificate of Sale dated May 17, 1937, TD 014134 tor the year 1976 in Asuncion's name and
covering Cadastral Lot Nos. 1, 2, and 3 PSU 216090, TD 0037 for the year 1994 in the names of Asuncion and Ponciano and covering
Cadastral Lot No. 1677, TD 0036 for the year 1994 in the names of Asuncion and Ponciano and covering Cadastral Lot No. 566, TD
0114 for the year 2003 in the names of Asuncion and Ponciano and covering Cadastral Lot No. 1677-A, TD 0118 for the year 2003 in
the names of Asuncion and Ponciano and covering Cadastral Lot No. 1 677-B, TD 0116 for the year 2003 in the names of Asuncion
and Ponciano and covering Cadastral Lot No. 566-A; and TD 0117 for the year 2003 in the names of Asuncion and Ponciano and
covering Cadastral Lot No. 566-B,17tax receipts for the years 1986, 1987, 1988, 1989, 1990, 1991, 1994, 2002 and 2003, statement of
the assessed value issued by the Provincial Assessor of Iloilo on March 26, 1996, Lot No. 566's Blue Print Survey Plan with technical
description, Lot 1677's Blue Print Survey Plan with technical description, Certificate of Unavailability of Surveyor's Certificate of
Survey for Lots 566 and 1677, and Survey Inspection Report dated August 28, 1997 for Lot Nos. 566 and 1677 issued by
Pe�aflorida,18 i.e. CENRO Report dated August 28, 1997, to the effect that the subject lots are free from liens and encumbrances, and
are moreover within the alienable and disposable area. Pursuant to the RTC's directive, petitioner also offered as additional evidence
the originally approved subdivision plan covering Lot No. 1677, Csd-06-008798 to prove the identity and location of the easement for
public use;19 and a certification by Joel B. Diaz, CENRO at Sara, Iloilo, to the effect that Lot No. 1677, Pls 1099, situated in Brgy.
Loong, Concepcion, Iloilo, with an area of 8,062 square meters was issued Patent No. 063015-92-846 dated May 28, 1992 in the name
of Flordeluz Sedigo, but that Lot No. 1677 has doubled with the lot situated at Poblacion, Concepcion, Iloilo in the name of the Heirs
of Ponciano and that this latter lot is not covered by any public land application filed with the CENRO in Sara, Iloilo, which explained
why no patent has been issued therefor, hence indicating that this other Lot No. 1677, Pls 1099, which is situated in Brgy. Aglusong,
Concepcion, Iloilo is entirely different from Lot No. 1677, which is situated in Sitio Loong, Poblacion, Concepcion, Iloilo.20

The petitioner likewise submitted in evidence an Ocular Inspection Report covering an ocular inspection earlier ordered by the RTC.21

Ruling of the Regional Trial Court

In its Decision dated March 19, 2007, the RTC disposed of this case in this wise:

WHEREFORE, general default having been declared and the [A]pplication supported by evidence, the adjudication and registration of
portion of Lot No. 566 with an area of 3.1161 hectares and portion of Lot 1677 with an area of 3.7255 hectares, all of Concepcion
Cadastre, together with all the improvements thereon are hereby ordered in favor of applicant [petitioner], of legal age, married to
[Ofelia], Filipino, and resident of Fairview, Quezon City, Philippines. Portions of Lot [No.] 1677 with an area of 2.3642 hectares and
portion of Lot [No.] 566 with an area of 1.1782 hectares are hereby adjudicated in favor of [Tancredo], of legal age, single, Filipino,
and resident of Lawa-an Village, Balantang, Jaro, Iloilo City, Philippines which portions shall be segregated in a proper subdivision
survey and to follow the description of the plan of Municipal Assessor of Concepcion, Iloilo commensurate to Lot 1677-A under
[T.D.] No. 054822 and 566-A under [T.D.] No. 0550.

The easement of right of way of the lots, highways, streets, alleys, shorelines and other portion[s] of land not specified as lots located
within the borders of the land covered by this case are declared to be the properties of the [Republic].

The Clerk of Court is directed to forward copies of this decision to all government agencies concerned.

And finally, the Administrator, Land Registration Authority, is hereby directed, after this decision shall have become final for which
he shall be duly advised by specific order of this Court, to issue [a] decree of registration and title in accordance with the amended
plan on file in the record.

SO ORDERED.23

The RTC held that petitioner had sufficiently established that his predecessors-in-interest had possessed and owned a parcel of land
in Barangay Loong, Concepcion, Iloilo to the extent not covered by Tancredo's Opposition; that while petitioner and his
predecessors-in-interest might not have been in actual possession of the subject lots at all time, they nonetheless had been consistently
visiting the same; and that petitioner's claim of possession and ownership is supported by documents consisting of the Certificate of
Sale issued by the Provincial Treasurer of Iloilo on May 17, 1937, the tax declarations in Asuncion's name for the years 1976, 1994,
and 2003, the official receipts showing payments of real estate taxes thereon, and the statement of the assessed value issued by the
Provincial Assessor of Iloilo on May 26, 1996. The RTC stressed that the period of possession by petitioner and his predecessors-in-
interest sufficed to confer a registrable title upon petitioner.

The RTC likewise ruled that Tancredo was also able to establish a superior claim with respect to his disputed portions; that all of the
tax declarations in Asuncion's name continuously bore the annotation acknowledging Tomas's adverse claim relative to Tancredo's
disputed portions; that Tomas's open and continuous possession for more than the required number of years was sufficiently shown by
a tax declaration issued as early as the year 1945; that the overseers and other persons authorized to manage Tancredo's disputed
portions were never driven out by petitioner; and that Tancredo had visited the disputed portions more frequently than petitioner who,
as the evidence shows, has his permanent residence in Quezon City, Metro Manila.

With regard to the claim of the Sicads, the RTC held that Mansueto and his successors-in-interest had no more interest in the Sicads'
contested portion because what was shown to have been sold by Asturias to Mansueto pertained to a lot measuring only two hectares,
52 acres, and 92 ares, a parcel of land at par with the land covered by the aforementioned free patent issued to Mansueto.

The RTC emphasized that it is well-entrenched in jurisprudence that alienable public land openly, continuously, and exclusively
possessed by a person personally or through his predecessors-in-interest for at least 30 years becomes ipso jure private property by
mere lapse of time, or by completion of said period pursuant to Section 48(b) of CA 141, as amended by RA 1942 and RA 3872.

Ruling of the Court of Appeals

Only the petitioner and the Republic filed their respective Notices of Appeal24 which were given due course by the RTC in its Order of
May 25, 2007.25 These notices of appeal were consolidated and docketed as CA-G.R. CV No. 02296. In a Decision dated August 13,
2009, the CA disposed as follows:

WHEREFORE, the Decision dated March 19, 2007 is modified, as follows: 1.) the portion pertaining to the award of [Lot No.] 566
with an area of 3.1161 hectares and [Lot No.] 1677 with an area of 3.7255 hectares to [petitioner], is REVERSED and SET ASIDE;
and 2.) the portion pertaining to the award of [Lot No.] 1677 with an area of 2.3642 hectares and [Lot No.] 566 with an area of 1.1782
hectares in favor of [Tancredo] is AFFIRMED.

SO ORDERED.26

The CA held that, contrary to the Republic's stance, the records showed that there had been compliance with the jurisdictional
requirements of publication, posting, and notice; that petitioner had properly identified the subject lots; that the subject lots had
already been classified as alienable and disposable at the time that petitioner filed the Application in 2002, pursuant to the CENRO
Report dated August 28, 1997 issued by Pe�aflorida; that it has been held that "[a] certification by the CENRO of the DENR stating
that the subject lots are found to be within the alienable and disposable site per land classification project map is sufficient evidence to
show the real character of the land subject of the application;"27that these notwithstanding, petitioner failed to prove with the requisite
evidence the kind of possession and the length of time required by law for the registration of the subject lots in his name, because his
lone testimony did not suffice to establish his and his predecessors-in-interest's alleged open, continuous, exclusive, and notorious
possession over the subject lots since June 12, 1945, or earlier; that petitioner's alleged acts of swimming in, and planting trees on the
subject lots, his having finished high school at the Victorino Salcedo High School in the neighboring town of Sara, Iloilo, and his
having left the subject lots when he attended college � all these neither added up nor supported his assertion of dominion or
ownership over the subject lots; that his allegation that his childhood memories regarding the subject lots all came back to him after
the death of his father Ponciano was indicative of the fact that he was really unaware of the existence of the subject lots; that his
Application was even opposed by Tancredo and by the Sicads who claimed exclusive possession over certain portions of the subject
lots; that petitioner's failure to explain why he or his predecessors-in-interest declared the subject lots for taxation purposes only in
1976, was inconsistent with his claim of possession thereover since 1937; and that it is an axiom of the law that the burden of proof in
a land registration case rests upon the applicant who must present clear, positive, and convincing evidence establishing the alleged
possession and occupation in good faith, and for the period required by law.

On the other hand, the CA ruled that Tancredo had sufficiently proven his open, continuous, exclusive, and notorious possession and
occupation for the period required by law, over the portions of the subject lots he was claiming in the concept of an owner; that
Tomas's adverse claims were annotated on the TDs issued in Asuncion's name covering the disputed portions, i.e. TD 014134, 0114,
and 0117;28 that Tomas declared the disputed portions for taxation purposes in his name as early as 1945; that Tancredo himself
testified that Tomas first used the disputed portions as rice land and converted the same into coconut land in the 1960s; that Tancredo's
witness, Etchona, likewise testified that Tomas employed him and Domingo Celestial not only to cultivate, but also to guard the
disputed portions, and that Tomas himself appropriated the harvest from the disputed portions and introduced improvements thereon;
and that even petitioner himself admitted in his Application that Tomas had declared the disputed portions in his (Tomas') name for
taxation purposes.

Petitioner moved for reconsideration29 but was denied by the CA in its Resolution of February 22, 2012.30

Issue

Before this Court, petitioner now raises the following issue:

[Whether] the [CA] gravely abused its discretion in denying the registration of [his] already vested title [over] Lot [Nos.] 566 and
1677 of the Concepcion, Iloilo Cadastre as his private property, and in awarding some portions thereof in favor of [Tancredo] in this
land registration proceeding.31
Petitioner's arguments

Petitioner insists in his Petition,32 Consolidated Reply,33 and Memorandum34 that the CA erred in finding that he failed to prove that he
and his predecessors-in-interest had been in open, continuous, exclusive, and notorious possession and occupation of the subject lots
since June 12, 1945, or earlier, and that there is indubitable evidence that the subject lots were in fact sold in a tax sale on May 17,
1937 by the government through the Provincial Treasurer of Iloilo; that he filed the present Application so that an OCT can be issued
in his name as evidence of his vested title over the subject lots; that assuming that the subject lots are still part of the public domain, he
is nevertheless still entitled to have the subject lots registered in his name by reason of his and his predecessors-in-interest's exclusive
possession and occupation thereof for more than 30 years, as compared to Tancredo's possession which supposedly began only in
1945; that under the Land Registration Act, as amended, the possessor is deemed to have acquired by operation of law the right to a
government grant upon compliance with the conditions therefor, which was just what he did in this case; that the confirmation
proceeding is a mere formality and the registration thereunder does not confer title but merely recognizes a title that is already vested;
that rejection of his vested title to the questioned lots will occasion loss of confidence in the government's sales of forfeited property
by reason of tax delinquency; that the CA erred in finding that the TDs in Asuncion's name carried Tomas's adverse claim, as the
attached copies thereof did not bear any such annotations; that the CA also erred in stating that petitioner did not present any TDs to
support his claim of ownership over the subject lots for the reason that the CA Decision itself mentioned that he submitted a TD for
the year 1976; that contrary to the CA's findings, he did testify that he had visited the subject lots every so often to plant trees after he
and his parents left Concepcion in 1945, and that such improvements were reflected in his exhibits; that the CA likewise erred in
holding that he only came to know about the subject lots after the death of his father, Ponciano, for the fact is that he did testify that he
and his cousins used to swim in the sea near the subject lots, as early as when he was 12 years old; that the CA moreover erred in
concluding that Tancredo had successfully established his claims over the disputed portions of the subject lots because the TDs in
Asuncion's name are all annotated with Tomas's adverse claim, and that Tomas had declared said disputed portions in his name as
early as 1945; that the tax declarations supposedly in Tomas's name were neither presented nor offered in evidence; that Tancredo
admitted during his cross-examination that Tomas's 1945 tax declaration was procured notwithstanding the fact that the subject lots
had already been declared in Asuncion's name; that Tancredo did not comply with the pertinent provisions of the Land Registration
Act, as amended because he did not present evidence to prove the specific date in 1945 when Tomas acquired the disputed portions, or
how Tomas in fact acquired the same; that besides these, Tancredo could not identify the disputed portions that he was claiming; that
if Tancredo wanted to vindicate his claims of ownership over the disputed portions, then Tancredo should institute the proper action
before a court of general jurisdiction, and not in the land registration court, as the subject lots were no longer part of the public
domain; that the issue of whether the sale by the government to Asuncion on May 17, 1937 changed the classification of the subject
lots from public to private is of first impression and should be resolved by the Supreme Court En Banc; and that the circumstances
obtaining in this case are exceptions to the rule that only questions of law are allowed in a petition filed pursuant to Rule 45 of the
Revised Rules of Court; and that to deny his Application, or to render judgment ordering the reversion to public ownership of the
subject lots would amount to grave abuse on the part of the judiciary.

The Republic's Arguments

In its Comment35 and Memorandum,36 the Republic counters that the instant Petition merely raises questions of fact which are
proscribed under Rule 45 of the Revised Rules of Court; that this Court is not a trier of facts; that petitioner's case does not fall under
any of the exceptions to the rule that factual findings of the CA are invariably binding upon the Supreme Court; and that the assailed
CA Decision should not be disturbed because the CA had amply justified the reversal of the RTC Decision which was erected upon
the petitioner's failure to substantiate his claim of ownership over the subject lots.

Tancredo's Arguments

In his Comment37 and Memorandum38 Tancredo maintains that the disputed portions had been in the absolute possession and dominion
of Tomas; that the findings of the RTC and the CA regarding petitioner's ineligibility to obtain title to the disputed portions due to
non-compliance with the requirements of the law, and for insufficiency of evidence, should not be disturbed; that the CA's finding that
petitioner's TDs bore the annotated claims of Tomas on the subject lots is a factual finding and should not be disturbed; that
petitioner's possession is not the possession required by law for purposes of land registration because petitioner failed to present
evidence that would prove actual, notorious, continuous, and exclusive possession and occupation of the subject lots; that the evidence
adduced by petitioner is self-serving, hence undeserving of any weight; that the origin of the disputed portions as pointed out by the
RTC is Assessor's Lot No. 337, which is individually identified after the Cadastral Survey as Lot Nos. 1676- A, 1677-A, and 566-A,
all of the Concepcion (Iloilo) Cadastre; that petitioner is barred or estopped from questioning the identity of the disputed portions that
had been adjudicated to him (Tancredo), as the lack of sufficient identification pertained to the subject lots that petitioner himself was
trying to register; and that the issues raised by petitioner were factual in nature, and the same is proscribed under Rule 45 of the
Revised Rules of Court.

The fundamental issues to be resolved in this case are: (1) Whether the petitioner is entitled to obtain a title over the subject lots; and
(2) Whether Tancredo has established, by his own evidence, that he was qualified to acquire title over the disputed portions claimed
by him.

The Court's Ruling

The Petition is denied.

Requisites for the confirmation and registration of an imperfect and incomplete title under CA 141 and PD 1529

"The Regalian doctrine, embodied in Section 2, Article XII of the 1987 Constitution, provides that all lands of the public domain
belong to the State, which is the source of any asserted right to ownership of land."39 "[Commonwealth Act No. 141, in turn,] governs
the classification and disposition of lands of the public domain. Section 11 [thereof] provides, as one of the modes of disposing public
lands that are suitable for agriculture, the 'confirmation of imperfect or incomplete titles.' Section 48 [thereof], on the other hand,
enumerates those who are considered to have acquired an imperfect or incomplete title over public lands and, therefore, entitled to
confirmation and registration under the Land Registration Act [now PD 1529]."40 The latter law then "specifies who are qualified to
apply for registration of land."41 Taken together, all the foregoing provide for the requisites for the confirmation and registration of an
imperfect and incomplete title, thus �

x x x In particular, Section 14 (1) [of PD 1529] in relation to Section 48 (b) of [CA] 141, as amended by Section 4 of P.D. No. 1073,
states:

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

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

xxx xxx xxx

Section 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such
lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance [now
Regional Trial Court] of the province where the land is located for confirmation of their claims and the issuance of a certificate of title
therefor, under [PD 1529], to wit:

xxx xxx xxx

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

Based on these legal parameters, applicants for registration of title under Section 14 (1) must sufficiently establish: (1) that the subject
land forms part of the disposable and alienable lands of the public domain; (2) that the applicant and his predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation of the same; and (3) that his possession has been under a
bona fide claim of ownership since June 12, 1945, or earlier.

These triple requirements of alienability and possession and occupation since June 12, 1945 or earlier under Section 14 (1) are
indispensable prerequisites to a favorable registration of title to the property. Each element must necessarily be proven by no less than
clear, positive and convincing evidence; otherwise, the application for registration should be denied.42

Petitioner did not cite the specific provision of CA 141 upon which he based his Application. Nevertheless, the allegations therein
seem to establish the fact that his claim is one of imperfect title under the above quoted Section 48(b) of CA 141 in relation to Section
14(1) of PD 1529.

The subject lots are considered alienable and disposable lands of the public domain

The first requirement is complied with in the case at bench. Notwithstanding that only a CENRO certification covering the subject lots
was presented in the instant case, the subject lots are considered alienable and disposable lands of the public domain because of this
Court's ruling that an application for land registration may be granted despite the absence of the DENR Secretary's certification,
provided that the same was pending at the time Republic v. Vega43 was promulgated on January 17, 2011. In Republic v. Alora,44 this
Court expressly clarified this matter in this wise:

x x x [I]n Republic v. T.A.N. Properties, Inc., which was promulgated on 26 June 2008 x x x we held that applicants for land
registration must present a copy of the original classification approved by the DENR Secretary and certified as true copy by the legal
custodian of the official records. x x x

x x x In Republic v. Serrano [(decided on 24 February 2010)], we allowed the approval of a land registration application even without
the submission of the certification from the DENR Secretary. As this ruling presented an apparent contradiction with our earlier
pronouncement in Republic v. TA.N. Properties, Inc., we sought to harmonize our previous rulings in Republic v. Vega [(decided on
17 January 2011)]. We then said that the applications for land registration may be granted even without the DENR Secretary's
certification provided that the application was currently pending at the time Republic v. Vega was promulgated. x x x45

It is worth stressing, however, that the foregoing ruling is the exception, not the rule. As explicitly elucidated in Republic v. Vega:46

It must be emphasized that the present ruling on substantial compliance applies pro hac vice. It does not in any way detract from our
rulings in Republic v. T.A.N. Properties, Inc., and similar cases which impose a strict requirement to prove that the public land is
alienable and disposable, especially in this case when the Decisions of the lower court and the [CA] were rendered prior to these
rulings. To establish that the land subject of the application is alienable and disposable public land, the general rule remains: all
applications for original registration under [PD 1529] must include both (1) a CENRO or PENRO certification and (2) a certified true
copy of the original classification made by the DENR Secretary.
As an exception, however, the courts � in their sound discretion and based solely on the evidence presented on record � may
approve the application, pro hac vice, on the ground of substantial compliance showing that there has been a positive act of
government to show the nature and character of the land and an absence of effective opposition from the government. This exception
shall only apply to applications for registration currently pending before the trial court prior to this Decision and shall be inapplicable
to all future applications. (Underscoring and emphases in the original)47

That said, we hold that both the petitioner and Tancredo failed to establish clearly and convincingly their respective rights to
registration of imperfect titles under CA 141 and PD 1529, as will be discussed below.

Petitioner failed to prove possession of the subject lots in the manner and for the period required by law

First off, petitioner failed to establish bona fide possession and ownership over the subject lots since June 12, 1945 or earlier. His
contention that his predecessors-in-interest became the owners of the subject lots pursuant to the May 17, 1937 Certificate of Sale48 of
the Forfeited Real Property issued by the Provincial Treasurer of Iloilo appears to be consistent with the fact that TD 3549 in Tomas's
name which was found by the CA as issued in 1945 bears an annotation stating that such is "[c]ontested by [Asuncion]".49 Even then,
the Certificate of Public Sale indicated that the balance of the purchase price in the amount of P29.44, was yet to be paid on or
before December 31, 1937.50

No incontrovertible proof was, however, presented to establish the fact that this balance of the purchase price in the said amount of
29.44 had indeed been paid on or before December 31, 1937. In addition, the CA also correctly pointed out that even as petitioner was
able to submit TDs and evidence of tax payments only for a few years, he nevertheless failed to explain why he or his predecessors-in-
interest declared the subject lots for taxation purposes only in 1976, this despite his claim that his predecessors� in-interest had been
in possession and occupation of the subject lots since 1937, as allegedly shown in the Provincial Treasurer's Certificate of Sale. It is
settled that intermittent and irregular tax payments run counter to a claim of ownership or possession.51

Second, even assuming for argument's sake that petitioner's predecessors-in-interest had paid the balance of the delinquent tax
payment, petitioner nonetheless failed to prove his and his predecessors-in-interests actual, notorious, exclusive and continuous
possession of the subject lots for the length of time required by law.

To be sure, petitioner's failure to explain what happened after his family supposedly left the subject lots in 1941, when the war broke
out, vis-�-vis his failure to prove that he had indeed introduced valuable improvements in the subject lots during the time that he and
his parents had been allegedly in actual possession and occupation thereof, cast doubts upon his claim of actual possession and
occupation thereof. Withal, petitioner's testimony of having swum near the subject lots, of having planted trees thereon, and his having
finished high school at the Victorino Salcedo High School in the neighboring town of Sara can hardly be considered as acts of
dominion or ownership over the subject lots. Besides, petitioner did not present clear and convincing evidence that the subject lots had
indeed been cultivated by him or by his predecessors-in-interest for the period of time required by law. Needless to say, all these
failings weaken his claim that he has been a bona fide possessor and occupant of the subject lots in the manner and for the period
prescribed by law, to wit:

The possession contemplated by Section 48 (b) of [CA] 141 is actual, not fictional or constructive. In Carlos v. Republic of the
Philippines, the Court explained the character of the required possession, as follows:

The law speaks of possession and occupation. Since these words are separated by the conjunction and, the clear intention of the law is
not to make one synonymous with the other. Possession is broader than occupation because it includes constructive possession. When,
therefore, the law adds the word occupation, it seeks to delimit the all-encompassing effect of constructive possession. Taken
together with the words open, continuous, exclusive and notorious, the word occupation serves to highlight the fact that for an
applicant to quality, his possession must not be a mere fiction. Actual possession of a land consists in the manifestation of acts
of dominion over it of such a nature as a party would naturally exercise over his own property. 52(Emphases in the original)

Oddly enough, while in its Decision the RTC appeared to have granted petitioner's Application, said Decision seemed to have
indulged in a bit of non-sequitur when it said that "[petitioner] and his predecessors were not in actual possession of the [subject lots]
all the time" x x x. 53 Simply said, the CA effectively ruled that since petitioner failed to prove that he or his predecessors-in-interest
had indeed performed the required acts of possession and occupation, or specific acts of dominion over the subject lots, it stands to
reason that registration thereof in his name cannot be allowed.

Tancredo also failed to establish possession and occupation over the disputed portions in the manner and for the period required
by law

At this juncture, we shall revisit the uniform finding by both the RTC and the CA, which in effect upheld Tancredo's right to register
the disputed portions in his name (as an exception to the settled rule that questions of fact are proscribed in a Rule 45 petition since a
correct evaluation of the facts will yield a different conclusion).54

First off, Tancredo failed to show that his or his predecessor-in� interest's possession and occupation over the disputed portions had
been under a bona fide claim of ownership since June 12, 1945, or earlier. We are inclined to agree with petitioner's posture that
Tancredo failed to adduce clear and convincing evidence which established the origin or antecedents of Tomas's straightforward
possession and occupation, or claim of ownership, over the disputed portions. Consider the following exchange/s between/among
Tancredo, the petitioner, and the Court �

[Petitioner]: (to the witness[, Tancredo])

� �
Q: When did your father acquire this property?
A: In 1945.
� �
Q: From whom?
A: I have no idea.
�
xxxx
� �
Q: Did you not ask your father from whom he acquired this property?
A: No, I did not.
� �
Q: As a matter of fact[,] until the death of your father[,] you have not ask[ed] him from whom did he acquire the property?
A: No, Sir.
�
xxxx
�
COURT: (to the witness[, Tancredo])
Q: Your father died in 1995[,] why did you not [cause] the transfer of tax declaration in your name or to the heirs?
A: Because the plan of the heirs is, if the property [is registered] in my father[']s name [then] the title should be transferred in my
name.
�
xxxx
� �
Q: Your tax receipts correspond only [to] the year 2003, how about other tax receipts?
A: I [will just [try] to find out if the Provincial Treasurer's Office still has the copy.
� �
Q: Even just a certification stating that you [continued] in paying realty tax from 1946 up to 2003?
A: Yes, I can ask the provincial treasurer for that matter.
� �
Q: When you secure[d] the tax declaration[,] you [knew] that the lot was also declared in the name of [Asuncion], is it not?
A: Yes, Your Honor.
� �
Q: That was in the office of the Municipal Assessor?
A: Yes, Your Honor.
� �
Q: Did you verify if they were paying taxes also?
A: No, Your Honor.
� �
Q: You did not?
A: I [did] not[,] Your Honor.
� �
Q: If that is the case[,] why did you [say] a while ago that you [knew] only [about] the case of [petitioner] when this case was filed
because the tax declaration itself [stated] that the lot was also declared in the name of [Asuncion]?
A: Although I have already seen the notation on the tax declaration that they also [secured a] tax declaration [over] the (disputed
portions]. I did not mind it Your Honor because they did not openly claim ownership over the [disputed portions]. And in the
same manner[,] Your Honor[,] in their tax declaration it is also indicated that the [disputed portions] is also declare[d] in the
name of [Tomas].55
More than this, Tancredo did not present clear, convincing evidence to support his claim that the disputed portions were in fact
transferred to him by his father, Tomas. Tancredo merely testified that the disputed portions were given to him solely by Tomas, an
act that was allegedly consented to by his siblings. Thus �

[Petitioner]: (to the witness, Tancredo)

� �
Q: You have siblings, meaning brothers and sisters?
A: Yes, Sir.
� �
Q: You said a while ago that you succeeded to the ownership of the [subject lots] when your father died in 1985, how about your
siblings[?] [Did they] not succeed to the [ownership of the subject lots?]
A: They sign[ed] a deed of adjudication in favor of me[.] I have a copy and it was notarized.
�
xxxx
� �
Q: In your [O]pposition you said that you were authorized?
A: Yes, Sir.
� �
Q: By whom?
A: By my brothers and sisters.
� �
Q: Where is your authority?
A: I can produce it. I can pass [sic] it anytime.
� �
Q: You did not [s]tate in your [O]pposition that you have your siblings with you?
A: Because the property was given to me by my father.56

Nonetheless, there is nothing in the records to support or confirm Tancredo's claim that the property was in fact deeded over to him by
his father, Tomas.

In Buenaventura v. Pascual,57 this Court affirmed the lower courts' dismissal of the claims for registration of imperfect titles because,
among others, both the applicant and oppositors failed to adduce evidence as to how they acquired the subject property from their
respective predecessors-in-interest, i.e., whether by succession or by donation or by some other mode. Furthermore, we stressed
therein that the applicant failed to prove the manner by which her predecessors-in-interest possessed the subject property.

Then, again, Tancredo also failed to establish that he and his predecessors-in-interest had/have been in open, continuous, exclusive
and notorious possession and occupation of the disputed portions since June 12, 1945, or prior thereto.

If anything, the records showed that Tancredo merely submitted photocopies of four tax declarations which were attached as annexes
to his Opposition. These included the 1945 TD 3549 as adverted to by the CA in the records58 pertaining to a 3.6237-hectare lot in an
unstated cadastral lot, TD 0548 covering an 813-hectare lot in Cadastral Lot No. 1676-A,59 TD 0549 for a 2.3642-hectare lot in
Cadastral Lot No. 1677-A,60 and TD 0550 concerning a 1.1782-hectare lot in Cadastral Lot No. 566-A.61 All four TDs are in Tomas's
name, without copies of the dorsal portions thereof, and bearing annotations stating either "[c]ontested by [Asuncion]" or "[a]lso
declared in the name of [Asuncion] or [Ponciano]".

It would thus appear that Tancredo had erected his opposition/claim to the lots in question upon the said photocopies of four tax
declarations whose authenticity or genuineness is open to the most serious doubts. And, even on the assumption that the said tax
declarations are in fact authentic and genuine, still it is settled that tax declarations are not conclusive proof of ownership. If anything,
tax declarations are merely corroborative of a person's claim of possession. More than that, as elsewhere indicated, intermittent and
irregular tax payments, as in this case, do not really provide strong support for a claim of ownership or possession.62

It is axiomatic of course that "[i]t is the policy of the State to encourage and promote the distribution of alienable public lands as a
spur to economic growth and in line with the social justice ideal enshrined in the Constitution. At the same time, the law imposes
stringent safeguards upon the grant of such resources lest they fall into the wrong hands to the prejudice of the national
patrimony."63 This ruling controls the present case.

As a final note: All of the foregoing discussion showed that the issues raised in this case have all been previously resolved and
determined by settled jurisprudence; hence, there is no reason to grant petitioner's prayer for this case to be referred to or heard by the
Court En Banc, as this is not a case of first impression at all.
WHEREFORE, the Petition is hereby DENIED. We AFFIRM with MODIFICATION the August 13, 2009 Decision and the
February 22, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 02296 in that the award by the Regional Trial Court of
Barotac Viejo, Iloilo, Branch 66 in LRC Case No. 02-195 of Lot No. 1677 with an area of 2.3642 hectares and Lot No. 566 with an
area of 1.1782 hectares, both in favor of respondent Tancredo Vargas, is OVERTURNED and NULLIFIED.

SO ORDERED.

[G.R. No. 135385. December 6, 2000]

ISAGANI CRUZ and CESAR EUROPA, petitioners, vs. SECRETARY OF ENVIRONMENT AND NATURAL
RESOURCES, SECRETARY OF BUDGET AND MANAGEMENT and CHAIRMAN and COMMISSIONERS OF
THE NATIONAL COMMISSION ON INDIGENOUS PEOPLES, respondents.
HON. JUAN M .FLAVIER, HON. PONCIANO BENNAGEN, BAYANI ASCARRAGA, EDTAMI MANSAYANGAN,
BASILIO WANDAG, EVELYN DUNUAN, YAOM TUGAS, ALFREMO CARPIANO, LIBERATO A. GABIN,
MATERNIDAD M. COLAS, NARCISA M. DALUPINES, BAI KIRAM-CONNIE SATURNO, BAE MLOMO-
BEATRIZ T. ABASALA, DATU BALITUNGTUNG-ANTONIO D. LUMANDONG, DATU MANTUMUKAW
TEOFISTO SABASALES, DATU EDUAARDO BANDA, DATU JOEL UNAD, DATU RAMON BAYAAN, TIMUAY
JOSE ANOY, TIMUAY MACARIO D. SALACAO, TIMUAY EDWIN B. ENDING, DATU SAHAMPONG
MALANAW VI, DATU BEN PENDAO CABIGON, BAI NANAPNAY-LIZA SAWAY, BAY INAY DAYA-
MELINDA S. REYMUNDO, BAI TINANGHAGA HELINITA T. PANGAN, DATU MAKAPUKAW ADOLINO L.
SAWAY, DATU MAUDAYAW-CRISPEN SAWAY, VICKY MAKAY, LOURDES D. AMOS, GILBERT P.
HOGGANG, TERESA GASPAR, MANUEL S. ONALAN, MIA GRACE L. GIRON, ROSEMARIE G. PE, BENITO
CARINO, JOSEPH JUDE CARANTES, LYNETTE CARANTES-VIVAL, LANGLEY SEGUNDO, SATUR S.
BUGNAY, CARLING DOMULOT, ANDRES MENDIOGRIN, LEOPOLDO ABUGAN, VIRGILIO CAYETANO,
CONCHITA G. DESCAGA, LEVY ESTEVES, ODETTE G. ESTEVEZ, RODOLFO C. AGUILAR, MAURO
VALONES, PEPE H. ATONG, OFELIA T. DAVI, PERFECTO B. GUINOSAO, WALTER N. TIMOL, MANUEL T.
SELEN, OSCAR DALUNHAY, RICO O. SULATAN, RAFFY MALINDA, ALFREDO ABILLANOS, JESSIE
ANDILAB, MIRLANDO H. MANGKULINTAS, SAMIE SATURNO, ROMEO A. LINDAHAY, ROEL S.
MANSANG-CAGAN, PAQUITO S. LIESES, FILIPE G. SAWAY, HERMINIA S. SAWAY, JULIUS S. SAWAY,
LEONARDA SAWAY, JIMMY UGYUB, SALVADOR TIONGSON, VENANCIO APANG, MADION MALID,
SUKIM MALID, NENENG MALID, MANGKATADONG AUGUSTO DIANO, JOSEPHINE M. ALBESO,
MORENO MALID, MARIO MANGCAL, FELAY DIAMILING, SALOME P. SARZA, FELIPE P. BAGON,
SAMMY SALNUNGAN, ANTONIO D. EMBA, NORMA MAPANSAGONOS, ROMEO SALIGA, SR., JERSON P.
GERADA, RENATO T. BAGON, JR., SARING MASALONG, SOLEDAD M. GERARDA, ELIZABETH L. MENDI,
MORANTE S. TIWAN, DANILO M. MALUDAO, MINORS MARICEL MALID, represented by her father
CORNELIO MALID, MARCELINO M. LADRA, represented by her father MONICO D. LADRA, JENNYLYN
MALID, represented by her father TONY MALID, ARIEL M. EVANGELISTA, represented by her mother LINAY
BALBUENA, EDWARD M. EMUY, SR., SUSAN BOLANIO, OND, PULA BATO BLAAN TRIBAL FARMERS
ASSOCIATION, INTER-PEOPLES EXCHANGE, INC. and GREEN FORUM-WESTERN VISAYAS, intervenors.
COMMISSION ON HUMAN RIGHTS, intervenor.
IKALAHAN INDIGENOUS PEOPLE and HARIBON FOUNDATION FOR THE CONSERVATION OF NATURAL
RESOURCES, INC., intervenor.

RESOLUTION
PER CURIAM:

Petitioners Isagani Cruz and Cesar Europa brought this suit for prohibition and mandamus as citizens and taxpayers, assailing the
constitutionality of certain provisions of Republic Act No. 8371 (R.A. 8371), otherwise known as the Indigenous Peoples Rights Act
of 1997 (IPRA), and its Implementing Rules and Regulations (Implementing Rules).
In its resolution of September 29, 1998, the Court required respondents to comment.[1] In compliance, respondents Chairperson
and Commissioners of the National Commission on Indigenous Peoples (NCIP), the government agency created under the IPRA to
implement its provisions, filed on October 13, 1998 their Comment to the Petition, in which they defend the constitutionality of the
IPRA and pray that the petition be dismissed for lack of merit.
On October 19, 1998, respondents Secretary of the Department of Environment and Natural Resources (DENR) and Secretary of
the Department of Budget and Management (DBM) filed through the Solicitor General a consolidated Comment. The Solicitor
General is of the view that the IPRA is partly unconstitutional on the ground that it grants ownership over natural resources to
indigenous peoples and prays that the petition be granted in part.
On November 10, 1998, a group of intervenors, composed of Sen. Juan Flavier, one of the authors of the IPRA, Mr. Ponciano
Bennagen, a member of the 1986 Constitutional Commission, and the leaders and members of 112 groups of indigenous peoples
(Flavier, et. al), filed their Motion for Leave to Intervene. They join the NCIP in defending the constitutionality of IPRA and praying
for the dismissal of the petition.
On March 22, 1999, the Commission on Human Rights (CHR) likewise filed a Motion to Intervene and/or to Appear as Amicus
Curiae. The CHR asserts that IPRA is an expression of the principle of parens patriae and that the State has the responsibility to
protect and guarantee the rights of those who are at a serious disadvantage like indigenous peoples. For this reason it prays that the
petition be dismissed.
On March 23, 1999, another group, composed of the Ikalahan Indigenous People and the Haribon Foundation for the
Conservation of Natural Resources, Inc. (Haribon, et al.), filed a motion to Intervene with attached Comment-in-Intervention. They
agree with the NCIP and Flavier, et al. that IPRA is consistent with the Constitution and pray that the petition for prohibition and
mandamus be dismissed.
The motions for intervention of the aforesaid groups and organizations were granted.
Oral arguments were heard on April 13, 1999. Thereafter, the parties and intervenors filed their respective memoranda in which
they reiterate the arguments adduced in their earlier pleadings and during the hearing.
Petitioners assail the constitutionality of the following provisions of the IPRA and its Implementing Rules on the ground that
they amount to an unlawful deprivation of the States ownership over lands of the public domain as well as minerals and other natural
resources therein, in violation of the regalian doctrine embodied in Section 2, Article XII of the Constitution:
(1) Section 3(a) which defines the extent and coverage of ancestral domains, and Section 3(b) which, in turn, defines
ancestral lands;
(2) Section 5, in relation to section 3(a), which provides that ancestral domains including inalienable public lands, bodies of
water, mineral and other resources found within ancestral domains are private but community property of the
indigenous peoples;
(3) Section 6 in relation to section 3(a) and 3(b) which defines the composition of ancestral domains and ancestral lands;
(4) Section 7 which recognizes and enumerates the rights of the indigenous peoples over the ancestral domains;
(5) Section 8 which recognizes and enumerates the rights of the indigenous peoples over the ancestral lands;
(6) Section 57 which provides for priority rights of the indigenous peoples in the harvesting, extraction, development or
exploration of minerals and other natural resources within the areas claimed to be their ancestral domains, and the right
to enter into agreements with nonindigenous peoples for the development and utilization of natural resources therein for
a period not exceeding 25 years, renewable for not more than 25 years; and
(7) Section 58 which gives the indigenous peoples the responsibility to maintain, develop, protect and conserve the
ancestral domains and portions thereof which are found to be necessary for critical watersheds, mangroves, wildlife
sanctuaries, wilderness, protected areas, forest cover or reforestation.[2]
Petitioners also content that, by providing for an all-encompassing definition of ancestral domains and ancestral lands which
might even include private lands found within said areas, Sections 3(a) and 3(b) violate the rights of private landowners.[3]
In addition, petitioners question the provisions of the IPRA defining the powers and jurisdiction of the NCIP and making
customary law applicable to the settlement of disputes involving ancestral domains and ancestral lands on the ground that these
provisions violate the due process clause of the Constitution.[4]
These provisions are:
(1) sections 51 to 53 and 59 which detail the process of delineation and recognition of ancestral domains and which vest on
the NCIP the sole authority to delineate ancestral domains and ancestral lands;
(2) Section 52[i] which provides that upon certification by the NCIP that a particular area is an ancestral domain and upon
notification to the following officials, namely, the Secretary of Environment and Natural Resources, Secretary of
Interior and Local Governments, Secretary of Justice and Commissioner of the National Development Corporation, the
jurisdiction of said officials over said area terminates;
(3) Section 63 which provides the customary law, traditions and practices of indigenous peoples shall be applied first with
respect to property rights, claims of ownership, hereditary succession and settlement of land disputes, and that any
doubt or ambiguity in the interpretation thereof shall be resolved in favor of the indigenous peoples;
(4) Section 65 which states that customary laws and practices shall be used to resolve disputes involving indigenous
peoples; and
(5) Section 66 which vests on the NCIP the jurisdiction over all claims and disputes involving rights of the indigenous
peoples.[5]
Finally, petitioners assail the validity of Rule VII, Part II, Section 1 of the NCIP Administrative Order No. 1, series of 1998,
which provides that the administrative relationship of the NCIP to the Office of the President is characterized as a lateral but
autonomous relationship for purposes of policy and program coordination. They contend that said Rule infringes upon the Presidents
power of control over executive departments under Section 17, Article VII of the Constitution.[6]
Petitioners pray for the following:
(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59, 63, 65 and 66 and other related provisions of R.A. 8371 are
unconstitutional and invalid;
(2) The issuance of a writ of prohibition directing the Chairperson and Commissioners of the NCIP to cease and desist from
implementing the assailed provisions of R.A. 8371 and its Implementing Rules;
(3) The issuance of a writ of prohibition directing the Secretary of the Department of Environment and Natural Resources
to cease and desist from implementing Department of Environment and Natural Resources Circular No. 2, series of
1998;
 (4) The issuance of a writ of prohibition directing the Secretary of Budget and Management to cease and desist from
disbursing public funds for the implementation of the assailed provisions of R.A. 8371; and
(5) The issuance of a writ of mandamus commanding the Secretary of Environment and Natural Resources to comply with
his duty of carrying out the States constitutional mandate to control and supervise the exploration, development,
utilization and conservation of Philippine natural resources.[7]
After due deliberation on the petition, the members of the Court voted as follows:
Seven (7) voted to dismiss the petition. Justice Kapunan filed an opinion, which the Chief Justice and Justices Bellosillo,
Quisumbing, and Santiago join, sustaining the validity of the challenged provisions of R.A. 8371. Justice Puno also filed a separate
opinion sustaining all challenged provisions of the law with the exception of Section 1, Part II, Rule III of NCIP Administrative Order
No. 1, series of 1998, the Rules and Regulations Implementing the IPRA, and Section 57 of the IPRA which he contends should be
interpreted as dealing with the large-scale exploitation of natural resources and should be read in conjunction with Section 2, Article
XII of the 1987 Constitution. On the other hand, Justice Mendoza voted to dismiss the petition solely on the ground that it does not
raise a justiciable controversy and petitioners do not have standing to question the constitutionality of R.A. 8371.
Seven (7) other members of the Court voted to grant the petition. Justice Panganiban filed a separate opinion expressing the view
that Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of R.A. 8371 are unconstitutional. He reserves judgment on the
constitutionality of Sections 58, 59, 65, and 66 of the law, which he believes must await the filing of specific cases by those whose
rights may have been violated by the IPRA. Justice Vitug also filed a separate opinion expressing the view that Sections 3(a), 7, and
57 of R.A. 8371 are unconstitutional. Justices Melo, Pardo, Buena, Gonzaga-Reyes, and De Leon join in the separate opinions of
Justices Panganiban and Vitug.
As the votes were equally divided (7 to 7) and the necessary majority was not obtained, the case was redeliberated
upon. However, after redeliberation, the voting remained the same.Accordingly, pursuant to Rule 56, Section 7 of the Rules of Civil
Procedure, the petition is DISMISSED.
Attached hereto and made integral parts thereof are the separate opinions of Justices Puno, Vitug, Kapunan, Mendoza, and
Panganiban.
SO ORDERED.

G.R. No. L-48321             August 31, 1946

OH CHO, applicant-appellee, 
vs.
THE DIRECTOR OF LANDS, oppositor-appellant.

Office of the Solicitor General Roman Ozaeta and Assistant Solicitor General Rafael Amparo for appellant.
Vicente Constantino for appellee.
Ferrier, Gomez and Sotelo and J. T. Chuidian as amici curiae.

PADILLA, J.:

This is an appeal from a judgment decreeing the registration of a residential lot located in the municipality of Guinayangan, Province
of Tayabas in the name of the applicant.

The opposition of the Director of Lands is based on the applicant's lack of title to the lot, and on his disqualification, as alien, from
acquiring lands of the public domain.

The applicant, who is an alien, and his predecessors in interest have been in open, continuous, exclusive and notorious possession of
the lot from 1880 to filing of the application for registration on January 17, 1940.

The Solicitor General reiterates the second objection of the opponent and adds that the lower court, committed an error in not
declaring null and void the sale of the lot to the applicant.

The applicant invokes the Land Registration Act (Act No. 496), or should it not be applicable to the case, then he would apply for the
benefits of the Public Land Act (C.A. No. 141).

The applicant failed to show that he has title to the lot that may be confirmed under the Land Registration Act. He failed to show that
he or any of his predecessors in interest had acquired the lot from the Government, either by purchase or by grant, under the laws,
orders and decrease promulgated by the Spanish Government in the Philippines, or by possessory information under the Mortgaged
Law (section 19, Act 496). All lands that were not acquired from the Government, either by purchase or by grant below to the public
domain. An exception to the rule would be any land that should have been in the possession of an occupant and of his predecessors in
interest since time immemorial, for such possession would justify the presumption that the land had never been part of the public
domain or that it had been a private property even before the Spanish conquest. (Cariño vs. Insular Government, 212 U.S., 449; 53
Law. Ed., 594.) The applicant does not come under the exception, for the earliest possession of the lot by his first predecessors in
interest begun in 1880.

As the applicant failed to show title to the lot, the next question is whether he is entitled to decree or registration of the lot, because he
is alien disqualified from acquiring lands of the public domain (sections 48, 49, C.A. No. 141).
As the applicant failed to show the title to the lot, and has invoked the provisions of the Public Land Act, it seems unnecessary to
make pronouncement in this case on the nature or classifications of the sought to be registered.

It may be argued that under the provisions of the Public Land Act the applicant immediate predecessor in interest would have been
entitled to a decree of registration of the lot had they applied for its registration; and that he having purchased or acquired it, the right
of his immediate predecessor in interest to a decree of registration must be deemed also to have been acquired by him. The benefits
provided in the Public Land Act for applicant's immediate predecessors in interest should comply with the condition precedent for the
grant of such benefits. The condition precedent is to apply for the registration of the land of which they had been in possession at least
since July 26, 1894. This the applicant's immediate predecessors in interest failed to do. They did not have any vested right in the lot
amounting to the title which was transmissible to the applicant. The only right, if it may thus be called, is their possession of the lot
which, tacked to that of their predecessors in interest, may be availed of by a qualified person to apply for its registration but not by a
person as the applicant who is disqualified.

It is urged that the sale of the lot to the applicant should have been declared null and void. In a suit between vendor and vendee for the
annulment of the sale, such pronouncement would be necessary, if the court were of the opinion that it is void. It is not necessary in
this case where the vendors do not even object to the application filed by the vendee.

Accordingly, judgment is reversed and the application for registration dismissed, without costs.

Moran, C.J., Feria, Pablo, Hilado and Bengzon, JJ., concur.

Separate Opinions

PERFECTO, J., concurring:

Oh Cho, a citizen of the Republic of China, purchased in 1938 from Antonio, Luis and Rafael Lagdameo a parcel of land located in
the residential district of Guinayangan, Tayabas, which has been in the continuous, public, and adverse possession of their
predecessors in interest as far back as 1880. on June 17, 1940, Oh Cho applied for the registration of said parcel of land. The Director
of Lands opposed the application because, among other grounds, the Constitution prohibits aliens from acquiring public or private
agricultural lands.

One of the witnesses for the applicant, on cross-examination, expressly admitted that the land in question is susceptible of cultivation
and may be converted into an orchard or garden. Rodolfo Tiquia, inspector of the Bureau of Lands, testifying as a witness for the
government, stated that the land, notwithstanding the use to which it is actually devoted, is agricultural land in accordance with an
opinion rendered in 1939 by the Secretary of Justice. The pertinent part of said opinion, penned by Secretary Jose Abad Santos, later
Chief Justice of the Supreme Court, is as follows:

1. Whether or not the "public agricultural land" in section 1, Article XII, of the Constitution may be interpreted to include
residential, commercial or industrial lots for purposes of their disposition.

1. Section 1, Article XII of the Constitution classifies lands of the public domain in the Philippines into agricultural, timber
and mineral. This is the basic classification adopted since the enactment of the Act of Congress of July 1, 1902, known as the
Philippine Bill. At the time of the adoption of the Constitution of the Philippines, the term "agricultural public lands" had,
therefor, acquired a technical meaning in our public laws. The Supreme Court of the Philippines in the leading case of Mapa
vs. Insular Government, 10 Phil., 175, held that the phrase "agricultural public lands" means those public lands acquired from
Spain which are neither timber nor mineral lands. This definition has been followed by our Supreme Court in many
subsequent cases. (Montano vs. Ins. Gov't 12 Phil., 572, 574; Santiago vs. Ins. Gov't., 12, Phil., 593; Ibañes de
Aldecoa vs. Ins. Gov't., 13 Phil., 159; Ins. Gov't., vs. Aldecoa & Co., 19 Phil., 505, 516 Mercado vs. Collector of Internal
Revenue, 32 Phil., 271, 276; Molina 175, 181; Jocson vs. Director of Forestry, 39 Phil., 560, 564; and Ankron vs.
Government of the Philippines, 40 Phil., 10, 14.)

Residential, commercial or industrial lots forming part of the public domain must have to be included in one or more of these
classes. Clearly, they are neither timber nor mineral, of necessity, therefore, they must be classified as agricultural.

Viewed from the another angle, it has been held that in determining whether lands are agricultural or not, the character of the
lands is the test (Odell vs. Durant 62 N. W., 524; Lerch vs. Missoula Brick & Tile Co., 123 p., 25). In other words, it is the
susceptibility of the land to cultivation for agricultural or not (State vs. Stewart, 190, p.,129).

Judge Pedro Magsalin, of the Court First Instance of Tayabas, rendered a decision on August 15, 1940, overruling the opposition
without must explanation and decreeing the registration prayed for the applicant. The Director of Lands appealed from the decision,
and the Solicitor General appearing for appellant, maintains that the applicant, not being a citizen of the Philippines, is disqualified to
buy or acquire the parcel of land in question and that the purchase made in question and that the purchase made in 1938 is null and
void.

This is the question squarely reversing to us for decision. The majority, although reversing the lower court's decision and dismissing
the application with we agree, abstained from the declaring null and void the purchase made by Oh Cho in 1938 as prayed for the
appellant. We deem it necessary to state our opinion on the important question raised, it must be squarely decided.
The Solicitor General argued in his brief as follows:

I. The lower court erred decreeing the registration of the lot in question in favor of the applicant who, according to his own
voluntary admission, is a citizen of the Chinese Republic.

(a) The phrase "agricultural land" as used in the Act of the Congress of July 1, 1902, in the Public Land Act includes
residential lots.

In this jurisdiction lands of public domain suitable for residential purposes are considered agricultural lands under the Public
Land Law. The phrase "agricultural public lands" has well settled judicial definition. It was used for the first time in the Act
of Congress of July 1, 1902, known as the Philippine Bill. Its means those public lands acquired form Spain which are neither
mineral nor timber lands (Mapa vs. Insular Government, 12 Phil., 572; Ibañes de Aldecoa vs. Insular Government 13 Phil.,
159; Ramos vs. Director of Lands, 39 Phil., 175; Jocson vs. Director of Forestry, 39 Phil., 560; Ankron vs. Government of the
Philippine Islands, 40 Phil., 10). In the case of Mapa vs. Insular Government, supra, the Supreme Court, in defining the
meaning and scope of that phrase from the context of the sections 13 and 15 of that Act, said:

The phrase "agricultural public lands" as defined by the Act of Congress of July 1, 1902, which phrase is also to be found in
several sections of the Public Land Act (No. 926) means those public lands acquired from Spain which are neither mineral
timber lands.

xxx     xxx     xxx

"We hold that there is to be found in the act of Congress a definition of the phrase "agricultural public lands," and
after careful consideration of the question we are satisfied that only definition which exists in said Act is the
definition adopted by the court below. Section 13 say that the Government shall "make and rules and regulations for
the lease, sale, or other dispositions of public lands other than timber or mineral lands," To our minds that is only
definition that can be said to be given agricultural lands. In other words, that the phrase "agricultural lands" as used
in Act No. 926 means those public lands acquired from Spain which are not timber or mineral lands. . . ."
Mapa vs. Insular Government, 10 Phil., 175, 178, 182, emphasis added.)

"This phrase "agricultural public lands" was subsequently used in Act No. 926, which is the first public land law of the
Philippines. As therein used, the phrase was expressly given by the Philippine Commission the same meaning intended for it
by Congress as interpreted in the case of Mapa vs. Insular Government, supra. This is a self-evident from a reading of section
1, 10, 32, and 64 (subsection 6 of Act No. 926). Whenever the phrase "agricultural public lands" is used in any of said
sections, it is invariably by the qualification "as defined by said Act of Congress of July first, nineteen hundred and two."

"More specially, in the case of Ibañez de Aldecoa vs. Insular Government, supra, the Supreme Court held that a residential or
building lot, forming part of the public domain, is agricultural land, irrespective of the fact that it is not actually used for
purposes of agriculture for the simple reason that it is susceptible of cultivation and may be converted into a rural estate, and
because when a land is not mineral or forestal in its nature it must necessarily be included within the classification of a
agricultural land. Because of the special applicability of the doctrine laid down in said case, we quote at some length from the
decision therein rendered:

"The question set up in these proceedings by virtue of the appeal interposed by counsel for Juan Ibañez de Aldecoa, is
whether or not a parcel of land that is susceptible of being cultivated, and ceasing to be agricultural land, was converted into a
building lot, is subject to the legal provisions in force regarding Government public lands which may be alienated in favor of
private individuals or corporations. . . .

xxx     xxx     xxx

"Hence, any parcel of land or building lot is susceptible of cultivation, and may converted into a field, and planted
with all kinds of vegetation ; for this reason, where land is not mining or forestal in its nature, it must necessarily be
included within the classification of agriculture land, not because it is actually used for the purposes of agriculture,
but because it was originally agricultural and may again become so under other circumstances; besides the Act of
Congress (of July 1, 1902) contains only three classifications, and makes no special provision with respect to
building lots or urban land that have ceased to be agricultural land. . . .

xxx     xxx     xxx

"From the language of the foregoing provisions of the law, it is deduced that, with the exception of those comprised
within the mineral and timber zone, all lands owned by State or by the sovereign nation are public in character,
and per se alienable and, provided they are not destine to the use of public in general or reserved by the Government
in accordance with law, they may be acquired by any private or juridical person; and considering their origin and
primitive state and the general uses to which they are accorded, they are called agricultural lands, urbans lands
and building lots being included in this classification for the purpose of distinguishing rural and urban estates from
mineral and timber lands; the transformation they may have undergone is no obstacle to such classification as the
possessors thereof may again convert them into rural estates." (Ibañez de Aldecoa vs. Insular Government 13 Phil.,
161, 163 164, 165, 166; emphasis added.).
 (b) Under the Constitution and Commonwealth Act No. 141 (Public Land Act), the phrase (Public Land
Act), the phrase "public agricultural land" includes lands of the public domain suitable for residential
purposes.

"Section 1, Article XII of the Constitution, reads as follows:

"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 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 publicagricultural land, shall not be alienated . . ." (Emphasis added.).

"Under the above-quote provision, the disposition exploitation, development or utilization of the natural resources, including
agricultural lands of the public domain is limited to citizens of the Philippines or to the corporations or associations therein
mentioned. It also clearly appears from said provision that natural resources, with the exception of public agricultural land,
are not subject to alienation.

"On November 7, 1936, or more than one year after the adoption of the Constitution, Commonwealth Act No. 141, known as
the Public Land Act, was approved. Under this Act the lands of the public have been classified into three divisions: (a)
alienable or disposable, (b) timber, and (c) mineral lands. The lands designated alienable or disposable correspond to lands
designated in the Constitution as public agricultural lands, because under section 1, Article XII, public agricultural lands are
the only natural resources of the country which are the only natural resources of the country which are subject to alienation or
deposition.

"Section 9 of Commonwealth Act No. 141 provide that the alienable or disposable public lands shall be classified, according
to use or purposes to which they are destined, into a agricultural, residential, commercial, industrial, etc., lands. At first blush
it would seem that under this classification residential land is different from agricultural land. The difference however, is
more apparent than real. 'Public agricultural land ' as that phrase is used in the Constitution means alienable lands of the
public domain and therefore this phrase is equivalent to the lands classified by the Commonwealth Act No. 141 as alienable
or disposable. The classification provided in section 9 is only for purposes administration and disposition, according to the
purposes to which said lands are especially adopted. But notwithstanding this of all said lands are essentially agricultural
public lands because only agricultural public lands are subject to alienation or disposition under section 1, Article XII of the
Constitution. A contrary view would necessarily create a conflict between Commonwealth Act No. 141 and section 1 of
Article XII of the Constitution, and such conflict should be avoided , if possible, and said Act construed in the light of the
fundamental provisions of the Constitution and in entire harmony therewith.

"Another universal principles applied in considering constitutional question is, that an Act will be so construed, if
possible, as to avoid conflict with the Constitution, although such a construction may not be the most obvious or
natural one. "The Court may resort to an implication to sustain a statute, but not to destroy it." But the courts cannot
go beyond the province of legitimate construction, in order to save a statute; and where the meaning is plain, words
cannot to be read into it or out of it for that purpose." ( 1 Sutherland, Statutory Construction, pp. 135, 136.)

"In view of the fact that more than one than one year after the adoption of the Constitution the National Assembly revised the
Public Land Law and passed Commonwealth Act No. 141, which a compilation of the laws relative to the lands of the public
domain and the amendments thereto, form to the Constitution.

"Where the legislature has revised a statute after a Constitution has been adopted, such a revision is to be regarded
as a legislative construction that the statute so revised conforms to the Constitution." (59 C.J., 1102; emphasis
added.)

"By the way of illustration, let us supposed that a piece or tract of public land has been classified pursuant to section 9 of
Commonwealth Act No. 141 as residential land. If, by reason of this classification, it is maintained that said land has ceased
to be agricultural public land, it will no longer be subject to alienation or disposition by reason of the constitutional provision
that only agricultural lands are alienable; and yet such residential lot is alienable under section 58, 59, and 60 of
Commonwealth Act No. 141 to citizens of the Philippines or to corporations or associations mentioned in section 1, Article
XII of the Constitution. Therefore, the classification of public agricultural lands into various subdivisions is only for purposes
of administration, alienation or disposition, but it does not destroy the inherent nature of all such lands as a public agricultural
lands.

"(c) Judicial interpretation of doubtful clause or phrase use in the law, controlling.

"The judicial interpretation given to the phrase "public agricultural land" is a sufficient authority for giving the same
interpretation to the phrase as used in subsequent legislation, and this is especially so in view of the length of time during
which this interpretation has been maintained by the courts. On this point Sutherland has the following to say:

"When a judicial interpretation has once been put upon a clause, expressed in a vague manner by the legislature, and
difficult to be understood, that ought of itself to be sufficient authority for adopting the same construction. Buller J.,
said: "We find solemn determination of these doubtful expressions in the statute, and as that now put another
construction has since prevailed, there is no reason why we should now put another construction of the act on
account of any suppose change of convenience." This rule of construction will hold good even if the court be
opinion that the practical erroneous; so that if the matter were res integra the court would adopt a different
 construction. Lord Cairns said: "I think that with regard to statutes ... it is desirable not so much that the principle of
the decision should be capable at all times of justification, as that the law should be settled, and should, when once
settled, be maintained without any danger of vacillation or uncertainty. "Judicial usage and practice will have
weight, and when continued for a long time will be sustained though carried beyond the pair purport of the
statute."(II Lewis' Sutherland Statutory Construction, pp. 892, 893.) .

"An important consideration affecting the weight of contemporary judicial construction is the length of time it has
continued. It is adopted, and derives great force from being adopted, soon after the enactment of the law. It may be,
and is presumed, that the legislative sense of its policy, and of its true scope and meaning, permeates the judiciary
and controls its exposition. Having received at that time a construction which is for the time settled, accepted, and
thereafter followed or acted upon, it has the sanction of the of the authority appointed to expound the law, just and
correct conclusions, when reached, they are, moreover, within the strongest reasons on which founded the maxim
of stare decisis. Such a construction is public given, and the subsequent silence of the legislature is strong evidence
of acquiescence, though not conclusive. . . . (II Lewis Sutherland Statutory Construction, pp. 894, 895.)

"Furthermore, when the phrase "public agricultural land" was used in section 1 of Article XII of the Constitution, it is
presumed that it was so used with the same judicial meaning therefor given to it and therefor the meaning of the phrase, as
used in the Constitution, includes residential lands and another lands of the public domain, but excludes mineral and timber
lands.

"Adoption of provisions previously construed — ad. Previous construction by Courts. — Where a statute that has
been construed by the courts of the last resort has been reenacted in same, or substantially the same, terms, the
legislature is presumed to have been familiar with its construction, and to have adopted it is part of the law, unless a
contrary intent clearly appears, or a different construction is expressly provided for; and the same rule applies in the
construction of a statute enacted after a similar or cognate statute has been judicially construed. So where words or
phrases employed in a new statute have been construed by the court to have been used in a particular sense in a
previous statute on the same subject, or one analogous to it, they are presumed, in the a absence of clearly expressed
intent to the contrary, to be used in the same sense in the statute as in the previous statute." (59 C.J., 1061-1063.).

"Legislative adoption of judicial construction. — In the adoption of the code, the legislature is presumed to have
known the judicial construction which have been placed on the former statutes; and therefore the reenactment in the
code or general revision of provisions substantially the same as those contained in the former statutes is a legislative
adoption of their known judicial constructions, unless a contrary intent is clearly manifest. So the fact that the
revisers eliminated statutory language after it had been judicially construed shows that they had such construction in
view." (59 C. J., 1102.)

"II. The lower court erred in not declaring null and void the sale of said land to the appellant (appellee).

"Granting that the land in question has ceased to be a part of the lands of the public domain by reason of the long continuous,,
public adverse possession of the applicant's predecessors in interest, and that the latter had performed all the conditions
essential to a Government grant and were entitled to a certificate of title under section 48, subsection (b), of Commonwealth
Act No. 141, still the sale of said land of December 8, 1938, to the applicant as evidenced by Exhibits B and C, was null and
void for being contrary to section 5, Article XII of the Constitution, which reads as follows:

"Save in cases of hereditary succession, no private agricultural land shall be transferred or assignedexcept to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain of the Philippines."

"The applicant, being a Chinese citizen, is disqualified to acquire or hold lands of the public domain (section 1, Article XII of
the Constitution; section 12, 22, 23, 33, 44, 48, Commonwealth Act No. 141 ), and consequently also disqualified to buy and
acquire private agriculture land.

"In view of the well settled judicial meaning of the phrase public agricultural land,' as hereinbefore demonstrated, the phrase
'private agricultural land,' as used in the above quoted provision, can only mean land of private ownership, whether
agricultural, residential, commercial or industrial. And this necessarily so, because the phrase 'agricultural land used in the
Constitution and in the Public Land Law must be given the same uniform meaning to wit, any land of the public domain or
any land of private ownership, which is neither mineral or forestal.

"A word or phrase repeated in a statute will bear the same meaning throughout the statute, unless a different
intention appears. ... Where words have being long used in a technical sense and have been judicially construed to
have a certain meaning, and have been adopted by the legislature as having a certain meaning prior to a particular
statute in which they are used, the rule of construction requires that the words used in such statute should be
construed according to the sense may vary from the strict literal meaning of the words." (II Sutherland, Statutory
Construction., p. 758.) .

"This interpretation is in harmony with the nationalistic policy, spirit and purpose of our Constitution and laws, to wit, `to
conserve and develop the patrimony of the nation,' as solemnly enunciated in the preamble to the Constitution.

"A narrow and literal interpretation of the phrase 'private agriculture land' would impair and defeat the nationalistic aim and
general policy of our laws and would allow a gradual, steady, and unlimited accumulation in alien hands of a substantial
portion of our patrimonial estates, to the detriment of our national solidarity, stability, and independence. Nothing could
prevent the acquisition of a great portion or the whole of a city by subjects of a foreign power. And yet a city or urban area is
more strategical than a farm or rural land.
 "The mere literal construction of section in a statute ought not to prevail if it is opposed to the intention of the
legislature apparent by the statute; and if the words are sufficiently flexible to admit of some other construction it is
to be adopted to effectuate that intention. The intent prevails over the letter, and the letter will, if possible be so read
as to conform to the spirit of the act. While the intention of the legislature must be ascertained from the words used
to express it, the manifest reason and the obvious purpose of the law should not be sacrificed to a liberal
interpretation of such words." (II Sutherland, Stat. Construction, pp. 721, 722.)

"We conclude, therefore, that the residential lot which the applicant seeks to register in his name falls within the meaning of
private agricultural land as this phrase is used in our Constitution and, consequently, is not subject to acquisition by
foreigners except by hereditary succession."

The argument hold water. It expresses a correct interpretation of the Constitution and the real intent of the Constitutional Convention.

One of our fellow members therein, Delegate Montilla, said:

The constitutional precepts that I believe will ultimately lead us to our desired goal are; (1) the complete nationalization of
our lands and natural resources; (2) the nationalization of our commerce and industry compatible with good international
practices. With the complete nationalization of our lands and natural resources it is to be understood that our God-given
birthright should be one hundred per cent in Filipino hands. ... Lands and natural resources are immovable and as such can be
compared to the vital organs of a person's body, the lack of possession of which may cause instant death or the shortening of
life. If we do not completely nationalize these two of our most important belongings, I am afraid that the time will come
when we shall be sorry for the time we were born. Our independence will be just a mockery, for what kind of independence
are we going to have if a part of our country is not in our hands but in those of foreigner? (2 Aruego, The Framing of the
Philippine Constitution, p. 592.).

From the same book of Delegate Aruego, we quote:

The nationalization of the natural resources of the country was intended (1) to insure their conservation for Filipino posterity;
(2) to serve as an instrument of national defense, helping prevent the extension into the country of foreign control through
peaceful economic penetration; and (3) to prevent making the Philippines a source of international conflict with the
consequent danger to its internal security and independence.

xxx     xxx     xxx

. . . In the preface to its report, the committee on nationalization and preservation of lands and other natural resources said;

"International complications have often resulted from the existence of alien ownership of land and natural resources in a
weak country. Because of this danger, it is best that aliens should be restricted in the acquisition of land and other natural
resources. An example is afforded by the case of Texas. This state was originally province of Mexico. In order to secure its
rapid settlements and development, the Mexican government offered free land to settlers in Texas. Americans responded
more rapidly than the Mexicans, and soon they organized a revolt against Mexican rule, and then secured annexation to the
United States. A new increase of alien landholding in Mexico has brought about the desire a prevent a repetition of the Texas
affair. Accordingly the Mexican constitution of 1917 contains serious limitation on the right of aliens to hold lands and mines
in Mexico. The Filipinos should profit from this example."

xxx     xxx     xxx

It was primarily for these reasons that the Convention approved readily the proposed principle of prohibiting aliens to
acquire, exploit, develop, or utilize 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. For the same
reasons the Convention approved equally readily the proposed principle of prohibiting the transfer of assignment to aliens of
private agricultural land, save in the case of hereditary succession. (2 Aruego, Framing of the Philippine Constitution, pp.
604, 605, 606.).

All the foregoing show why we, having been a member of the Constitutional Convention, agree with Solicitor General's position and
concur in the result in this case, although we would go as far as the outright pronouncement that the purchase made by appelle is null
and void.

BRIONES, M., con quien estan conformes PARAS y TUASON, MM., disidente:

El solicitante en este expediente pide el registro del solar de que se trata como terreno de propiedad privada, y tan solo con caracter
supletorio invoca las disposiciones del capitulo 8.º de la Ley No. 2874 sobre terrenos publicos (Pieza de Excepciones, pag. 3.)

Por su parte el Director de Terrenos se opone a la solicitud en virtud de tres fundamentos, a saber: (1) porque ni el solicitante ni sus
predecesores en interes pueden demonstrar titulo suficiente sobre dicha parcela de terreno, no habiendose adquirido la misma ni por
titulo de composicion con el Estado bajo la soberania de España, ni por titulo de informacion posesoria bajo el Real Decreto de 13 de
Febrero de 1894; (2) porque el citado solar es una porcion de los terrenos de dominio publico pertenecientes al Commonwealth de
Filipinas; (3) porque siendo el solicitante un ciudadano chino, no esta capacitado bajo las disposiciones de la Constitucion de Filipinas
para adquirir terrenos de caracter publico o privado (idem, pags. 5 y 6).
Tanto el solicitante como el Director de Terrenos practicaron sus pruebas ante un arbitro nombrado por el Juzgado de Primera
Instancia de Tayabas. Con vista de tales pruebas, el Juez Magsalin, del referido Juzgado, dicto sentencia a favor del solicitante, de la
cual transcribimos las siguientes porciones pertinentes:

La representacion del opositor Director de Terrenos trata de probar por medio del testimonio del Inspector del Buro de
Terrenos que, el terreno objeto de la solicitud es parte del dominio publico y ademas el solicitante es ciudadano chino, pero
dicho testigo afirmo que el terreno objeto de la presente solicitud es un solar situado dentro de la poblacion del municipio de
Guinayanga, Tayabas, y en el mismo existe una casa de materiales fuertes y careciendo de merito esta oposicion debe
desestimarse la misma.

Por tanto, previa desestimacion de la oposicion del Director de Terrenos, se adjudica con sus mejoras la parcela de terreno
objeto de la presente solicitud descrito en el plano Psu-109117, a favor del solicitante Oh Cho, ciudadano chino, mayor de
edad, casado con Yee Shi, y residente en el municipio de Guinayanga, Tayabas, Islas Filipinas. (Decision, pag. 8, Record on
Appeal.)

De lo transcrito se infiere de una manera forzosa lo siguiente: (a) que el tribunal inferior desestimo de plano la oposicion del Director
de Terrenos fundada en el supuesto de que el solar cuestionado es parte del dominio publico; (b) que el mismo tribunal rechazo el otro
fundamento de la oposicion, esto es, que siendo el solicitante ciudadano chino esta incapacitado bajo nuestra Constitucion para
adquirir terreno, ya publico, ya privado, aunque sea un solar de caracter urbano; (c) que, segun el fallo del Juez a quo, no siendo
publico el terreno cuestionado, es necesariamente terreno privado.

El Director de Terrenos, no estando conforme con la sentencia, apelo de ella para ante el Tribunal de Apelacion y hace en su alegato
dos señalamientos de error, ninguno de los cuales pone en tela de juicio la calidad de privado del terreno cuestionado. El apelante no
plantea ninguna cuestion de hecho; plantea solo una cuestion de derecho. Por eso que en la reconstitucion de este expediente — el
original se quemo durante la guerra — no ha habido necesidad de incluir las notas taquigraficas ni las pruebas documentales, y de
hecho hemos considerado y decidido este asunto sin dichas notas y pruebas. El abogado Constantino, del apelado, en la audiencia para
la reconstitucion de los autos, hizo esta manifestacion; "In view also of the fact that the questions involved here are only questions of
law, this representation waives the right to present the evidence presented in the trial court . . . ." Por su parte, el Procurador General,
al explanar el caso en representacion del apelante Director de Terrenos, principia su alegato con la siguiente declaracion:

This appeal is a test case. There are now several cases of exactly the same nature pending in the trial courts.

Whether or not an alien can acquire a residential lot and register it in his name is the only question raised in this appeal from
a decision of the Court of First Instance of Tayabas which sustained the affirmance and decreed the registration of the said
property in favor of the applicant who, by his own voluntary admission, is a citizen of the Chinese Republic. This question is
raised in connection with the constitutional provision that no private agricultural land shall be transferred or assigned to
foreigners except in cases of hereditary succession. (Pags. 1, 2, alegato del apelante.)

Habiendose apelado de la sentencia para ante el Tribunal de Apelacion ¿por que se elevo este asunto al Tribunal Supremo, ante el cual
ya estaba pendiente aun antes de la guerra, y sin resolverse durante la ocupacion japonesa? La razon no consta especificamente en
autos, pero como no se trata de una alzada del Tribunal de Apelacaion a la Corte Suprema, la unica explicacion que cabe es que aquel,
la percatarse de que en la apelacion no se planteaba mas que una cuestion de derecho, ordeno, como era de rigor, el traslado del asunto
a esta Corte por ser de su jurisdiccion y competencia.

Hemos estimado necesario sentar las anteriores premisas porque las mismas sirven de base a la argumentacion que a seguida vamos a
desenvolver para fundamentar esta disidencia.

I. De lo expuesto resulta evidente que el Director de Terrenos se ha opuesto al registro solicitado, entre otros fundamentos, porque el
terreno es publico; que el tribunal inferior ha desestimado este fundamento por "carecer de merito," fallando que el terreno es privado;
que el Director de Terrenos, en su apelacion ante nosotros, no cuestiona esta conclusion del Juez a quo, sino que dando por admitido
que el terreno es de propiedad privada, arguye, sin embargo, que bajo la seccion 5, Articulo XII de la Constitucion de Filipinas el
solicitante, por ser extranjero, no puede adquirir terreno agricula privado, estando incluido en este concepto un solar urbano como el
de que se trata en este expediente. Planteado el asunto en tales terminos ¿puede esta Corte considerar y resolver un punto no
contendido entre las partes — un punto que esta firme y definitivamente resuelto y no es objeto de apelacion? Dicho de otra manera:
¿puede esta Corte, como hace la mayoria en su opinion, revocar una conclusion del tribunal-inferior que no esta discutida en el alegato
del apelante? ¿Podemos, en buena ley procesal, declarar publico el terreno en cuestion por nuestra propia iniciativa, cuando el mismo
Procurador General, que representa al Estado, admite en su alegato el caracter privado del solar, y solo suscita una cuestion, de
derecho, a saber: que bajo nuestra Constitucion ningun acto traslativo de dominio a favor de un extranjero es valido, asi se trata de
predio urbano, porque la frase "terreno agricola privado" qe se contiene en la Constitucion abarca no solo las fincas rusticas sino
tambien las urbanas? Y, sobre todo, ¿podemos, en equidad y justicia, considerar y revisar un punto que no solo no esta discutido por
las partes, pues lo dan por admitido y establecido, sino que es de derecho y dehecho al propio tiempo? ¿Que base tenemos para
hacerlo cuando no tenemos delante las pruebas tanto testificales como documentales? Nuestra contestacion es, en absoluto, negativo.

La competencia de esta Corte para revisar las sentencias de los tribunales inferiores, de las cuales se ha interpuesto apelacion, se basa
en el principio de que dicha competencia, en su ejercicio, tiene que limitarse a las cuestiones controvertidas, y esto se determina
mediante el señalamiento de errores que el apelante hace en su alegato. El articulo 19 del antiguo reglamento de los procedimientos en
este Tribunal Supremo decia en su primer parrafo lo siguiente:

Anexo al alegato del apelante y en pliego separado, se acompañara una relacion de los errores de derecho que han de
discutirse. La especificacion de cada uno de estos errores se hara por parrafos separados, con toda claridad, de una manera
concisa, y sin incurrir en repeticiones, y seran numerados por orden correlativo.
El articulo 20 del mismo reglamento preceptuaba:

Ningun error de derecho fuera del relativo a competencia sobre la materia de un litigio, sera tomado en consideracion como
no se halle puntualizado en la relacion de los errores y presentado como uno de los fundamentos en el alegato.

Interpretando estas disposiciones reglamentarias, la Corte hizo en el asunto de Santiago contra Felix (24 Jur. Fil., 391), los siguientes
pronunciamientos doctrinales:

1. APELACION; EFECTO DE DEJAR DE PRESENTAR RELACION DE ERRORES; REGLA FIRMEMENTE

ESTABLECIDA. — Es regla establecida por la jurisprudencia de los Tribunales de estas Islas, en virtud de repetidas y
uniformes sentencias de esta Corte, la de que si en una apelacione el recurrente dejare de hacer señalamiento de los errores en
que haya incurrido el Tribunal inferior, y se limitare a discutir cuestiones de hecho en general, no es posible que este Tribunal
pueda considerar ni revisar la resolucion adversa a la parte apelante, por el motivo de haberse dictado contra la ley y el peso
de las pruebas, sino que es necesario que se señale y se especifique el error o errores que determinaron la decision apelada
que el apelante califica de ilegal e injusta.

2. Id.; Id.; Regla Igual a la Adoptada por los Tribunales de los Estados Unidos. — Igual doctrina legal se halla en observancia
en los Tribunales de los Estados Unidos de America del Norte, toda vez que una manifestacion general de que el Juzgado
erro en dictar sentencia a favor de una de las partes, no es suficiente como base para que la Corte pueda revisar la sentencia
apelada, pues que a no ser que la apreciacion hecha por un Juez de los hechos alegados y probados en juicio sea
manifestamente contraria al resultado y peso de las pruebas, el Tribunal de alzada suela aceptar el juicio y criterio del Juez
sobre las cuestiones de hecho, y no procede revocar sin motivo fundado la sentencia apelada. (Enriquez contraEnriquez, 8
Jur. Fil., 574; Capellania de Tambobong contra Antonio, 8 Jur. Fil., 693; Paterno contra la Ciudad de Manila, 17 Jur. Fil.,
26)" (Santiago contra Felix, 24 Jur. Fil., 391.)

Esta doctrina se reitero posteriormente en los siguientes asuntos: Tan Me Nio contra Administrador de Aduanas, 34 Jur. Fil., 995, 996;
Hernaez contra Montelibano, 34 Jur. Fil., 1011.

La regla 53, seccion 6, del actual reglamento de los tribunales, dispone lo siguiente:

SEC. 5. Questions that may be decided. — No error which does not affect the jurisdiction over the subject matter will be
considered unless stated in the assignment of errors and properly argued in the brief, save as the court, at its option, may
notice plain errors not specified, and also clerical errors.

No se dira que la cuestion de si el terreno cuestionado es publico o privado, considerada y resuelta por la mayoria en su decision sin
previo señalamiento de error ni apropiada argumentacion en el alegato del Procurador General, esta comprendida entre las
salvedades de que habla la regla arriba transcrita porque ni afecta a la jurisdiccion sobre la materia del litigio, ni es un "plain error," o
"clerical error."

Se notara que en el antiguo reglamento no habia eso de "plain errors not specified" (errores patentes o manifiestos no especificados en
el alegato). Pero ¿cabe invocar esta reserva en el caso que nos ocupa Indudablemente que no, por las siguientes razones: (a) los autos
no demuestran que el Juez a quo cometio un error patente y manifiesto al declarar en su sentencia que el terreno no es publico sino
privado; no tenemos mas remedio que aceptar en su faz la conclusion del Juez sentenciador sobre este respecto por la sencilla razon de
que no tenemos ante nosotros las pruebas ni testificales ni documentales, y, por tanto, no hay base para revisar, mucho menos para
revocar dicha conclusion, habiendose interpretado esta reserva en el sentido de que solo se puede tomar "conocimiento judicial del
error palpable con vista de los autos y procedimientos"; (b) aun admitiendo por un momento, a los efectos de la argumentacion, que
Su Señoria el Juez padecio error palpable al sentar dicha conclusion, como quiera que el Procurador General no suscita la cuestion en
su alegato debe entenderse que ha renunciado a su derecho de hacerlo, optando por fundamentar su caso en otros motivos y razones;
por tanto, no estamos facultados para considerar motu proprio el supuesto error, pues evidentemente no se trata de un descuido
u oversight del representante del Estado, sino de una renuncia deliberada, y la jurisprudencia sobre el particular nos dice que "el
proposito subyacente, fundamental de la reserva en la regla es el de prevenir el extravio de la justicia en virtud de un descuido." He
aqui algunas autoridades pertinentes:

Purpose of exception as to plain errors. — The proviso in the rule requiring assignments of error, permitting the court, at its
option, to notice a plain error not assigned, "was and in intended, in the interest of justice, to reserve to the appellate court the
right, resting in public duty, to take cognizance of palpable error on the face of the record and proceedings, especially such
as clearly demonstrate that the suitor has no cause of action." Santaella vs. Otto F. Lange Co. (155 Fed., 719, 724; 84 C. C.
A., 145).

The rules does not intend that we are to sift the record and deal with questions which are of small importance, but only to
notice errors which are obvious upon inspection and of a controlling character. The underlying purpose of this reservation in
the rule is to prevent the miscarriage of justice from oversight. Mast vs. Superior Drill Co. (154 Fed., 45, 51; 83 C. C. A.
157).

II. Hasta aqui hemos desarrollado nuestra argumentacion bajo el supuesto de que la calidad de privado del terreno litigioso no
es controversia justiciable en esta instancia por no estar suscitada la cuestion en el alegato del Procurador General ni ser materia de
disputa entre las partes en la apelacion pendiente ante nosotros; por lo que, consiguientemente, no estamos facultados para revisar,
mucho menos revocar motu proprio la conclusion del tribunal a quo sobre el particular. Ahora vamos a laborar bajo otro supuesto —
el de que el Procurador General haya hecho el correspondiente señalamiento de error y la cuestion este, por tanto, propiamente
planteada ante esta Corte Suprema para los efectos de la revision. La pregunta naturalmente en orden es la siguiente: ¿cometio error el
Juez a quo al declarar y conceptuar como privado el terreno en cuestion, o es, por el contrario, acertada su conclusion a este respecto?
Somos de opinion que el Juez no cometio error, que el terreno de que se trata reune las condiciones juridicas necesarias para
calificarlo como privado y diferenciarlo de una propiedad de dominio publico, y que, por tanto, el solicitante tiene sobre la propiedad
un titulo confirmable bajo las disposiciones de la Ley de Registro de Terrenos No. 496.

Afirmase en la decision de la mayoria que el solicitante no ha podido demostrar que el o cualquiera de sus causantes en derecho
adquirio el lote del Estado mediante compra o concesion bajo las leyes, ordenanzas y decretos promulgados por el Gobierno Español
en Filipinas, o en virtud de los tramites relativos a informacion posesoria bajo la ley hipotecaria en tiempo de España. De esto la
mayoria saca la conclusion de que el terreno cuestionado no es privado porque, segun su criterio, "todos los terrenos que no fueron
adquiridos del Gobierno (Gobierno Español, se quiere decir), ya mediante compra, ya por concesion, pertenecen al dominio publico";
y citando como autoridad el asunto clasico de Cariño contra el Gobierno Insular la ponencia no admite mas excepcion a la regla que el
caso en que un terreno ha estado en la posesion del ocupante y de sus predecesores en interes desde tiempo inmemorial, pues
semejante posesion justificaria la presuncion de que el terreno nunca habia sido parte del dominio publico, o que habia sido propiedad
privada aun antes de la conquista española."

Lo que, en primer lugar, no parece correcto es la seguridad con que en la ponencia se afirma que el terreno no se adquirio bajo la
soberania española en virtud de cualquiera de los modos conocidos en la legislacion de entonces, pues como no tenemos delante las
pruebas, no hay naturalmente manera de comprobar la certeza de la proposicion. Si se tiene en cuenta que el Director deTerrenos se
opuso a la solicitud de registro por el fundamento de que el terreno es de dominio publico, y que el tribunal inferior desestimo este
fundamento, la presuncion es que la calidad de privado del terreno se probo satisfactoriamente, presuncion que queda robustecida si se
considera que el Procurador General, al sostener la apelacion del Gobierno, no discute ni cuestiona en su alegato la conclusion de que
el referido terreno es de propiedad particular.

Por otro lado, la mayoria parece dar un caracter demasiado absoluto y rigido a la proposicion de que "todos los terrenos que no fueron
adquiridos del Gobierno (en tiempo de España), mediante compra o por concesion, pertenecen al dominio publico." Interpretando
estrictamente la ley, esta Corte Suprema denego el registro solicitado en el celebre asunto de Cariño contra el Gobierno Insular que
cita la mayoria en su opinion, por eso mismo que se acentua en la ponencia — por el fundamento de que Cariño no pudo demostrar
titulo de compra, concesion o informacion posesoria expedido por el Gobierno en tiempo de España, siendo por consiguiente el
terreno parte del dominio publico. Pero al elevarse el asunto en grado de apelacion a la Corte Suprema de los Estados Unidos, la
misma revoco la sentencia de esta Corte, declarando el terreno como propiedad privada y decretando su registro a nombre del
solicitante. En la luminosa ponencia del Magistrado Holmes se sientan conclusiones que proclama el espiritu liberal de aquel gran
jurista y reafirman con vigor democratico los derechos de propiedad de los nativos de estas Islas sobre sus predios en contra del
concepto y teoria feudales de que la Corona de España era la dueña absoluta hasta del ultimo palmo de tierra y de que ningun
habitante podia ser dueño de nada, a menos que tuviese en sus manos un titulo o papel expedido por aquel Gobierno. He aqui lo que
dice el Magistrado Holmes:

We come, then, to the question on which the case was decided below — namely, whether the plaintiff owns the land. The
position of government, shortly stated, is that Spain assumed, asserted, and had title to all the land in the Philippines except
so far it saw fit to permit private titles to be acquired; that there was no prescripcion against the Crown, and that, if there was,
a decree of June 25, 1880, required registration within a limited time to make the title good; that the plaintiff's land was not
registered, and therefore became, if it was not always, public land; that the United States succeeded to the title of Spain, and
so that the plaintiff has no rights that the Philippine Government is bound to respect.

If we suppose for the moment that the government's contention is so far correct that the Crown of Spain in form asserted a
title to this land at the date of the treaty of Paris, to which the United States succeeded, it is not to be assumed without
argument that the plaintiff's case is at an end. It is true that Spain, in its earlier decrees,"embodied the universal feudal theory
that all lands were held from the Crown, and perhaps the general attitude of conquering nations toward people not recognized
as entitled to the treatment accorded to those in the same zone of civilization with themselves. It is true, also that, in legal
theory, sovereignty is absolute, and that, as against foreign nations, the United States may assert, as Spain asserted, absolute
power. But it does not follow that, as against the inhabitants of the Philippines, the United States asserts that Spain had such
power. When theory is left on one side, sovereignty is a question of strength, and may vary in degree. How far a new
sovereign shall insist upon the theoretical relation of the subjects to the head in the past, and how far it shall recognize actual
facts, are matters for it to decide. (U. S. Supreme Court Reports, Vol. 212, p. 596.)

Mas adelante se dice lo siguiente en la citada sentencia de la Corte Suprema Federal:

It is true that, by section 14, the Government of the Philippines is empowered to enact rules and prescribe terms for
perfecting titles to public lands were some, but not all, spanish conditions has been fulfilled, and to issue patents to natives
for not more than 16 hectares of public lands actually occupied by the native or his ancestors before August 13, 1898. But
this section perhaps might be satisfied if confined to cases where the occupation was of land admitted to be public land, and
had not continued for such a length of time and under such circumstances as to give rise to the understanding that the
occupants were owners at that date. We hesitate to suppose that it was intended to declare every native who had not a paper
title a trespasser, and to set the claims of all the wilder tribes afloat.

xxx     xxx     xxx

If the applicant's case is to be tried by the law of Spain, we do not discover such clear proof that it was bas by that law as to
satisfy us that he does not own the land. To begin with, the older decrees and laws cited by the counsel for the plaintiff in
error seem to indicate pretty clearly that the natives were recognized as owning some lands, irrespective of any royal grant. In
other words, Spain did not assume to convert all the native inhabitants of the Philippines into trespassers or even into tenants
at will. For instance, Book 4, title 12, Law 14 of the Recopilacion de Leyes de las Indias, cited for a contrary conclusion in
Valenton vs. Murciano (3 Phil., 537), while it commands viceroys and others, when it seems proper, to call for the exhibition
of grants, directs them to confirm those who hold by good grants or justa prescripcion. It is true that it begins by the
characteristic assertion of feudal overlordship and the origin of all titles in the King or his predecessors. That was theory and
 discourse. The fact was that titles were admitted to exist that owed nothing to the powers of Spain beyond this recognition in
their books.

Prescription is mentioned again in the royal cedula of October 15, 1754, cited in (3 Phil., 546): "Where such possessors shall
not be able to produce title deeds, it shall be sufficient if they shall show that ancient possession, as a valid title by
prescription." It may be that this means possession from before 1700; but, at all events, the principle is admitted. As
prescription, even against Crown lands, was recognized by the laws of Spain, we see no sufficient reason for hesitating to
admit that it was recognized in the Philippines in regard to lands over which Spain had only a paper sovereignty.

It is true that the language of articles 4 and 5 attributes title to those "who may prove" possession for the necessary time, and
we do not overlook the argument that this means may prove in registration proceedings. It may be that an English
conveyancer would have recommended an application under the foregoing decree, but certainly it was not calculated to
convey to the mind of an Igorot chief the notion that ancient family possessions were in danger, if he had read every word of
it. The words "may prove" (acrediten), as well, or better, in view of the other provisions, might be taken to mean when called
upon to do so in any litigation. There are indications that registration was expected from all, but none sufficient to show that,
for want of it, ownership actually gained would be lost. The effect of the proof, wherever made, as not to confer title, but
simply to establish it, as already conferred by the decree, if not by earlier law. The royal decree of February 13, 1894,
declaring forfeited titles that were capable of adjustment under the decree of 1880, for which adjustment had not been
sought, should not be construed as a confiscation, but as the withdrawal of a privilege. As a matter of fact, the applicant
never was disturbed. This same decree is quoted by the court of land registration for another recognition of the common-law
prescription of thirty years as still running against alienable Crown land.

xxx     xxx     xxx

. . . Upon a consideration of the whole case we are of opinion that law and justice require that the applicant should be granted
what he seeks, and should not be deprived of what, by the practice and belief of those among whom he lived, was his
property, through a refined interpretation of an almost forgotten law of Spain. (U. S. Supreme Court Reports, Vol. 212, pp.
597-599.)

Resulta evidente de la jurisprudencia sentada en el citado asunto de Cariño contra el Gobierno Insular que cualquiera que fuese la
teoria acerca del superdominio feudal que la Corona de España asumia sobre todos los terrenos en Filipinas, en la practica y en la
realidad se reconocia que el mero lapso de tiempo en la posesion (20 o 30 años, segun el caso) podia establecer y de hecho establecia
derechos privados de propiedad por justaprescripcion, y el titulo presuntivo asi adquirido era para todos los efectos equivalente a una
concesion expresa o un titulo escrito expedido por el Gobierno. Pero de todas maneras — parafraseando lo dicho por el Magistrado
Holmes — aun suponiendo que España tenia semejante soberania o superdominio feudal sobre todas las tierras en este archipielago, y
que contra otras naciones los Estados Unidos, al suceder a España, afirmaria dicha suberania, de ello no se sigue que contra los
habitantes de Filipinas el Gobierno americano (ahora la Republica filipina) tomaria la posicion de que España tenia tal poder absoluto.
Historicamente se sabe que el cambio de soberania tuvo el efecto de liquidar muchas instituciones y leyes españolas que vinieron a ser
obsoletas, arcaicas en el nuevo estado de cosas, e incompatibles con el espiritu del nuevo regimen. No habia ninguna razon para que
este cambio no produjese tambien sus saludables efectos en las normas juridicas del regimen de la propiedad sobre la tierra.
Parafraseando otra vez al Magistrado Holmes, y aplicando la doctrina al presente caso, no hay razon por que, medinate "una refinada
interpretacion de una casi olvidada ley de España," se considere como terreno publico lo que evidentemente, bajo todos los conceptos
y normas, es un terreno privado.

La jurisprudencia sentada en el asunto de Cariño contra el Gobierno Insular ha venido a establecer la norma, la autoridad basica en los
asuntos de registro ante nuestros tribunales. Al socaire de su sentido y tendencia genuinamente liberal se han registrado bajo el sistema
Torrens infinidad de terrenos privados. En casos mucho menos meritorios que el que nos ocupa se ha reconocido por nuestros
tribunales el caracter o condicion de propiedad privada de los terrenos sobre que versaban las solicitudes, aplicandose no las
habilitadoras y supletorias clausulas de las leyes sobre terrenos publicos — primeramente la Ley No. 926, despues la No. 2874, y
finalmente la No. 141 del Commonwealth — sino las disposiciones mas estrictas de la Ley No. 496 sobre registro de terrenos
privados, bajo el sistema Torrens. No existe motivo para que esa tendencia liberal y progresiva sufra una desviacion en el presente
caso.

Pero aun bajo la legislacion española interpretada estrictamente, creemos que el terreno en cuestion es tan privado como el terreno en
el asunto de Cariño, si no mas. Segun la sentencia del inferior — el unido dato para este examen, pues ya se ha dicho repetidas veces
que no tenemos delante las pruebas — "el terreno objeto de la presente solicitud era primitivamente de Capitana Gina y que esta
estuvo en posesion desde el año 1880, despues paso a ser de Francisco Reformado hasta el año 1885, mas tarde o sea en 1886 fue de
Claro Lagdameo, a la muerte de este le sucedio en la posesion su viuda Fortunata Olega de Lagdameo, esta en 1929 lo vendio a sus
tres hijos Antonio, Luis y Rafael appellidados Lagdameo, segun los Exhibitos F y G, y estos ultimos a su vez lo vendieron en 1938 al
solicitante Oh Cho, segun los Exhibitos B 1-y C-1." " ... Este terreno es un solar residencial dentro de la poblacion del municipio de
Guinayangan, Tayabas, y en el mismo existe una casa de materiales fuertes que ocupa casi todo el terreno ..." (Pieza de Excepciones,
pag. 8).

Como se ve, por lo menos desde 1880 habia un conocido propietario y poseedor del terreno — la Capitana Gina. Ahora bien, coincide
que el 25 de Junio de aquel año que precisamente cuando se expidio el Decreto "para el ajuste y adjudicacion de los terrenos realengos
ocupados indebidamente por individuos particulares en las Islas Filipinas." Si bien es cierto que el objeto del Decreto o ley era el
ordenar que se cumpliesen y practicasen los procedimientos de ajuste y registro descritos en el mismo, y en tal sentido el requirir que
cada cual obtuviese un documento de titulo o, en su defecto, perder su propiedad. Tambien es cierto que en el Decreto se expresaban
ciertas salvedades que paracian denotar que estos tramites formanes no eran de rigurosa aplicacion a todo el mundo. Una de dicha
salvedades, por ejemplo, proveia (articulo 5) que, para todos los efectos legales, "todos aquellos que han estado en posesion por ciento
periodo de tiempo serian considerados como dueños — para terreno cultivado, 20 20 años sin interrupcion, es suficiente, y para
terreno no cultivado, 30 años." Y el articulo 6 dispone que "las partes interesadas no incluidas en los dos articulos anteriores (los
articulos que reconocen la prescripcion de 20 y 30 años) podran legalizar su posesion, y consiguientemente adquirir pleno dominio
sobre dichos terrenos, mediante procedimientos de ajuste y adjudicacion tramitados de la siguiente manera." Esta ultima disposicion
parece indicar, por sus terminos, que no es aplicable a aquellos que ya han sido declarados dueños en virtud del simple transcurso de
cierto lapso de tiempo (Vease Cariño contra Gobierno Insular, supra, 598).

No consta en la sentencia del inferior que Capitana Gina se haya acogido a las disposiciones del referido Decreto de 25 de Junio de
1880, obteniendo un documento de titulo para legalizar su posesion, pero tampoco consta positivamente lo contrario, pues no tenemos
ante nosotros las pruebas. Pero aun suponiendo que no se hayan cumplido los tramites formales prescritos en el Decreto, de ello no se
sigue que el terreno no era ya privado entonces, pues la presuncion es que no hubo menester de semejante formalidad porque la
Capitana Gina o sus causantes en derecho ya habian sido declarados dueños del predio por el mero transcurso de un lapso de tiempo, a
tenor de las salvedades de que se ha hecho mencion. Esta presuncion es tanto mas logica cuanto que el articulo 8 del Decreto proveia
para el caso de partes que no solicitaban dentro del plazo de un año el ajuste y adjudicacion de terrenos de cuya posesion disfrutaban
indebidamente, y conminaba que el Tesoro "reasumira el dominio del Estado sobre los terrenos" y vendera en subasta la parte que no
se reserva para si; y no solo no consta en autos que la posesion de Capitata Gina o de sus causahabientes en derecho se haya
considerado jamas como ilegal o que el Estao y sus agentes hayan adoptado y practicado contra ellos las diligencias y procedimientos
de que trata el cittado articulo 8 del Decreto, sino que, por el contrario, consta en la sentencia que desde Capitana Gina en 1880 hubo
sucesivas transmisiones de derechos primeramente a Francisco Reformado en 1885 y despues a Claro Lagdameo en 1886, y a la
muerte de este ultimo a su viuda Fortunata Olega de Lagdameo, de quien pase el titulo en virtud de compraventa a sus hijos Antonio,
Luis y Rafael apellidados Lagdameo, y la ultima transaccion sobre el solar tuvo lugar en fecha bastante reciente, en 1938, cuando los
ultimamente nombrados lo vendieron a Oh Cho el solicitante en el presente expediente de registro. De todo lo cual se deduce que el
solar en cuestion fue considerado siempre como propiedad privada — por lomenos alli donde la memoria alcanza — desde 1880 hasta
que fenecio la soberania americana en Filipinas, y que ni el Estado ni sus agentes se entrometieron jamas en el hecho de su posesion
exclusiva, continua y publica a titulo de dueño por diferentes personas no solo bajo el Decreto de 25 de Junio de 1880 tantas veces
mencionado, sino aun bajo el Decreto de 13 de Febrero de 1894 (informacion posesoria) que fue practicamente el ultimo decreto
expedido en las postrimerias de la soberania española en relacion con el ajuste y adjudicacion de terrenos realengos o publicos. Y no
se diga que ello habria sido por inadvertencia de las autoridades, particularmente del Fisco, porque tratandose de un solar situado en la
misma poblacion de Guinayangan, uno de los pueblos mas antiguos de la provincia de Tayabas, es indudable que si no reuniera las
condiciones y requisitos para ser conceptuado como propiedad privada y la posesion de sus ocupantes sucesivos fuese indebida e
ilegal, ya los agentes del Fisco y Tesoro lo hubiesen prestamente confiscado a tenor del articulo 8 ya citado del Decreto de 25 de Junio
de 1880 (Vease Cariño contra Gobierno Insular, ut supra598.) El que nada de esto haya acontecido es la mejor prueba de que en
tiempo de España los diferentes y sucesivos ocupantes de este solar ya tenian titulo dominical perfecto, y es sencillamente absurdo,
ridiculo que ahora, al cabo de 66 años, se declare publico el terreno; y todo ¿por que y para que — para rendir sometimiento,
repitiendo de nuevo la sutil ironia del Magistrado Homles, a la "refinada interpretacion de una casi olvidada ley de Espana." Y resulta
mas la futilidad de este tardio tributo a un anacronismo, a una momia juridica de un pasado cada vez mas remoto, si se considera que
cuando el Magistrado Homes pronuncio su sentencia a todas luces libera y progresiva (23 de Enero de 1909) estabamos tan solo a
escasamente 10 años desde la caida de la soberania española en Filipinas mientras que ahora que se intenta una radical desviacion del
surco trazado por la solida reja de dicha sentencia estamos ya casi a medio siglo de distancia, con pleno dominio republicano sobre el
territorio nacional. Esto no debiera preocuparnos si no fuese porque esta decision de ahora puede ser interpretada como una
abrogacion de tantos precedentes moldeados en la turquesa de la doctrina holmesiana, y al propio tiempo como la demarcacion del
punto de partida de una nueva ruta en nuestra jurisprudencia sobre registro de terrenos.

Sin embargo, en la opinion de la mayoria se dice que el solicitante no puede alegar con exito que su lote es terreno privado porque la
posesion de su primer predecessor (Capitana Gina) comenzo solo en 1880, mientras que en el asunto de Cariño contra El gobierno
Insular, es exige como requisito la posesion desde tiempo inmemorial, posesion que, segun la mayoria. "justificaria la presuncion de
que el terreno nunca habia sido parte del dominio publico, o que habia sido propiedad privada aun antes de la conquista española." No
parece sino que se quiere señalar una fecha, un año, como norma para determinar la inmemorialidad del comienzo posesorio. Pero
¿que fecha, que año seria este? ¿1870, '60, '50? ¿No seria suficiente v. gr. 1875, '65, o '55? En el asunto de Cariño la fecha conocida y
recordada de la posesion inicial podia fijarse alrededor de la mitad del siglo pasado, o sea 1849, pues segun las pruebas, Cariño y sus
antecesores habian poseido el terreno algo mas de 50 años hasta el tratado de Paris — Abril 11, 1899. En el presente caso, desde
Capitana Gina hasta que el solicitante presento su solicitud de registro el 17 de Enero, 1940, habian transcurrido 60 años; de suerte
que en cuanto al tiempo de la posesion ambos casos son identicos. Con una ventaja a favor del presente caso, a saber: mientras en el
asunto de Cariño las tierras objeto de la solicitud eran pasto, en gran parte, y solo cultivadas unas cuantas porciones, en el que nos
ocupa el lote es urbano, sino en uno de los pueblos mas antiguos de Filipinas, con una casa de materiales fuertes enclavada en el. Es
innegabl que la posesion de un solar urbano es mas concreta, mas terminante y mas adversa a todo el mundo, sin excluir el Estado.

Pero aun limitandonos a la posesion bajo la soberania española para los efectos de la calificacion del terreno como propiedad privada,
todavia se puede sosener que el presente caso es tan bueno si no mejor que el de Cariño. En el asunto de Cariño el punto de partida
conocido es alrededor de 1849; en el nuestro, 1880, en que comenzo la posesion de Capitana Gina, segun la sentencia apelada. Pero
esto no quiere decir que antes de Capitana Gina el solar no fuese ya finca urbana, habida por algun otro como propiedad particular.
Hay que tener en cuenta que se trata de un solar ubicado en la poblacion de Guinayangan, uno de los mas antiguos en Tayabas. No
tenemos delante la fecha exacta de la fundacion de dicho pueblo, y no tenemos tiempo ahora para hacer investigacion historica. Pero
afortunadamente hemos logrado salvar de la devastacion causada por la reciente guerra una parte sustancial de nuestra biblioteca
privada, y uno de los libros salvados es el celebrado Diccionario Geografico, Estadistico e Historico de las Islas Filipinas publicado en
Madrid por Fr. Manuel Buzeta y Fr. Felipe Bravo en 1950, segun el pie de imprenta, de dos volumenes. En el 2.º tomo, pp. 70 y 71, se
da una descripcion del pueblo de Guinayanga, con buena copia de datos historicos, geograficos, sociales y economicos. Comienza la
descripcion de esta manera: "Pueblo con cura y gobernadorcillo, en la Isla de Luzon, provincia de Tayabas, dioc, de Nueva
caceres"; . . "tiene como unas 1,500 casas, en general de sencilla construccion, distinguiendose como de mejor fabrica la casa
parroquial y la llamada tribunal de justicia, donde esta la carcel. ." Considerando que podemos tomas conocimiento judicial de que en
tiempo de España el municipio y la parroquia eran la culminacion de un lento y largo proceso de civilizacion y cristianizacion,
podemos, por tanto, presumir que mucho antes de 1850 — 50, 70 o 100 años — el pueblo de Guinayangan ya era una unidad
geografiva, civil y espiritual, en toda regla, y con caracteres definitivos de viabilidad urbana. Tambien cabe perfectamente presumir
que sus habitantes poseian sus respectivos solares a titulo de dueños, al igual que lo que ocurria en otros municipios debidamente
organizados. No cabe presumir que el Estado les permitiera ocupar indebidamente sus solares, sin que tomase contra ellos la accion de
que habla el articulo 8 del referido Decreto de 25 de Junio de 1880; y ya hemos visto que no consta en autos que el solar en cuestion
haya sido jamas confiscado por los agentes del Fisco o Tesoro, o declarada ilegal la posesion sobre el mismo, a tenor de lo ordenado
en el mencionado Decreto. Asi que desde cualquier angulo que se vea el presente asunto, cae perfectamente bajo las normas de
posesion inmemorial establecidas en el asunto de Cariño.

III. Demostrado ya que el terreno en cuestion es privado, resulta forzosa la conclusion de que el solicitante tiene derecho a que se
confirme su titulo bajo las disposiciones de la Ley de Registro de Terrenos No. 496, de acuerdo con el sistema Torrens. Es doctrina
firmemente establecida en esta jurisdiccion que un extranjero tiene perfecto derecho a que se registre a su nombre un terreno privado,
bajo el sistema Torrens, y que las disposiciones de la ley de terrenos publicos son inaplicables a terrenos privados
(veanse Agari contra Gobierno de las Islas Filipinas, 42 Jur. Fil., 150; Tan Yungquip contra Director de Terrenos, 42 Jur. Fil., 134;
Central Capiz contra Ramirez, 40 Jur. Fil., 926). En el primer asunto citado el solicitante era un japones llamado Ichisuke Agari y la
solicitud se estimo por tratarse de un terreno privado, adquirido en tiempo de España mediant composicion con el estado. En el
segundo asunto el solicitante era un chino y se estimo la solicitud por la misma razon, habiendose probado una posesion conocida y
recordada de 30 a 40 años con anteriorida a la presentacion de la solicitud, es decir, un tiempo mas corto que el del presente caso. Lo
propio sucedio en el tercer asunto citado, siendo españoles los dueños de la finca. Confirmese, por tanto, la sentencia apelada.

G.R. No. 127882           January 27, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., represented by its Chairman F'LONG MIGUEL M. LUMAYONG,
WIGBERTO E. TAÑADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR., F'LONG
AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE, SIMEON H. DOLOJO, IMELDA M. GANDON, LENY
B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A. LABUAYAN, LOMINGGES D. LAWAY, BENITA P.
TACUAYAN, minors JOLY L. BUGOY, represented by his father UNDERO D. BUGOY, ROGER M. DADING, represented
by his father ANTONIO L. DADING, ROMY M. LAGARO, represented by his father TOTING A. LAGARO, MIKENY
JONG B. LUMAYONG, represented by his father MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by his
mother EDITHA T. MIGUEL, ALDEMAR L. SAL, represented by his father DANNY M. SAL, DAISY RECARSE,
represented by her mother LYDIA S. SANTOS, EDWARD M. EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL,
ALDEN S. TUSAN, AMPARO S. YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN
CARLO CULAR, VIRGILIO CULAR, JR., represented by their father VIRGILIO CULAR, PAUL ANTONIO P.
VILLAMOR, represented by his parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA GININA R. TALJA,
represented by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN, represented by her father ALFREDO M.
CUNANAN, ANTONIO JOSE A. VITUG III, represented by his mother ANNALIZA A. VITUG, LEAN D. NARVADEZ,
represented by his father MANUEL E. NARVADEZ, JR., ROSERIO MARALAG LINGATING, represented by her father
RIO OLIMPIO A. LINGATING, MARIO JOSE B. TALJA, DAVID E. DE VERA, MARIA MILAGROS L. SAN JOSE, SR.,
SUSAN O. BOLANIO, OND, LOLITA G. DEMONTEVERDE, BENJIE L. NEQUINTO,1 ROSE LILIA S. ROMANO,
ROBERTO S. VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by his father ELPIDIO
V. PERIA,2 GREEN FORUM PHILIPPINES, GREEN FORUM WESTERN VISAYAS, (GF-WV), ENVIRONMETAL
LEGAL ASSISTANCE CENTER (ELAC), PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT
REPORMANG PANSAKAHAN (KAISAHAN),3 KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT
REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and RURAL
DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PART`NERSHIP FOR THE DEVELOPMENT OF HUMAN
RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA), WOMEN'S LEGAL BUREAU (WLB), CENTER FOR
ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI), UPLAND DEVELOPMENT INSTITUTE (UDI),
KINAIYAHAN FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP PANLIGAL (SALIGAN), LEGAL
RIGHTS AND NATURAL RESOURCES CENTER, INC. (LRC), petitioners, 
vs.
VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR),
HORACIO RAMOS, DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES,
EXECUTIVE SECRETARY, and WMC (PHILIPPINES), INC.4 respondents.

DECISION

CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of Republic Act No. 7942,5 otherwise known as the
PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and Regulations issued pursuant thereto, Department of
Environment and Natural Resources (DENR) Administrative Order 96-40, and of the Financial and Technical Assistance Agreement
(FTAA) entered into on March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a corporation
organized under Philippine laws.

On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 2796 authorizing the DENR Secretary to
accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts or agreements involving
either technical or financial assistance for large-scale exploration, development, and utilization of minerals, which, upon appropriate
recommendation of the Secretary, the President may execute with the foreign proponent. In entering into such proposals, the President
shall consider the real contributions to the economic growth and general welfare of the country that will be realized, as well as the
development and use of local scientific and technical resources that will be promoted by the proposed contract or agreement. Until
Congress shall determine otherwise, large-scale mining, for purpose of this Section, shall mean those proposals for contracts or
agreements for mineral resources exploration, development, and utilization involving a committed capital investment in a single
mining unit project of at least Fifty Million Dollars in United States Currency (US $50,000,000.00).7

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to "govern the exploration, development, utilization and
processing of all mineral resources."8 R.A. No. 7942 defines the modes of mineral agreements for mining operations,9 outlines the
procedure for their filing and approval,10 assignment/transfer11 and withdrawal,12and fixes their terms.13 Similar provisions govern
financial or technical assistance agreements.14
The law prescribes the qualifications of contractors15 and grants them certain rights, including timber,16 water17 and easement18 rights,
and the right to possess explosives.19 Surface owners, occupants, or concessionaires are forbidden from preventing holders of mining
rights from entering private lands and concession areas.20 A procedure for the settlement of conflicts is likewise provided for.21

The Act restricts the conditions for exploration,22 quarry23 and other24 permits. It regulates the transport, sale and processing of
minerals,25 and promotes the development of mining communities, science and mining technology,26and safety and environmental
protection.27

The government's share in the agreements is spelled out and allocated,28 taxes and fees are imposed,29 incentives granted.30 Aside from
penalizing certain acts,31 the law likewise specifies grounds for the cancellation, revocation and termination of agreements and
permits.32

On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and Manila Times, two newspapers of general
circulation, R.A. No. 7942 took effect.33 Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the President
entered into an FTAA with WMCP covering 99,387 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North
Cotabato.34

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 95-23, s. 1995,
otherwise known as the Implementing Rules and Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s. 1996
which was adopted on December 20, 1996.

On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary demanding that the DENR stop the implementation
of R.A. No. 7942 and DAO No. 96-40,35 giving the DENR fifteen days from receipt36 to act thereon. The DENR, however, has yet to
respond or act on petitioners' letter.37

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining order. They allege
that at the time of the filing of the petition, 100 FTAA applications had already been filed, covering an area of 8.4 million
hectares,38 64 of which applications are by fully foreign-owned corporations covering a total of 5.8 million hectares, and at least one
by a fully foreign-owned mining company over offshore areas.39

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:

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

II

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

III

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

IV

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

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

VI

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

VII

x x x in recommending approval of and implementing the Financial and Technical Assistance Agreement between the President of the
Republic of the Philippines and Western Mining Corporation Philippines Inc. because the same is illegal and unconstitutional.40
They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or Technical Assistance Agreements;

(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null and void;

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

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

Impleaded as public respondents are Ruben Torres, the then Executive Secretary, Victor O. Ramos, the then DENR Secretary, and
Horacio Ramos, Director of the Mines and Geosciences Bureau of the DENR. Also impleaded is private respondent WMCP, which
entered into the assailed FTAA with the Philippine Government. WMCP is owned by WMC Resources International Pty., Ltd.
(WMC), "a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly listed major Australian mining and
exploration company."42 By WMCP's information, "it is a 100% owned subsidiary of WMC LIMITED."43

Respondents, aside from meeting petitioners' contentions, argue that the requisites for judicial inquiry have not been met and that the
petition does not comply with the criteria for prohibition and mandamus. Additionally, respondent WMCP argues that there has been a
violation of the rule on hierarchy of courts.

After petitioners filed their reply, this Court granted due course to the petition. The parties have since filed their respective
memoranda.

WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on January 23, 2001, WMC sold all its shares in
WMCP to Sagittarius Mines, Inc. (Sagittarius), a corporation organized under Philippine laws.44WMCP was subsequently renamed
"Tampakan Mineral Resources Corporation."45 WMCP claims that at least 60% of the equity of Sagittarius is owned by Filipinos
and/or Filipino-owned corporations while about 40% is owned by Indophil Resources NL, an Australian company.46 It further claims
that by such sale and transfer of shares, "WMCP has ceased to be connected in any way with WMC."47

By virtue of such sale and transfer, the DENR Secretary, by Order of December 18, 2001,48 approved the transfer and registration of
the subject FTAA from WMCP to Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co. (Lepanto) to
the Office of the President which upheld it by Decision of July 23, 2002.49 Its motion for reconsideration having been denied by the
Office of the President by Resolution of November 12, 2002,50 Lepanto filed a petition for review51 before the Court of Appeals.
Incidentally, two other petitions for review related to the approval of the transfer and registration of the FTAA to Sagittarius were
recently resolved by this Court.52

It bears stressing that this case has not been rendered moot either by the transfer and registration of the FTAA to a Filipino-owned
corporation or by the non-issuance of a temporary restraining order or a preliminary injunction to stay the above-said July 23, 2002
decision of the Office of the President.53 The validity of the transfer remains in dispute and awaits final judicial determination. This
assumes, of course, that such transfer cures the FTAA's alleged unconstitutionality, on which question judgment is reserved.

WMCP also points out that the original claimowners of the major mineralized areas included in the WMCP FTAA, namely,
Sagittarius, Tampakan Mining Corporation, and Southcot Mining Corporation, are all Filipino-owned corporations,54 each of which
was a holder of an approved Mineral Production Sharing Agreement awarded in 1994, albeit their respective mineral claims were
subsumed in the WMCP FTAA;55 and that these three companies are the same companies that consolidated their interests in
Sagittarius to whom WMC sold its 100% equity in WMCP.56 WMCP concludes that in the event that the FTAA is invalidated, the
MPSAs of the three corporations would be revived and the mineral claims would revert to their original claimants.57

These circumstances, while informative, are hardly significant in the resolution of this case, it involving the validity of the FTAA, not
the possible consequences of its invalidation.

Of the above-enumerated seven grounds cited by petitioners, as will be shown later, only the first and the last need be delved into; in
the latter, the discussion shall dwell only insofar as it questions the effectivity of E. O. No. 279 by virtue of which order the questioned
FTAA was forged.

Before going into the substantive issues, the procedural questions posed by respondents shall first be tackled.

REQUISITES FOR JUDICIAL REVIEW

When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the following requisites are
present:

(1) The existence of an actual and appropriate case;

(2) A personal and substantial interest of the party raising the constitutional question;
 (3) The exercise of judicial review is pleaded at the earliest opportunity; and

(4) The constitutional question is the lis mota of the case. 58

Respondents claim that the first three requisites are not present.

Section 1, Article VIII of the Constitution states that "(j)udicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable." The power of judicial review, therefore, is limited to
the determination of actual cases and controversies.59

An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination, not conjectural or
anticipatory,60 lest the decision of the court would amount to an advisory opinion.61 The power does not extend to hypothetical
questions62 since any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated
to actualities.63

"Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or
will sustain direct injury as a result of the governmental act that is being challenged,64alleging more than a generalized
grievance.65 The gist of the question of standing is whether a party alleges "such personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult
constitutional questions."66 Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or
ordinance, he has no standing.67

Petitioners traverse a wide range of sectors. Among them are La Bugal B'laan Tribal Association, Inc., a farmers and indigenous
people's cooperative organized under Philippine laws representing a community actually affected by the mining activities of WMCP,
members of said cooperative,68 as well as other residents of areas also affected by the mining activities of WMCP.69 These petitioners
have standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial injury. They claim that
they would suffer "irremediable displacement"70 as a result of the implementation of the FTAA allowing WMCP to conduct mining
activities in their area of residence. They thus meet the appropriate case requirement as they assert an interest adverse to that of
respondents who, on the other hand, insist on the FTAA's validity.

In view of the alleged impending injury, petitioners also have standing to assail the validity of E.O. No. 279, by authority of which the
FTAA was executed.

Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue either or both contracting parties to annul it.71 In
other words, they contend that petitioners are not real parties in interest in an action for the annulment of contract.

Public respondents' contention fails. The present action is not merely one for annulment of contract but for prohibition and mandamus.
Petitioners allege that public respondents acted without or in excess of jurisdiction in implementing the FTAA, which they submit is
unconstitutional. As the case involves constitutional questions, this Court is not concerned with whether petitioners are real parties in
interest, but with whether they have legal standing. As held in Kilosbayan v. Morato:72

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

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

As earlier stated, petitioners meet this requirement.

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

The WMCP FTAA provides:

14.3 Future Legislation

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

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

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

As there is no suggestion that WMCP has indicated its intention not to avail of the provisions of Chapter XVI of R.A. No. 7942, it can
safely be presumed that they apply to the WMCP FTAA.

Misconstruing the application of the third requisite for judicial review – that the exercise of the review is pleaded at the earliest
opportunity – WMCP points out that the petition was filed only almost two years after the execution of the FTAA, hence, not raised at
the earliest opportunity.

The third requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of
the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to
allow it to be raised later.73 A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by
the mere failure of the proper party to promptly file a case to challenge the same.

PROPRIETY OF PROHIBITION AND MANDAMUS

Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule 65 read:

SEC. 2. Petition for prohibition. – When the proceedings of any tribunal, corporation, board, or person, whether exercising functions
judicial or ministerial, are without or in excess of its or his jurisdiction, or with grave abuse of discretion, and there is no appeal or any
other plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court alleging the facts with certainty and praying that judgment be rendered commanding the defendant to desist from further
proceeding in the action or matter specified therein.

Prohibition is a preventive remedy.74 It seeks a judgment ordering the defendant to desist from continuing with the commission of an
act perceived to be illegal.75

The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself may be fait accompli, its
implementation is not. Public respondents, in behalf of the Government, have obligations to fulfill under said contract. Petitioners seek
to prevent them from fulfilling such obligations on the theory that the contract is unconstitutional and, therefore, void.

The propriety of a petition for prohibition being upheld, discussion of the propriety of the mandamus aspect of the petition is rendered
unnecessary.

HIERARCHY OF COURTS

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

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

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

A becoming regard for judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first
level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only where there are special and
important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy necessary to prevent
inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and
to prevent further over-crowding of the Court's docket x x x.76 [Emphasis supplied.]

The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as well as the novelty
thereof, constitute exceptional and compelling circumstances to justify resort to this Court in the first instance.

In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the requirements of an actual case or
legal standing when paramount public interest is involved.77 When the issues raised are of paramount importance to the public, this
Court may brush aside technicalities of procedure.78
 II

Petitioners contend that E.O. No. 279 did not take effect because its supposed date of effectivity came after President Aquino had
already lost her legislative powers under the Provisional Constitution.

And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates Section 2, Article XII of the
Constitution because, among other reasons:

(1) It allows foreign-owned companies to extend more than mere financial or technical assistance to the State in the
exploitation, development, and utilization of minerals, petroleum, and other mineral oils, and even permits foreign owned
companies to "operate and manage mining activities."

(2) It allows foreign-owned companies to extend both technical and financial assistance, instead of "either technical or
financial assistance."

To appreciate the import of these issues, a visit to the history of the pertinent constitutional provision, the concepts contained therein,
and the laws enacted pursuant thereto, is in order.

Section 2, Article XII reads in full:

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

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

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

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

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

THE SPANISH REGIME AND THE REGALIAN DOCTRINE

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

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

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

The Philippines having passed to Spain by virtue of discovery and conquest,81 earlier Spanish decrees declared that "all lands were
held from the Crown."82

The Regalian doctrine extends not only to land but also to "all natural wealth that may be found in the bowels of the earth."83 Spain, in
particular, recognized the unique value of natural resources, viewing them, especially minerals, as an abundant source of revenue to
finance its wars against other nations.84 Mining laws during the Spanish regime reflected this perspective.85

THE AMERICAN OCCUPATION AND THE CONCESSION REGIME

By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago known as the Philippine Islands" to the United States. The
Philippines was hence governed by means of organic acts that were in the nature of charters serving as a Constitution of the occupied
territory from 1900 to 1935.86 Among the principal organic acts of the Philippines was the Act of Congress of July 1, 1902, more
commonly known as the Philippine Bill of 1902, through which the United States Congress assumed the administration of the
Philippine Islands.87 Section 20 of said Bill reserved the disposition of mineral lands of the public domain from sale. Section 21
thereof allowed the free and open exploration, occupation and purchase of mineral deposits not only to citizens of the Philippine
Islands but to those of the United States as well:

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

Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit to allow both Filipino
and American citizens to explore and exploit minerals in public lands, and to grant patents to private mineral lands.88 A person who
acquired ownership over a parcel of private mineral land pursuant to the laws then prevailing could exclude other persons, even the
State, from exploiting minerals within his property.89 Thus, earlier jurisprudence90 held that:

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

x x x.

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

The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the Regalian theory, mineral rights
are not included in a grant of land by the state; under the American doctrine, mineral rights are included in a grant of land by the
government.91

Section 21 also made possible the concession (frequently styled "permit", license" or "lease")92 system.93 This was the traditional
regime imposed by the colonial administrators for the exploitation of natural resources in the extractive sector (petroleum, hard
minerals, timber, etc.).94

Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural
resource within a given area.95 Thus, the concession amounts to complete control by the concessionaire over the country's natural
resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction.96 In consideration for the
right to exploit a natural resource, the concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds.97

Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual framework of the
concession.98 For instance, Act No. 2932,99 approved on August 31, 1920, which provided for the exploration, location, and lease of
lands containing petroleum and other mineral oils and gas in the Philippines, and Act No. 2719,100 approved on May 14, 1917, which
provided for the leasing and development of coal lands in the Philippines, both utilized the concession system.101

THE 1935 CONSTITUTION AND THE NATIONALIZATION OF NATURAL RESOURCES

By the Act of United States Congress of March 24, 1934, popularly known as the Tydings-McDuffie Law, the People of the Philippine
Islands were authorized to adopt a constitution.102 On July 30, 1934, the Constitutional Convention met for the purpose of drafting a
constitution, and the Constitution subsequently drafted was approved by the Convention on February 8, 1935.103 The Constitution was
submitted to the President of the United States on March 18, 1935.104 On March 23, 1935, the President of the United States certified
that the Constitution conformed substantially with the provisions of the Act of Congress approved on March 24, 1934.105 On May 14,
1935, the Constitution was ratified by the Filipino people.106

The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines, including mineral lands and
minerals, to be property belonging to the State.107 As adopted in a republican system, the medieval concept of jura regalia is stripped of
royal overtones and ownership of the land is vested in the State.108

Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935 Constitution provided:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or
associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant,
lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources,
with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation,
development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, except
as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in
which cases beneficial use may be the measure and the limit of the grant.
The nationalization and conservation of the natural resources of the country was one of the fixed and dominating objectives of the
1935 Constitutional Convention.109 One delegate relates:

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

The adoption of the principle of state ownership of the natural resources and of the Regalian doctrine was considered to be a necessary
starting point for the plan of nationalizing and conserving the natural resources of the country. For with the establishment of the
principle of state ownership of the natural resources, it would not be hard to secure the recognition of the power of the State to control
their disposition, exploitation, development or utilization.110

The nationalization of the natural resources was intended (1) to insure their conservation for Filipino posterity; (2) to serve as an
instrument of national defense, helping prevent the extension to the country of foreign control through peaceful economic penetration;
and (3) to avoid making the Philippines a source of international conflicts with the consequent danger to its internal security and
independence.111

The same Section 1, Article XIII also adopted the concession system, expressly permitting the State to grant licenses, concessions, or
leases for the exploitation, development, or utilization of any of the natural resources. Grants, however, were limited to Filipinos or
entities at least 60% of the capital of which is owned by Filipinos.lawph!l.ne+

The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November 1946, the Parity Amendment,
which came in the form of an "Ordinance Appended to the Constitution," was ratified in a plebiscite.112 The Amendment extended,
from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural resources to citizens of the United States and business
enterprises owned or controlled, directly or indirectly, by citizens of the United States:113

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

The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as the Laurel-Langley
Agreement, embodied in Republic Act No. 1355.114

THE PETROLEUM ACT OF 1949 AND THE CONCESSION SYSTEM

In the meantime, Republic Act No. 387,115 also known as the Petroleum Act of 1949, was approved on June 18, 1949.

The Petroleum Act of 1949 employed the concession system for the exploitation of the nation's petroleum resources. Among the kinds
of concessions it sanctioned were exploration and exploitation concessions, which respectively granted to the concessionaire the
exclusive right to explore for116 or develop117 petroleum within specified areas.

Concessions may be granted only to duly qualified persons118 who have sufficient finances, organization, resources, technical
competence, and skills necessary to conduct the operations to be undertaken.119

Nevertheless, the Government reserved the right to undertake such work itself.120 This proceeded from the theory that all natural
deposits or occurrences of petroleum or natural gas in public and/or private lands in the Philippines belong to the State.121 Exploration
and exploitation concessions did not confer upon the concessionaire ownership over the petroleum lands and petroleum
deposits.122 However, they did grant concessionaires the right to explore, develop, exploit, and utilize them for the period and under
the conditions determined by the law.123

Concessions were granted at the complete risk of the concessionaire; the Government did not guarantee the existence of petroleum or
undertake, in any case, title warranty.124

Concessionaires were required to submit information as maybe required by the Secretary of Agriculture and Natural Resources,
including reports of geological and geophysical examinations, as well as production reports.125Exploration126 and
exploitation127 concessionaires were also required to submit work programs.lavvphi1.net

Exploitation concessionaires, in particular, were obliged to pay an annual exploitation tax,128 the object of which is to induce the
concessionaire to actually produce petroleum, and not simply to sit on the concession without developing or exploiting it.129 These
concessionaires were also bound to pay the Government royalty, which was not less than 12½% of the petroleum produced and saved,
less that consumed in the operations of the concessionaire.130 Under Article 66, R.A. No. 387, the exploitation tax may be credited
against the royalties so that if the concessionaire shall be actually producing enough oil, it would not actually be paying the
exploitation tax.131

Failure to pay the annual exploitation tax for two consecutive years,132 or the royalty due to the Government within one year from the
date it becomes due,133 constituted grounds for the cancellation of the concession. In case of delay in the payment of the taxes or
royalty imposed by the law or by the concession, a surcharge of 1% per month is exacted until the same are paid.134

As a rule, title rights to all equipment and structures that the concessionaire placed on the land belong to the exploration or
exploitation concessionaire.135 Upon termination of such concession, the concessionaire had a right to remove the same.136

The Secretary of Agriculture and Natural Resources was tasked with carrying out the provisions of the law, through the Director of
Mines, who acted under the Secretary's immediate supervision and control.137 The Act granted the Secretary the authority to inspect
any operation of the concessionaire and to examine all the books and accounts pertaining to operations or conditions related to
payment of taxes and royalties.138

The same law authorized the Secretary to create an Administration Unit and a Technical Board.139 The Administration Unit was
charged, inter alia, with the enforcement of the provisions of the law.140 The Technical Board had, among other functions, the duty to
check on the performance of concessionaires and to determine whether the obligations imposed by the Act and its implementing
regulations were being complied with.141

Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development, analyzed the benefits and drawbacks of the
concession system insofar as it applied to the petroleum industry:

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

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

Other liabilities of the system have also been noted:

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

Eventually, the concession system failed for reasons explained by Dimagiba:

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

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

PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND THE SERVICE CONTRACT SYSTEM

The promulgation on December 31, 1972 of Presidential Decree No. 87,145 otherwise known as The Oil Exploration and Development
Act of 1972 signaled such a transformation. P.D. No. 87 permitted the government to explore for and produce indigenous petroleum
through "service contracts."146

"Service contracts" is a term that assumes varying meanings to different people, and it has carried many names in different countries,
like "work contracts" in Indonesia, "concession agreements" in Africa, "production-sharing agreements" in the Middle East, and
"participation agreements" in Latin America.147 A functional definition of "service contracts" in the Philippines is provided as follows:
A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum, mineral, energy, land
and other natural resources by which a government or its agency, or a private person granted a right or privilege by the government
authorizes the other party (service contractor) to engage or participate in the exercise of such right or the enjoyment of the privilege, in
that the latter provides financial or technical resources, undertakes the exploitation or production of a given resource, or directly
manages the productive enterprise, operations of the exploration and exploitation of the resources or the disposition of marketing or
resources.148

In a service contract under P.D. No. 87, service and technology are furnished by the service contractor for which it shall be entitled to
the stipulated service fee.149 The contractor must be technically competent and financially capable to undertake the operations required
in the contract.150

Financing is supposed to be provided by the Government to which all petroleum produced belongs.151 In case the Government is
unable to finance petroleum exploration operations, the contractor may furnish services, technology and financing, and the proceeds of
sale of the petroleum produced under the contract shall be the source of funds for payment of the service fee and the operating
expenses due the contractor.152 The contractor shall undertake, manage and execute petroleum operations, subject to the government
overseeing the management of the operations.153 The contractor provides all necessary services and technology and the requisite
financing, performs the exploration work obligations, and assumes all exploration risks such that if no petroleum is produced, it will
not be entitled to reimbursement.154 Once petroleum in commercial quantity is discovered, the contractor shall operate the field on
behalf of the government.155

P.D. No. 87 prescribed minimum terms and conditions for every service contract.156 It also granted the contractor certain privileges,
including exemption from taxes and payment of tariff duties,157 and permitted the repatriation of capital and retention of profits
abroad.158

Ostensibly, the service contract system had certain advantages over the concession regime.159 It has been opined, though, that, in the
Philippines, our concept of a service contract, at least in the petroleum industry, was basically a concession regime with a production-
sharing element.160

On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new Constitution.161Article XIV on the
National Economy and Patrimony contained provisions similar to the 1935 Constitution with regard to Filipino participation in the
nation's natural resources. Section 8, Article XIV thereof provides:

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

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

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

The concept of service contracts, according to one delegate, was borrowed from the methods followed by India, Pakistan and
especially Indonesia in the exploration of petroleum and mineral oils.162 The provision allowing such contracts, according to another,
was intended to "enhance the proper development of our natural resources since Filipino citizens lack the needed capital and technical
know-how which are essential in the proper exploration, development and exploitation of the natural resources of the country."163

The original idea was to authorize the government, not private entities, to enter into service contracts with foreign entities.164 As finally
approved, however, a citizen or private entity could be allowed by the National Assembly to enter into such service contract.165 The
prior approval of the National Assembly was deemed sufficient to protect the national interest.166 Notably, none of the laws allowing
service contracts were passed by the Batasang Pambansa. Indeed, all of them were enacted by presidential decree.

On March 13, 1973, shortly after the ratification of the new Constitution, the President promulgated Presidential Decree No.
151.167 The law allowed Filipino citizens or entities which have acquired lands of the public domain or which own, hold or control
such lands to enter into service contracts for financial, technical, management or other forms of assistance with any foreign persons or
entity for the exploration, development, exploitation or utilization of said lands.168

Presidential Decree No. 463,169 also known as The Mineral Resources Development Decree of 1974, was enacted on May 17, 1974.
Section 44 of the decree, as amended, provided that a lessee of a mining claim may enter into a service contract with a qualified
domestic or foreign contractor for the exploration, development and exploitation of his claims and the processing and marketing of the
product thereof.
Presidential Decree No. 704170 (The Fisheries Decree of 1975), approved on May 16, 1975, allowed Filipinos engaged in commercial
fishing to enter into contracts for financial, technical or other forms of assistance with any foreign person, corporation or entity for the
production, storage, marketing and processing of fish and fishery/aquatic products.171

Presidential Decree No. 705172 (The Revised Forestry Code of the Philippines), approved on May 19, 1975, allowed "forest products
licensees, lessees, or permitees to enter into service contracts for financial, technical, management, or other forms of assistance . . .
with any foreign person or entity for the exploration, development, exploitation or utilization of the forest resources."173

Yet another law allowing service contracts, this time for geothermal resources, was Presidential Decree No. 1442,174 which was signed
into law on June 11, 1978. Section 1 thereof authorized the Government to enter into service contracts for the exploration, exploitation
and development of geothermal resources with a foreign contractor who must be technically and financially capable of undertaking the
operations required in the service contract.

Thus, virtually the entire range of the country's natural resources –from petroleum and minerals to geothermal energy, from public
lands and forest resources to fishery products – was well covered by apparent legal authority to engage in the direct participation or
involvement of foreign persons or corporations (otherwise disqualified) in the exploration and utilization of natural resources through
service contracts.175

THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS

After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power under a revolutionary government. On March
25, 1986, President Aquino issued Proclamation No. 3,176 promulgating the Provisional Constitution, more popularly referred to as the
Freedom Constitution. By authority of the same Proclamation, the President created a Constitutional Commission (CONCOM) to draft
a new constitution, which took effect on the date of its ratification on February 2, 1987.177

The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: "All lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife,
flora and fauna, and other natural resources are owned by the State."

Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same provision, prohibits the
alienation of natural resources, except agricultural lands.

The third sentence of the same paragraph is new: "The exploration, development and utilization of natural resources shall be under the
full control and supervision of the State." The constitutional policy of the State's "full control and supervision" over natural resources
proceeds from the concept of jura regalia, as well as the recognition of the importance of the country's natural resources, not only for
national economic development, but also for its security and national defense.178 Under this provision, the State assumes "a more
dynamic role" in the exploration, development and utilization of natural resources.179

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses,
concessions, or leases for the exploration, exploitation, development, or utilization of natural resources. By such omission, the
utilization of inalienable lands of public domain through "license, concession or lease" is no longer allowed under the 1987
Constitution.180

Having omitted the provision on the concession system, Section 2 proceeded to introduce "unfamiliar language":181

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

Consonant with the State's "full supervision and control" over natural resources, Section 2 offers the State two "options."182 One, the
State may directly undertake these activities itself; or two, it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or entities at least 60% of whose capital is owned by such citizens.

A third option is found in the third paragraph of the same section:

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

While the second and third options are limited only to Filipino citizens or, in the case of the former, to corporations or associations at
least 60% of the capital of which is owned by Filipinos, a fourth allows the participation of foreign-owned corporations. The fourth
and fifth paragraphs of Section 2 provide:

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

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its
execution.
Although Section 2 sanctions the participation of foreign-owned corporations in the exploration, development, and utilization of
natural resources, it imposes certain limitations or conditions to agreements with such corporations.

First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements, and only with
corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter into a service
contract with a "foreign person or entity."

Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The term "large-scale
usually refers to very capital-intensive activities."183

Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the intent being
to limit service contracts to those areas where Filipino capital may not be sufficient.184

Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and conditions
provided by law.

Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real
contributions to economic growth and general welfare of the country.

Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of local scientific
and technical resources.

Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance
agreement entered into within thirty days from its execution.

Finally, the scope of the agreements. While the 1973 Constitution referred to "service contracts for financial, technical,
management, or other forms of assistance" the 1987 Constitution provides for "agreements. . . involving either financial or
technical assistance." It bears noting that the phrases "service contracts" and "management or other forms of assistance" in
the earlier constitution have been omitted.

By virtue of her legislative powers under the Provisional Constitution,185 President Aquino, on July 10, 1987, signed into law E.O. No.
211 prescribing the interim procedures in the processing and approval of applications for the exploration, development and utilization
of minerals. The omission in the 1987 Constitution of the term "service contracts" notwithstanding, the said E.O. still referred to them
in Section 2 thereof:

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

The same law provided in its Section 3 that the "processing, evaluation and approval of all mining applications . . . operating
agreements and service contracts . . . shall be governed by Presidential Decree No. 463, as amended, other existing mining laws, and
their implementing rules and regulations. . . ."

As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by authority of which the subject WMCP FTAA
was executed on March 30, 1995.

On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof declares that the Act "shall govern the
exploration, development, utilization, and processing of all mineral resources." Such declaration notwithstanding, R.A. No. 7942 does
not actually cover all the modes through which the State may undertake the exploration, development, and utilization of natural
resources.

The State, being the owner of the natural resources, is accorded the primary power and responsibility in the exploration, development
and utilization thereof. As such, it may undertake these activities through four modes:

The State may directly undertake such activities.

(2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or qualified
corporations.

(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens.

(4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils, the President
may enter into agreements with foreign-owned corporations involving technical or financial assistance.186

Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and surveys,187 and a passing mention
of government-owned or controlled corporations,188 R.A. No. 7942 does not specify how the State should go about the first mode. The
third mode, on the other hand, is governed by Republic Act No. 7076189(the People's Small-Scale Mining Act of 1991) and other
pertinent laws.190 R.A. No. 7942 primarily concerns itself with the second and fourth modes.
Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A. No. 7942 as "mineral
agreements."191 The Government participates the least in a mineral production sharing agreement (MPSA). In an MPSA, the
Government grants the contractor192 the exclusive right to conduct mining operations within a contract area193 and shares in the gross
output.194 The MPSA contractor provides the financing, technology, management and personnel necessary for the agreement's
implementation.195 The total government share in an MPSA is the excise tax on mineral products under Republic Act No.
7729,196 amending Section 151(a) of the National Internal Revenue Code, as amended.197

In a co-production agreement (CA),198 the Government provides inputs to the mining operations other than the mineral
resource,199 while in a joint venture agreement (JVA), where the Government enjoys the greatest participation, the Government and the
JVA contractor organize a company with both parties having equity shares.200 Aside from earnings in equity, the Government in a JVA
is also entitled to a share in the gross output.201The Government may enter into a CA202 or JVA203 with one or more contractors. The
Government's share in a CA or JVA is set out in Section 81 of the law:

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

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

any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or
authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources development
and duly registered in accordance with law at least sixty per centum (60%) of the capital of which is owned by citizens of the
Philippines x x x.206

The fourth mode involves "financial or technical assistance agreements." An FTAA is defined as "a contract involving financial or
technical assistance for large-scale exploration, development, and utilization of natural resources."207 Any qualified person with
technical and financial capability to undertake large-scale exploration, development, and utilization of natural resources in the
Philippines may enter into such agreement directly with the Government through the DENR.208 For the purpose of granting an FTAA,
a legally organized foreign-owned corporation (any corporation, partnership, association, or cooperative duly registered in accordance
with law in which less than 50% of the capital is owned by Filipino citizens)209 is deemed a "qualified person."210

Other than the difference in contractors' qualifications, the principal distinction between mineral agreements and FTAAs is the
maximum contract area to which a qualified person may hold or be granted.211 "Large-scale" under R.A. No. 7942 is determined by the
size of the contract area, as opposed to the amount invested (US $50,000,000.00), which was the standard under E.O. 279.

Like a CA or a JVA, an FTAA is subject to negotiation.212 The Government's contributions, in the form of taxes, in an FTAA is
identical to its contributions in the two mineral agreements, save that in an FTAA:

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

III

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

THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279

Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was executed, did not come into effect.

E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days before the opening of Congress on July 27,
1987.214 Section 8 of the E.O. states that the same "shall take effect immediately." This provision, according to petitioners, runs
counter to Section 1 of E.O. No. 200,215 which provides:

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

On that premise, petitioners contend that E.O. No. 279 could have only taken effect fifteen days after its publication at which time
Congress had already convened and the President's power to legislate had ceased.

Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in Miners Association of the Philippines v.
Factoran, supra. This is of course incorrect for the issue in Miners Association was not the validity of E.O. No. 279 but that of DAO
Nos. 57 and 82 which were issued pursuant thereto.
Nevertheless, petitioners' contentions have no merit.

It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other than – even before – the 15-
day period after its publication. Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O.
No. 200. Indeed, this is the very essence of the phrase "unless it is otherwise provided" in Section 1 thereof. Section 1, E.O. No. 200,
therefore, applies only when a statute does not provide for its own date of effectivity.

What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Tañada v. Tuvera,217is the publication of
the law for without such notice and publication, there would be no basis for the application of the maxim "ignorantia legis n[eminem]
excusat." It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no
notice whatsoever, not even a constructive one.

While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its invalidation since the
Constitution, being "the fundamental, paramount and supreme law of the nation," is deemed written in the law.218 Hence, the due
process clause,219 which, so Tañada held, mandates the publication of statutes, is read into Section 8 of E.O. No. 279. Additionally,
Section 1 of E.O. No. 200 which provides for publication "either in the Official Gazette or in a newspaper of general circulation in the
Philippines," finds suppletory application. It is significant to note that E.O. No. 279 was actually published in the Official
Gazette220 on August 3, 1987.

From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Tañada v. Tuvera, this Court holds that E.O. No.
279 became effective immediately upon its publication in the Official Gazette on August 3, 1987.

That such effectivity took place after the convening of the first Congress is irrelevant. At the time President Aquino issued E.O. No.
279 on July 25, 1987, she was still validly exercising legislative powers under the Provisional Constitution.221 Article XVIII
(Transitory Provisions) of the 1987 Constitution explicitly states:

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

The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it did not prevent the
effectivity of laws she had previously enacted.

There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute.

THE CONSTITUTIONALITY OF THE WMCP FTAA

Petitioners submit that, in accordance with the text of Section 2, Article XII of the Constitution, FTAAs should be limited to
"technical or financial assistance" only. They observe, however, that, contrary to the language of the Constitution, the WMCP FTAA
allows WMCP, a fully foreign-owned mining corporation, to extend more than mere financial or technical assistance to the State, for it
permits WMCP to manage and operate every aspect of the mining activity. 222

Petitioners' submission is well-taken. It is a cardinal rule in the interpretation of constitutions that the instrument must be so construed
as to give effect to the intention of the people who adopted it.223 This intention is to be sought in the constitution itself, and the
apparent meaning of the words is to be taken as expressing it, except in cases where that assumption would lead to absurdity,
ambiguity, or contradiction.224 What the Constitution says according to the text of the provision, therefore, compels acceptance and
negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say.225 Accordingly,
following the literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration,
development, and utilization of petroleum, minerals and mineral oils should be limited to "technical" or "financial" assistance only.

WMCP nevertheless submits that the word "technical" in the fourth paragraph of Section 2 of E.O. No. 279 encompasses a "broad
number of possible services," perhaps, "scientific and/or technological in basis."226 It thus posits that it may also well include "the area
of management or operations . . . so long as such assistance requires specialized knowledge or skills, and are related to the exploration,
development and utilization of mineral resources."227

This Court is not persuaded. As priorly pointed out, the phrase "management or other forms of assistance" in the 1973 Constitution
was deleted in the 1987 Constitution, which allows only "technical or financial assistance." Casus omisus pro omisso habendus est. A
person, object or thing omitted from an enumeration must be held to have been omitted intentionally.228 As will be shown later, the
management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely
the evil that the drafters of the 1987 Constitution sought to eradicate.

Respondents insist that "agreements involving technical or financial assistance" is just another term for service contracts. They
contend that the proceedings of the CONCOM indicate "that although the terminology 'service contract' was avoided [by the
Constitution], the concept it represented was not." They add that "[t]he concept is embodied in the phrase 'agreements involving
financial or technical assistance.'"229 And point out how members of the CONCOM referred to these agreements as "service contracts."
For instance:

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

MR. VILLEGAS. That is right.

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

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

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

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

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

x x x.

MR. GARCIA. Thank you.

I vote no. x x x.

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

xxx

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

x x x.

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

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

x x x.

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

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

This Court is likewise not persuaded.

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

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

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

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

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

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

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

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

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

So we are still limiting it only to Filipino citizens.

x x x.

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

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

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

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

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

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

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

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

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

 MR. DAVIDE. It will not take three minutes.

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

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

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

Thank you.239 [Emphasis supplied.]

The opinion of another member of the CONCOM is persuasive240 and leaves no doubt as to the intention of the framers to eliminate
service contracts altogether. He writes:

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

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

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

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

Furthermore, it appears that Proposed Resolution No. 496,242 which was the draft Article on National Economy and Patrimony,
adopted the concept of "agreements . . . involving either technical or financial assistance" contained in the "Draft of the 1986 U.P.
Law Constitution Project" (U.P. Law draft) which was taken into consideration during the deliberation of the CONCOM.243 The
former, as well as Article XII, as adopted, employed the same terminology, as the comparative table below shows:

DRAFT OF THE UP LAW PROPOSED RESOLUTION NO. 496 ARTICLE XII OF THE 1987
CONSTITUTION PROJECT OF THE CONSTITUTIONAL CONSTITUTION
COMMISSION

Sec. 1. All lands of the public domain,
waters, minerals, coal, petroleum and
other mineral oils, all forces of
potential energy, fisheries, flora and
fauna and other natural resources of
the Philippines 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.
Such activities may be directly
undertaken by the state, or it may
enter into co-production, joint venture,
production sharing agreements with
Filipino citizens or corporations or
associations sixty per cent of whose
voting stock or controlling interest is
owned by such citizens for a period of
Sec. 3. All lands of the public domain,
waters, minerals, coal, petroleum and
other mineral oils, all forces of
potential energy, fisheries, forests,
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.
Such activities may be directly
undertaken by the State, or it may
enter into co-production, joint venture,
production-sharing agreements with
Filipino citizens or corporations or
associations at least sixty per cent of
whose voting stock or controlling
interest is owned by such citizens.
Sec. 2. All lands of the public domain,
waters, minerals, coal, petroleum, and
other mineral oils, all forces of
potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and
other natural resources are owned by
the State. With the exception of
agricultural lands, all other natural
resources shall not be alienated. The
exploration, development, and
utilization of natural resources shall be
under the full control and supervision
of the State. The State may directly
undertake such activities or it may
enter into co-production, joint venture,
or production-sharing agreements with
Filipino citizens, or corporations or
associations at least sixty per centum
of whose capital is owned by such
citizens. Such agreements may be for
 not more than twenty-five years,
renewable for not more than twenty-
five years and under such terms and
conditions as may be provided by law.
In case as to water rights for irrigation,
water supply, fisheries, or industrial
uses other than the development of
water power, beneficial use may be
the measure and limit of the grant.
The National Assembly may by law
allow small scale utilization of natural
resources by Filipino citizens.
The National Assembly, may, by two-
thirds vote of all its members by
special law provide the terms and
conditions under which a foreign-
owned corporation may enter into
agreements with the government
involving either technical or
financial assistance for large-scale
exploration, development, or
utilization of natural resources.
[Emphasis supplied.]
Such agreements shall be for a period
of twenty-five years, renewable for
not more than twenty-five years, and
under such term and conditions as
may be provided by law. In cases of
water rights for irrigation, water
supply, fisheries or industrial uses
other than the development for water
power, beneficial use may be the
measure and limit of the grant.
The Congress may by law allow
small-scale utilization of natural
resources by Filipino citizens, as well
as cooperative fish farming in rivers,
lakes, bays, and lagoons.
The President with the concurrence of
Congress, by special law, shall
provide the terms and conditions
under which a foreign-owned
corporation may enter into agreements
with the government involving either
technical or financial assistance for
large-scale exploration, development,
and utilization of natural resources.
[Emphasis supplied.]
a period not exceeding twenty-five
years, renewable for not more than
twenty-five years, and under such
terms and conditions as may be
provided by law. In case of water
rights for irrigation, water supply,
fisheries, or industrial uses other than
the development of water power,
beneficial use may be the measure and
limit of the grant.
The State shall protect the nation's
marine wealth in its archipelagic
waters, territorial sea, and exclusive
economic zone, and reserve its use and
enjoyment exclusively to Filipino
citizens.
The Congress may, by law, allow
small-scale utilization of natural
resources by Filipino citizens, as well
as cooperative fish farming, with
priority to subsistence fishermen and
fish-workers in rivers, lakes, bays, and
lagoons.
The President may enter into
agreements with foreign-owned
corporations involving either
technical or financial assistance for
large-scale exploration, development,
and utilization of minerals, petroleum,
and other mineral oils according to the
general terms and conditions provided
by law, based on real contributions to
the economic growth and general
welfare of the country. In such
agreements, the State shall promote
the development and use of local
scientific and technical resources.
[Emphasis supplied.]

The President shall notify the

Congress of every contract entered
into in accordance with this provision,
within thirty days from its execution.

The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase "technical or financial
assistance."

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

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

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

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

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

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

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

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

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

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

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

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

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

Accordingly, Professor Agabin recommends that:

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

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

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

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

In the annotations on the proposed Article on National Economy and Patrimony, the U.P. Law draft summarized the rationale therefor,
thus:

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

Under the proposed provision, only technical assistance or financial assistance agreements may be entered into, and only for large-
scale activities. These are contract forms which recognize and assert our sovereignty and ownership over natural resources since the
foreign entity is just a pure contractor and not a beneficial owner of our economic resources. The proposal recognizes the need for
capital and technology to develop our natural resources without sacrificing our sovereignty and control over such resources by the
safeguard of a special law which requires two-thirds vote of all the members of the Legislature. This will ensure that such agreements
will be debated upon exhaustively and thoroughly in the National Assembly to avert prejudice to the nation.249 [Emphasis supplied.]
The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial ownership of the country's
natural resources to foreign owned corporations. While, in theory, the State owns these natural resources – and Filipino citizens, their
beneficiaries – service contracts actually vested foreigners with the right to dispose, explore for, develop, exploit, and utilize the same.
Foreigners, not Filipinos, became the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the
constitutional ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader perspective, with Philippine
sovereignty.

The proponents nevertheless acknowledged the need for capital and technical know-how in the large-scale exploitation, development
and utilization of natural resources – the second paragraph of the proposed draft itself being an admission of such scarcity. Hence,
they recommended a compromise to reconcile the nationalistic provisions dating back to the 1935 Constitution, which reserved all
natural resources exclusively to Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate in these
resources through service contracts. Such a compromise called for the adoption of a new system in the exploration, development, and
utilization of natural resources in the form of technical agreements or financial agreements which, necessarily, are distinct concepts
from service contracts.

The replacement of "service contracts" with "agreements… involving either technical or financial assistance," as well as the deletion
of the phrase "management or other forms of assistance," assumes greater significance when note is taken that the U.P. Law draft
proposed other equally crucial changes that were obviously heeded by the CONCOM. These include the abrogation of the concession
system and the adoption of new "options" for the State in the exploration, development, and utilization of natural resources. The
proponents deemed these changes to be more consistent with the State's ownership of, and its "full control and supervision" (a phrase
also employed by the framers) over, such resources. The Project explained:

3. In line with the State ownership of natural resources, the State should take a more active role in the exploration, development, and
utilization of natural resources, than the present practice of granting licenses, concessions, or leases – hence the provision that said
activities shall be under the full control and supervision of the State. There are three major schemes by which the State could
undertake these activities: first, directly by itself; second, by virtue of co-production, joint venture, production sharing agreements
with Filipino citizens or corporations or associations sixty per cent (60%) of the voting stock or controlling interests of which are
owned by such citizens; or third, with a foreign-owned corporation, in cases of large-scale exploration, development, or utilization of
natural resources through agreements involving either technical or financial assistance only. x x x.

At present, under the licensing concession or lease schemes, the government benefits from such benefits only through fees, charges, ad
valorem taxes and income taxes of the exploiters of our natural resources. Such benefits are very minimal compared with the
enormous profits reaped by theses licensees, grantees, concessionaires. Moreover, some of them disregard the conservation of natural
resources and do not protect the environment from degradation. The proposed role of the State will enable it to a greater share in the
profits – it can also actively husband its natural resources and engage in developmental programs that will be beneficial to them.

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

Professor Agabin, in particular, after taking pains to illustrate the similarities between the two systems, concluded that the service
contract regime was but a "rehash" of the concession system. "Old wine in new bottles," as he put it. The rejection of the service
contract regime, therefore, is in consonance with the abolition of the concession system.

In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed changes, there is no
doubt that the framers considered and shared the intent of the U.P. Law proponents in employing the phrase "agreements . . . involving
either technical or financial assistance."

While certain commissioners may have mentioned the term "service contracts" during the CONCOM deliberations, they may not have
been necessarily referring to the concept of service contracts under the 1973 Constitution. As noted earlier, "service contracts" is a
term that assumes different meanings to different people.251 The commissioners may have been using the term loosely, and not in its
technical and legal sense, to refer, in general, to agreements concerning natural resources entered into by the Government with foreign
corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution provision allowing service
contracts.

It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in response to Sr. Tan's question,
Commissioner Villegas commented that, other than congressional notification, the only difference between "future" and "past"
"service contracts" is the requirement of a general law as there were no laws previously authorizing the same.252 However, such
remark is far outweighed by his more categorical statement in his exchange with Commissioner Quesada that the draft article "does
not permit foreign investors to participate" in the nation's natural resources – which was exactly what service contracts did – except to
provide "technical or financial assistance."253

In the case of the other commissioners, Commissioner Nolledo himself clarified in his work that the present charter prohibits service
contracts.254 Commissioner Gascon was not totally averse to foreign participation, but favored stricter restrictions in the form of
majority congressional concurrence.255 On the other hand, Commissioners Garcia and Tadeo may have veered to the extreme side of
the spectrum and their objections may be interpreted as votes against any foreign participation in our natural resources whatsoever.

WMCP cites Opinion No. 75, s. 1987,256 and Opinion No. 175, s. 1990257 of the Secretary of Justice, expressing the view that a
financial or technical assistance agreement "is no different in concept" from the service contract allowed under the 1973 Constitution.
This Court is not, however, bound by this interpretation. When an administrative or executive agency renders an opinion or issues a
statement of policy, it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is
the courts that finally determine what the law means.258

In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned corporations is an exception
to the rule that participation in the nation's natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be
construed strictly against their enjoyment by non-Filipinos. As Commissioner Villegas emphasized, the provision is "very
restrictive."259 Commissioner Nolledo also remarked that "entering into service contracts is an exception to the rule on protection of
natural resources for the interest of the nation and, therefore, being an exception, it should be subject, whenever possible, to stringent
rules."260 Indeed, exceptions should be strictly but reasonably construed; they extend only so far as their language fairly warrants and
all doubts should be resolved in favor of the general provision rather than the exception.261

With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service contracts.
Although the statute employs the phrase "financial and technical agreements" in accordance with the 1987 Constitution, it actually
treats these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law.

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

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

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

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

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

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

"Utilization" "means the extraction or disposition of minerals."268 A stipulation that the proponent shall dispose of the minerals and
byproducts produced at the highest price and more advantageous terms and conditions as provided for under the implementing rules
and regulations is required to be incorporated in every FTAA.269

A foreign-owned/-controlled corporation may likewise be granted a mineral processing permit.270 "Mineral processing" is the milling,
beneficiation or upgrading of ores or minerals and rocks or by similar means to convert the same into marketable products.271

An FTAA contractor makes a warranty that the mining operations shall be conducted in accordance with the provisions of R.A. No.
7942 and its implementing rules272 and for work programs and minimum expenditures and commitments.273 And it obliges itself to
furnish the Government records of geologic, accounting, and other relevant data for its mining operation.274

"Mining operation," as the law defines it, means mining activities involving exploration, feasibility, development, utilization, and
processing.275

The underlying assumption in all these provisions is that the foreign contractor manages the mineral resources, just like the foreign
contractor in a service contract.

Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights that it grants contractors in
mineral agreements (MPSA, CA and JV).276 Parenthetically, Sections 72 to 75 use the term "contractor," without distinguishing
between FTAA and mineral agreement contractors. And so does "holders of mining rights" in Section 76. A foreign contractor may
even convert its FTAA into a mineral agreement if the economic viability of the contract area is found to be inadequate to justify
large-scale mining operations,277 provided that it reduces its equity in the corporation, partnership, association or cooperative to forty
percent (40%).278

Finally, under the Act, an FTAA contractor warrants that it "has or has access to all the financing, managerial, and technical
expertise. . . ."279 This suggests that an FTAA contractor is bound to provide some management assistance – a form of assistance that
has been eliminated and, therefore, proscribed by the present Charter.

By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R.A. No.
7942 have in effect conveyed beneficial ownership over the nation's mineral resources to these contractors, leaving the State with
nothing but bare title thereto.

Moreover, the same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained 60%-40%
capitalization requirement for corporations or associations engaged in the exploitation, development and utilization of Philippine
natural resources.
In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the Constitution:

(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:

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

(2) Section 23,280 which specifies the rights and obligations of an exploration permittee, insofar as said section applies to a
financial or technical assistance agreement,

(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance agreement;

(4) Section 35,281 which enumerates the terms and conditions for every financial or technical assistance agreement;

(5) Section 39,282 which allows the contractor in a financial and technical assistance agreement to convert the same into a
mineral production-sharing agreement;

(6) Section 56,283 which authorizes the issuance of a mineral processing permit to a contractor in a financial and technical
assistance agreement;

The following provisions of the same Act are likewise void as they are dependent on the foregoing provisions and cannot stand on
their own:

(1) Section 3 (g),284 which defines the term "contractor," insofar as it applies to a financial or technical assistance agreement.

Section 34,285 which prescribes the maximum contract area in a financial or technical assistance agreements;

Section 36,286 which allows negotiations for financial or technical assistance agreements;

Section 37,287 which prescribes the procedure for filing and evaluation of financial or technical assistance agreement
proposals;

Section 38,288 which limits the term of financial or technical assistance agreements;

Section 40,289 which allows the assignment or transfer of financial or technical assistance agreements;

Section 41,290 which allows the withdrawal of the contractor in an FTAA;

The second and third paragraphs of Section 81,291 which provide for the Government's share in a financial and technical
assistance agreement; and

Section 90,292 which provides for incentives to contractors in FTAAs insofar as it applies to said contractors;

When the parts of the statute are so mutually dependent and connected as conditions, considerations, inducements, or compensations
for each other, as to warrant a belief that the legislature intended them as a whole, and that if all could not be carried into effect, the
legislature would not pass the residue independently, then, if some parts are unconstitutional, all the provisions which are thus
dependent, conditional, or connected, must fall with them.293

There can be little doubt that the WMCP FTAA itself is a service contract.

Section 1.3 of the WMCP FTAA grants WMCP "the exclusive right to explore, exploit, utilise[,] process and dispose of all Minerals
products and by-products thereof that may be produced from the Contract Area."294 The FTAA also imbues WMCP with the following
rights:

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

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

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

xxx

(f) to construct roadways, mining, drainage, power generation and transmission facilities and all other types of works on the
Contract Area;
 (g) to erect, install or place any type of improvements, supplies, machinery and other equipment relating to the Mining
Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all parts thereof;

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

xxx

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

x x x. 295

All materials, equipment, plant and other installations erected or placed on the Contract Area remain the property of WMCP, which
has the right to deal with and remove such items within twelve months from the termination of the FTAA.296

Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing, technology, management and personnel necessary for the
Mining Operations." The mining company binds itself to "perform all Mining Operations . . . providing all necessary services,
technology and financing in connection therewith,"297 and to "furnish all materials, labour, equipment and other installations that may
be required for carrying on all Mining Operations."298> WMCP may make expansions, improvements and replacements of the mining
facilities and may add such new facilities as it considers necessary for the mining operations.299

These contractual stipulations, taken together, grant WMCP beneficial ownership over natural resources that properly belong to the
State and are intended for the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are precisely the
vices that the fundamental law seeks to avoid, the evils that it aims to suppress. Consequently, the contract from which they spring
must be struck down.

In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the Promotion and Protection of Investments
between the Philippine and Australian Governments, which was signed in Manila on January 25, 1995 and which entered into force on
December 8, 1995.

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

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

The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn, would amount to a violation
of Section 3, Article II of the Constitution adopting the generally accepted principles of international law as part of the law of the land.
One of these generally accepted principles is pacta sunt servanda, which requires the performance in good faith of treaty obligations.

Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that "the Philippines could not . . .
deprive an Australian investor (like [WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without likewise
nullifying the service contracts entered into before the enactment of RA 7942 . . .," the annulment of the FTAA would not constitute a
breach of the treaty invoked. For this decision herein invalidating the subject FTAA forms part of the legal system of the
Philippines.301 The equal protection clause302 guarantees that such decision shall apply to all contracts belonging to the same class,
hence, upholding rather than violating, the "fair and equitable treatment" stipulation in said treaty.

One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section 2, Article XII of the
Constitution, the President may enter into agreements involving "either technical or financial assistance" only. The agreement in
question, however, is a technical and financial assistance agreement.

Petitioners' contention does not lie. To adhere to the literal language of the Constitution would lead to absurd consequences.303 As
WMCP correctly put it:

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

Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of "either/or." A constitution is not to
be interpreted as demanding the impossible or the impracticable; and unreasonable or absurd consequences, if possible, should be
avoided.305 Courts are not to give words a meaning that would lead to absurd or unreasonable consequences and a literal interpretation
is to be rejected if it would be unjust or lead to absurd results.306 That is a strong argument against its adoption.307 Accordingly,
petitioners' interpretation must be rejected.

The foregoing discussion has rendered unnecessary the resolution of the other issues raised by the petition.

WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void:

(1) The following provisions of Republic Act No. 7942:

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

(b) Section 23,

(c) Section 33 to 41,

(d) Section 56,

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

(f) Section 90.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s. 1996 which are not
in conformity with this Decision, and

(3) The Financial and Technical Assistance Agreement between the Government of the Republic of the Philippines and
WMC Philippines, Inc.

G.R. No. 124293             January 31, 2005

J.G. SUMMIT HOLDINGS, INC., petitioner, 

vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET PRIVATIZATION
TRUST; and PHILYARDS HOLDINGS, INC., respondents.

RESOLUTION

PUNO, J.:

For resolution before this Court are two motions filed by the petitioner, J.G. Summit Holdings, Inc. for reconsideration of our
Resolution dated September 24, 2003 and to elevate this case to the Court En Banc. The petitioner questions the Resolution which
reversed our Decision of November 20, 2000, which in turn reversed and set aside a Decision of the Court of Appeals promulgated on
July 18, 1995.

I. Facts

The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as follows:

On January 27, 1997, the National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint
Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and
management of the Subic National Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will contribute ₱330 million for the capitalization of
PHILSECO in the proportion of 60%-40% respectively. One of its salient features is the grant to the parties of the right of first
refusal should either of them decide to sell, assign or transfer its interest in the joint venture, viz:

1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] to any third party without giving the
other under the same terms the right of first refusal. This provision shall not apply if the transferee is a corporation owned or
controlled by the GOVERNMENT or by a KAWASAKI affiliate.

On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such
interests were subsequently transferred to the National Government pursuant to Administrative Order No. 14. On December 8, 1986,
President Corazon C. Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset
Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National
Government. Thereafter, on February 27, 1987, a trust agreement was entered into between the National Government and the APT
wherein the latter was named the trustee of the National Government's share in PHILSECO. In 1989, as a result of a quasi-
reorganization of PHILSECO to settle its huge obligations to PNB, the National Government's shareholdings in PHILSECO increased
to 97.41% thereby reducing KAWASAKI's shareholdings to 2.59%.

In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government's
share in PHILSECO to private entities. After a series of negotiations between the APT and KAWASAKI, they agreed that the latter's
right of first refusal under the JVA be "exchanged" for the right to top by five percent (5%) the highest bid for the said shares. They
further agreed that KAWASAKI would be entitled to name a company in which it was a stockholder, which could exercise the right to
top. On September 7, 1990, KAWASAKI informed APT that Philyards Holdings, Inc. (PHI)1 would exercise its right to top.

At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of the JVA between NIDC and
KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for the National Government's 87.6% equity share in
PHILSECO. The provisions of the ASBR were explained to the interested bidders who were notified that the bidding would be held
on December 2, 1993. A portion of the ASBR reads:

1.0 The subject of this Asset Privatization Trust (APT) sale through public bidding is the National Government's equity in PHILSECO
consisting of 896,869,942 shares of stock (representing 87.67% of PHILSECO's outstanding capital stock), which will be sold as a
whole block in accordance with the rules herein enumerated.

xxx xxx xxx

2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the Committee
on Privatization (COP).

2.1 APT reserves the right in its sole discretion, to reject any or all bids.

3.0 This public bidding shall be on an Indicative Price Bidding basis. The Indicative price set for the National Government's 87.67%
equity in PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION (₱1,300,000,000.00).

xxx xxx xxx

6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting following the bidding, for the
purpose of determining whether or not it should be endorsed by the APT Board of Trustees to the COP, and the latter approves the
same. The APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc., that the highest bid is
acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a
period of thirty (30) calendar days from the date of receipt of such advice from APT within which to exercise their "Option to Top the
Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof.

6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option to Top the Highest Bid," they
shall so notify the APT about such exercise of their option and deposit with APT the amount equivalent to ten percent (10%) of the
highest bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. APT will then serve
notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they
shall have a period of ninety (90) days from the receipt of the APT's notice within which to pay the balance of their bid price.

6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to exercise their "Option to Top the Highest
Bid" within the thirty (30)-day period, APT will declare the highest bidder as the winning bidder.

xxx xxx xxx

12.0 The bidder shall be solely responsible for examining with appropriate care these rules, the official bid forms, including any
addenda or amendments thereto issued during the bidding period. The bidder shall likewise be responsible for informing itself with
respect to any and all conditions concerning the PHILSECO Shares which may, in any manner, affect the bidder's proposal. Failure on
the part of the bidder to so examine and inform itself shall be its sole risk and no relief for error or omission will be given by APT or
COP. . . .

At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc.2 submitted a bid of Two Billion and Thirty Million Pesos
(₱2,030,000,000.00) with an acknowledgment of KAWASAKI/[PHILYARDS'] right to top, viz:

4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to act on APT's recommendation based on the
result of this bidding. Should the COP approve the highest bid, APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such advice from APT
within which to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest bid plus five (5%) percent
thereof.

As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993 "subject to the right of Kawasaki
Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in the bidding rules."

On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to top its bid on the grounds that: (a) the
KAWASAKI/PHI consortium composed of KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life
violated the ASBR because the last four (4) companies were the losing bidders thereby circumventing the law and prejudicing the
weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c) giving the same option to top to PHI constituted
unwarranted benefit to a third party; (d) no right of first refusal can be exercised in a public bidding or auction sale; and (e) the JG
Summit consortium was not estopped from questioning the proceedings.

On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the purchase price of the subject bidding. On
February 7, 1994, the APT notified petitioner that PHI had exercised its option to top the highest bid and that the COP had approved
the same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock Purchase Agreement. Consequently,
petitioner filed with this Court a Petition for Mandamus under G.R. No. 114057. On May 11, 1994, said petition was referred to the
Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of merit. It ruled that the petition for mandamus
was not the proper remedy to question the constitutionality or legality of the right of first refusal and the right to top that was exercised
by KAWASAKI/PHI, and that the matter must be brought "by the proper party in the proper forum at the proper time and threshed out
in a full blown trial." The Court of Appeals further ruled that the right of first refusal and the right to top are prima facie legal and that
the petitioner, "by participating in the public bidding, with full knowledge of the right to top granted to KAWASAKI/[PHILYARDS]
is…estopped from questioning the validity of the award given to [PHILYARDS] after the latter exercised the right to top and had paid
in full the purchase price of the subject shares, pursuant to the ASBR." Petitioner filed a Motion for Reconsideration of said Decision
which was denied on March 15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging grave abuse of discretion
on the part of the appellate court.

On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the Court of Appeals erred when it dismissed
the petition on the sole ground of the impropriety of the special civil action of mandamus because the petition was also one of
certiorari. It further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be sixty percent (60%) Filipino-
owned. Consequently, the right to top granted to KAWASAKI under the Asset Specific Bidding Rules (ASBR) drafted for the sale of
the 87.67% equity of the National Government in PHILSECO is illegal — not only because it violates the rules on competitive
bidding — but more so, because it allows foreign corporations to own more than 40% equity in the shipyard. It also held that
"although the petitioner had the opportunity to examine the ASBR before it participated in the bidding, it cannot be estopped from
questioning the unconstitutional, illegal and inequitable provisions thereof." Thus, this Court voided the transfer of the national
government's 87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to
take title to the said shares, viz:

WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid price of Two Billion Thirty Million Pesos
(₱2,030,000,000.00), less its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered to:

(a) accept the said amount of ₱2,030,000,000.00 less bid deposit and interests from petitioner;

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6% of PHILSECO's total
capitalization;

(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One Million Five Hundred Thousand
Pesos (₱2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to PHI.

SO ORDERED.

In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x resolution: (1) Whether PHILSECO is a
public utility; (2) Whether under the 1977 JVA, KAWASAKI can exercise its right of first refusal only up to 40% of the total
capitalization of PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the principles of competitive
bidding.3 (citations omitted)

In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first issue, we held that Philippine
Shipyard and Engineering Corporation (PHILSECO) is not a public utility, as by nature, a shipyard is not a public utility4 and that no
law declares a shipyard to be a public utility.5 On the second issue, we found nothing in the 1977 Joint Venture Agreement (JVA)
which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECO’s total
capitalization.6 On the final issue, we held that the right to top granted to KAWASAKI in exchange for its right of first refusal did not
violate the principles of competitive bidding.7

On October 20, 2003, the petitioner filed a Motion for Reconsideration8 and a Motion to Elevate This Case to the Court En
Banc.9 Public respondents Committee on Privatization (COP) and Asset Privatization Trust (APT), and private respondent Philyards
Holdings, Inc. (PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.’s (JG Summit’s) Motion for Reconsideration and
Motion to Elevate This Case to the Court En Banc on January 29, 2004 and February 3, 2004, respectively.

II. Issues

Based on the foregoing, the relevant issues to resolve to end this litigation are the following:

1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.

2. Whether the motion for reconsideration raises any new matter or cogent reason to warrant a reconsideration of this Court’s
Resolution of September 24, 2003.
Motion to Elevate this Case to the

Court En Banc

The petitioner prays for the elevation of the case to the Court en banc on the following grounds:

1. The main issue of the propriety of the bidding process involved in the present case has been confused with the policy issue
of the supposed fate of the shipping industry which has never been an issue that is determinative of this case.10

2. The present case may be considered under the Supreme Court Resolution dated February 23, 1984 which included
among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by the
Court en banc or in division may be modified or reversed.11

3. There was clear executive interference in the judicial functions of the Court when the Honorable Jose Isidro Camacho,
Secretary of Finance, forwarded to Chief Justice Davide, a memorandum dated November 5, 2001, attaching a copy of the
Foreign Chambers Report dated October 17, 2001, which matter was placed in the agenda of the Court and noted by it in a
formal resolution dated November 28, 2001.12

Opposing J.G. Summit’s motion to elevate the case en banc, PHILYARDS points out the petitioner’s inconsistency in
previously opposing PHILYARDS’ Motion to Refer the Case to the Court En Banc. PHILYARDS contends that J.G. Summit should
now be estopped from asking that the case be referred to the Court en banc. PHILYARDS further contends that the Supreme Court en
banc is not an appellate court to which decisions or resolutions of its divisions may be appealed citing Supreme Court Circular No. 2-
89 dated February 7, 1989.13 PHILYARDS also alleges that there is no novel question of law involved in the present case as the
assailed Resolution was based on well-settled jurisprudence. Likewise, PHILYARDS stresses that the Resolution was merely an
outcome of the motions for reconsideration filed by it and the COP and APT and is "consistent with the inherent power of courts to
‘amend and control its process and orders so as to make them conformable to law and justice.’ (Rule 135, sec. 5)"14 Private respondent
belittles the petitioner’s allegations regarding the change in ponente and the alleged executive interference as shown by former
Secretary of Finance Jose Isidro Camacho’s memorandum dated November 5, 2001 arguing that these do not justify a referral of the
present case to the Court en banc.

In insisting that its Motion to Elevate This Case to the Court En Banc should be granted, J.G. Summit further argued that: its
Opposition to the Office of the Solicitor General’s Motion to Refer is different from its own Motion to Elevate; different grounds are
invoked by the two motions; there was unwarranted "executive interference"; and the change in ponente is merely noted in asserting
that this case should be decided by the Court en banc.15

We find no merit in petitioner’s contention that the propriety of the bidding process involved in the present case has been confused
with the policy issue of the fate of the shipping industry which, petitioner maintains, has never been an issue that is determinative of
this case. The Court’s Resolution of September 24, 2003 reveals a clear and definitive ruling on the propriety of the bidding process.
In discussing whether the right to top granted to KAWASAKI in exchange for its right of first refusal violates the principles of
competitive bidding, we made an exhaustive discourse on the rules and principles of public bidding and whether they were complied
with in the case at bar.16This Court categorically ruled on the petitioner’s argument that PHILSECO, as a shipyard, is a public utility
which should maintain a 60%-40% Filipino-foreign equity ratio, as it was a pivotal issue. In doing so, we recognized the impact of our
ruling on the shipbuilding industry which was beyond avoidance.17

We reject petitioner’s argument that the present case may be considered under the Supreme Court Resolution dated February 23, 1984
which included among en banc cases those involving a novel question of law and those where a doctrine or principle laid down by the
court en banc or in division may be modified or reversed. The case was resolved based on basic principles of the right of first refusal
in commercial law and estoppel in civil law. Contractual obligations arising from rights of first refusal are not new in this jurisdiction
and have been recognized in numerous cases.18 Estoppel is too known a civil law concept to require an elongated discussion.
Fundamental principles on public bidding were likewise used to resolve the issues raised by the petitioner. To be sure, petitioner leans
on the right to top in a public bidding in arguing that the case at bar involves a novel issue. We are not swayed. The right to top was
merely a condition or a reservation made in the bidding rules which was fully disclosed to all bidding parties. In Bureau Veritas,
represented by Theodor H. Hunermann v. Office of the President, et al., 19 we dealt with this conditionality, viz:

x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that
in an "invitation to bid, there is a condition imposed upon the bidders to the effect that the bidding shall be subject to the right of
the government to reject any and all bids subject to its discretion. In the case at bar, the government has made its choice and
unless an unfairness or injustice is shown, the losing bidders have no cause to complain nor right to dispute that choice. This is
a well-settled doctrine in this jurisdiction and elsewhere."

The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with that function. The
discretion given to the authorities on this matter is of such wide latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this
discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation, and deliberation. This task can
best be discharged by the Government agencies concerned, not by the Courts. The role of the Courts is to ascertain whether a branch
or instrumentality of the Government has transgressed its constitutional boundaries. But the Courts will not interfere with executive or
legislative discretion exercised within those boundaries. Otherwise, it strays into the realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award of a contract made by a
government entity. Grave abuse of discretion implies a capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v.
Intermediate Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must be so patent and gross as
to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined by law, as to act at all in contemplation of
law, where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility (Litton Mills, Inc. v. Galleon
Trader, Inc., et al[.], L-40867, 26 July 1988, 163 SCRA 489).

The facts in this case do not indicate any such grave abuse of discretion on the part of public respondents when they awarded the CISS
contract to Respondent SGS. In the "Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee made an express
reservation of the right of the Government to "reject any or all bids or any part thereof or waive any defects contained
thereon and accept an offer most advantageous to the Government." It is a well-settled rule that where such reservation is
made in an Invitation to Bid, the highest or lowest bidder, as the case may be, is not entitled to an award as a matter of
right (C & C Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or any Bid may be
rejected or, in the exercise of sound discretion, the award may be made to another than the lowest bidder (A.C. Esguerra & Sons v.
Aytona, supra, citing 43 Am. Jur., 788). (emphases supplied)1awphi1.nét

Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the government in the bidding rules which
was made known to all parties. It was a condition imposed on all bidders equally, based on the APT’s exercise of its discretion in
deciding on how best to privatize the government’s shares in PHILSECO. It was not a whimsical or arbitrary condition plucked
from the ether and inserted in the bidding rules but a condition which the APT approved as the best way the government could comply
with its contractual obligations to KAWASAKI under the JVA and its mandate of getting the most advantageous deal for the
government. The right to top had its history in the mutual right of first refusal in the JVA and was reached by agreement of the
government and KAWASAKI.

Further, there is no "executive interference" in the functions of this Court by the mere filing of a memorandum by Secretary of
Finance Jose Isidro Camacho. The memorandum was merely "noted" to acknowledge its filing. It had no further legal significance.
Notably too, the assailed Resolution dated September 24, 2003 was decided unanimously by the Special First Division in favor
of the respondents.

Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court20 and the Court en banc is not an
appellate court to which decisions or resolutions of a Division may be appealed.21

For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.

Motion for Reconsideration

Three principal arguments were raised in the petitioner’s Motion for Reconsideration. First, that a fair resolution of the case should be
based on contract law, not on policy considerations; the contracts do not authorize the right to top to be derived from the right of first
refusal.22 Second, that neither the right of first refusal nor the right to top can be legally exercised by the consortium which is not the
proper party granted such right under either the JVA or the Asset Specific Bidding Rules (ASBR).23 Third, that the maintenance of the
60%-40% relationship between the National Investment and Development Corporation (NIDC) and KAWASAKI arises from contract
and from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-
40% constitutional limitation.24

On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to show compelling reasons to warrant
a reconsideration of the Decision of the Court.25 PHILYARDS denies that the Decision is based mainly on policy considerations and
points out that it is premised on principles governing obligations and contracts and corporate law such as the rule requiring respect for
contractual stipulations, upholding rights of first refusal, and recognizing the assignable nature of contracts rights.26 Also, the ruling
that shipyards are not public utilities relies on established case law and fundamental rules of statutory construction. PHILYARDS
stresses that KAWASAKI’s right of first refusal or even the right to top is not limited to the 40% equity of the latter.27 On the
landholding issue raised by J.G. Summit, PHILYARDS emphasizes that this is a non-issue and even involves a question of fact. Even
assuming that this Court can take cognizance of such question of fact even without the benefit of a trial, PHILYARDS opines that
landholding by PHILSECO at the time of the bidding is irrelevant because what is essential is that ultimately a qualified entity would
eventually hold PHILSECO’s real estate properties.28 Further, given the assignable nature of the right of first refusal, any applicable
nationality restrictions, including landholding limitations, would not affect the right of first refusal itself, but only the manner of its
exercise.29 Also, PHILYARDS argues that if this Court takes cognizance of J.G. Summit’s allegations of fact regarding PHILSECO’s
landholding, it must also recognize PHILYARDS’ assertions that PHILSECO’s landholdings were sold to another corporation.30 As
regards the right of first refusal, private respondent explains that KAWASAKI’s reduced shareholdings (from 40% to 2.59%) did not
translate to a deprivation or loss of its contractually granted right of first refusal.31 Also, the bidding was valid because PHILYARDS
exercised the right to top and it was of no moment that losing bidders later joined PHILYARDS in raising the purchase price.32

In cadence with the private respondent PHILYARDS, public respondents COP and APT contend:

1. The conversion of the right of first refusal into a right to top by 5% does not violate any provision in the JVA between
NIDC and KAWASAKI.

2. PHILSECO is not a public utility and therefore not governed by the constitutional restriction on foreign ownership.

3. The petitioner is legally estopped from assailing the validity of the proceedings of the public bidding as it voluntarily
submitted itself to the terms of the ASBR which included the provision on the right to top.

4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact that PHILYARDS formed a
consortium to raise the required amount to exercise the right to top the highest bid by 5% does not violate the JVA or the
ASBR.
 5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does not apply to PHILSECO
because as admitted by petitioner itself, PHILSECO no longer owns real property.

6. Petitioner’s motion to elevate the case to the Court en banc is baseless and would only delay the termination of this case.33

In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the public and private respondents in this
wise:

1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders through the exercise of a
right to top, which is contrary to law and the constitution is null and void for being violative of substantive due process and
the abuse of right provision in the Civil Code.

a. The bidders[’] right to top was actually exercised by losing bidders.

b. The right to top or the right of first refusal cannot co-exist with a genuine competitive bidding.

c. The benefits derived from the right to top were unwarranted.

2. The landholding issue has been a legitimate issue since the start of this case but is shamelessly ignored by the respondents.

a. The landholding issue is not a non-issue.

b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was agreed upon and at the time of the
bidding are most relevant.

d. Whether a shipyard is a public utility is not the core issue in this case.

3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to the right to top.

a. The history behind the birth of the right to top shows fraud and bad faith.

b. The right of first refusal was, indeed, "effectively useless."

4. Petitioner is not legally estopped to challenge the right to top in this case.

a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or against public policy.

b. Deception was patent; the right to top was an attractive nuisance.

c. The 10% bid deposit was placed in escrow.

J.G. Summit’s insistence that the right to top cannot be sourced from the right of first refusal is not new and we have already ruled on
the issue in our Resolution of September 24, 2003. We upheld the mutual right of first refusal in the JVA.34 We also ruled that nothing
in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECO’s total capitalization.35 Likewise, nothing in the JVA
or ASBR bars the conversion of the right of first refusal to the right to top. In sum, nothing new and of significance in the petitioner’s
pleading warrants a reconsideration of our ruling.

Likewise, we already disposed of the argument that neither the right of first refusal nor the right to top can legally be exercised by the
consortium which is not the proper party granted such right under either the JVA or the ASBR. Thus, we held:

The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life Assurance, Mitsui and ICTSI), has
joined PHILYARDS in the latter's effort to raise ₱2.131 billion necessary in exercising the right to top is not contrary to law, public
policy or public morals. There is nothing in the ASBR that bars the losing bidders from joining either the winning bidder (should the
right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as it did), to raise the purchase price. The
petitioner did not allege, nor was it shown by competent evidence, that the participation of the losing bidders in the public bidding was
done with fraudulent intent. Absent any proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in a free
enterprise system. The appellate court is thus correct in holding the petitioner estopped from questioning the validity of the transfer of
the National Government's shares in PHILSECO to respondent.36

Further, we see no inherent illegality on PHILYARDS’ act in seeking funding from parties who were losing bidders. This is a purely
commercial decision over which the State should not interfere absent any legal infirmity. It is emphasized that the case at bar involves
the disposition of shares in a corporation which the government sought to privatize. As such, the persons with whom PHILYARDS
desired to enter into business with in order to raise funds to purchase the shares are basically its business. This is in contrast to a case
involving a contract for the operation of or construction of a government infrastructure where the identity of the buyer/bidder or
financier constitutes an important consideration. In such cases, the government would have to take utmost precaution to protect public
interest by ensuring that the parties with which it is contracting have the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company, KAWASAKI could exercise its right
of first refusal only up to 40% of the shares of PHILSECO due to the constitutional prohibition on landholding by corporations with
more than 40% foreign-owned equity. It further argues that since KAWASAKI already held at least 40% equity in PHILSECO, the
right of first refusal was inutile and as such, could not subsequently be converted into the right to top. 37 Petitioner also asserts that, at
present, PHILSECO continues to violate the constitutional provision on landholdings as its shares are more than 40% foreign-
owned.38 PHILYARDS admits that it may have previously held land but had already divested such landholdings.39 It contends,
however, that even if PHILSECO owned land, this would not affect the right of first refusal but only the exercise thereof. If the land is
retained, the right of first refusal, being a property right, could be assigned to a qualified party. In the alternative, the land could be
divested before the exercise of the right of first refusal. In the case at bar, respondents assert that since the right of first refusal was
validly converted into a right to top, which was exercised not by KAWASAKI, but by PHILYARDS which is a Filipino corporation
(i.e., 60% of its shares are owned by Filipinos), then there is no violation of the Constitution.40 At first, it would seem that questions of
fact beyond cognizance by this Court were involved in the issue. However, the records show that PHILYARDS admits it had owned
land up until the time of the bidding.41 Hence, the only issue is whether KAWASAKI had a valid right of first refusal over
PHILSECO shares under the JVA considering that PHILSECO owned land until the time of the bidding and KAWASAKI
already held 40% of PHILSECO’s equity.

We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC. First of all, the right of
first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows
them to purchase the shares of their co-shareholder before they are offered to a third party. The agreement of co-shareholders to
mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting
land ownership to Filipinos and Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of
first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer, by itself, does
not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent. The transfer could be made either to a
nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with. Alternatively,
PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of
PHILSECO’s equity. In fact, it can even be said that if the foreign shareholdings of a landholding corporation exceeds 40%, it is
not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to own
land – that is, the corporation becomes disqualified to own land. This finds support under the basic corporate law principle that the
corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the
shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive
stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even
if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. This is the
clear import of the following provisions in the Constitution:

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 sixty per
centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water
rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the
measure and limit of the grant.

xxx xxx xxx

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain.42(emphases supplied)

The petitioner further argues that "an option to buy land is void in itself (Philippine Banking Corporation v. Lui She, 21 SCRA 52
[1967]). The right of first refusal granted to KAWASAKI, a Japanese corporation, is similarly void. Hence, the right to top, sourced
from the right of first refusal, is also void."43 Contrary to the contention of petitioner, the case of Lui She did not that say "an option to
buy land is void in itself," for we ruled as follows:

x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real
property on condition that he is granted Philippine citizenship. As this Court said in Krivenko vs. Register of Deeds:

[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the
Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution.
Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner
cannot sell or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the arrangement is a virtual
transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land (jus possidendi, jus
utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus disponendi) — rights the sum total of which make
up ownership. It is just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on,
until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this is just exactly what the
parties in this case did within this pace of one year, with the result that Justina Santos'[s] ownership of her property was reduced to a
hollow concept. If this can be done, then the Constitutional ban against alien landholding in the Philippines, as announced
in Krivenko vs. Register of Deeds, is indeed in grave peril.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of ownership as the owner could not sell or
dispose of his properties. The contract in Lui She prohibited the owner of the land from selling, donating, mortgaging, or encumbering
the property during the 50-year period of the option to buy. This is not so in the case at bar where the mutual right of first refusal in
favor of NIDC and KAWASAKI does not amount to a virtual transfer of land to a non-Filipino. In fact, the case at bar involves
a right of first refusal over shares of stock while the Lui She case involves an option to buy the land itself. As discussed earlier,
there is a distinction between the shareholder’s ownership of shares and the corporation’s ownership of land arising from the separate
juridical personalities of the corporation and its shareholders.

We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to violate the Constitution as its
foreign equity is above 40% and yet owns long-term leasehold rights which are real rights.45It cites Article 415 of the Civil Code
which includes in the definition of immovable property, "contracts for public works, and servitudes and other real rights over
immovable property."46 Any existing landholding, however, is denied by PHILYARDS citing its recent financial statements.47 First,
these are questions of fact, the veracity of which would require introduction of evidence. The Court needs to validate these factual
allegations based on competent and reliable evidence. As such, the Court cannot resolve the questions they pose. Second, J.G. Summit
misreads the provisions of the Constitution cited in its own pleadings, to wit:

29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40% corporation, and this violates the
Constitution x x x The violation continues to this day because under the law, it continues to own real property…

xxx xxx xxx

32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution (the JVA was signed in 1977),
provided:

"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain."

32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.

32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public domain are corporations at least 60% of
which is owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution applies only to ownership of land.48 It does not
extend to immovable or real property as defined under Article 415 of the Civil Code.Otherwise, we would have a strange
situation where the ownership of immovable property such as trees, plants and growing fruit attached to the land49 would be limited to
Filipinos and Filipino corporations only.

III.

WHEREFORE, in view of the foregoing, the petitioner’s Motion for Reconsideration is DENIED WITH FINALITY and the
decision appealed from is AFFIRMED. The Motion to Elevate This Case to the Court En Banc is likewise DENIED for lack of merit.

SO ORDERED.

G.R. No. 114222 April 6, 1995

FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, petitioners, 

vs.
HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of Transportation and Communications,
and EDSA LRT CORPORATION, LTD., respondents.

QUIASON, J.:

This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing and enforcing the
"Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" dated April 22, 1992, and the
"Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement To Build, Lease and Transfer a Light Rail Transit
System for EDSA" dated May 6, 1993.

Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine Senate and are suing in their
capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of the Department of
Transportation and Communications (DOTC), while private respondent EDSA LRT Corporation, Ltd. is a private corporation
organized under the laws of Hongkong.

In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan Manila, which
shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT
III), was intended to provide a mass transit system along EDSA and alleviate the congestion and growing transportation problem in
the metropolis.

On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu Levin to DOTC Secretary
Oscar Orbos, proposing to construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.

On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with DOTC.

On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by President Corazon C. Aquino. Referred to as the
Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990.

Republic Act No. 6957 provides for two schemes for the financing, construction and operation of government projects through private
initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).

In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on January 22, 1991 and
March 14, 1991, issued Department Orders Nos. 91-494 and 91-496, respectively creating the Prequalification Bids and Awards
Committee (PBAC) and the Technical Committee.

After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing and implementation of the
project The notice, advertising the prequalification of bidders, was published in three newspapers of general circulation once a week
for three consecutive weeks starting February 21, 1991.

The deadline set for submission of prequalification documents was March 21, 1991, later extended to April 1, 1991. Five groups
responded to the invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel International of Mandaue,
Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT Consortium, composed of ten foreign and domestic corporations: namely, Kaiser
Engineers International, Inc., ACER Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak
Federal Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L. Enterprises, Inc.,
A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F. F. Cruz & co., Inc.

On the last day for submission of prequalification documents, the prequalification criteria proposed by the Technical Committee were
adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal aspects — 10 percent; (b)
Management/Organizational capability — 30 percent; and (c) Financial capability — 30 percent; and (d) Technical capability — 30
percent (Rollo, p. 122).

On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementation Rules and Regulations
thereof, approved the same.

After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991 declaring that of the five applicants, only
the EDSA LRT Consortium "met the requirements of garnering at least 21 points per criteria [sic], except for Legal Aspects, and
obtaining an over-all passing mark of at least 82 points" (Rollo, p. 146). The Legal Aspects referred to provided that the BOT/BT
contractor-applicant meet the requirements specified in the Constitution and other pertinent laws (Rollo, p. 114).

Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by Secretary
Pete Nicomedes Prado. The latter sent to President Aquino two letters dated May 31, 1991 and June 14, 1991, respectively
recommending the award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and requesting for
authority to negotiate with the said firm for the contract pursuant to paragraph 14(b) of the Implementing Rules and Regulations of the
BOT Law (Rollo, pp. 298-302).

In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the DOTC to proceed with the
negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid proposal to DOTC.

Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT Corporation, Ltd., in
substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for
EDSA" under the terms of the BOT Law (Rollo, pp. 147-177).

Secretary Prado, thereafter, requested presidential approval of the contract.

In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary Orbos, informed Secretary
Prado that the President could not grant the requested approval for the following reasons: (1) that DOTC failed to conduct actual
public bidding in compliance with Section 5 of the BOT Law; (2) that the law authorized public bidding as the only mode to award
BOT projects, and the prequalification proceedings was not the public bidding contemplated under the law; (3) that Item 14 of the
Implementing Rules and Regulations of the BOT Law which authorized negotiated award of contract in addition to public bidding was
of doubtful legality; and (4) that congressional approval of the list of priority projects under the BOT or BT Scheme provided in the
law had not yet been granted at the time the contract was awarded (Rollo, pp. 178-179).

In view of the comments of Executive Secretary Drilon, the DOTC and private respondents re-negotiated the agreement. On April 22,
1992, the parties entered into a "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA"
(Rollo, pp. 47-78) inasmuch as "the parties [are] cognizant of the fact the DOTC has full authority to sign the Agreement without need
of approval by the President pursuant to the provisions of Executive Order No. 380 and that certain events [had] supervened since
November 7, 1991 which necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6, 1992, DOTC, represented by
Secretary Jesus Garcia vice Secretary Prado, and private respondent entered into a "Supplemental Agreement to the 22 April 1992
Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" so as to "clarify their respective
rights and responsibilities" and to submit [the] Supplemental Agreement to the President, of the Philippines for his approval" (Rollo,
pp. 79-80).

Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and approval. In a Memorandum to
Secretary Garcia on May 6, 1993, approved the said Agreements, (Rollo, p. 194).

According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics and will
have a maximum carrying capacity of 450,000 passengers a day, or 150 million a year to be achieved-through 54 such vehicles
operating simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-section of EDSA for a distance of 17.8
kilometers from F.B. Harrison, Pasay City to North Avenue, Quezon City. The system will have its own power facility (Revised and
Restated Agreement, Sec. 2.3 (ii); Rollo p. 55). It will also have thirteen (13) passenger stations and one depot in 16-hectare
government property at North Avenue (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).

Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system (Revised
and Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days or approximately three years from the
implementation date of the contract inclusive of mobilization, site works, initial and final testing of the system (Supplemental
Agreement, Sec. 5; Rollo, p. 83). Upon full or partial completion and viability thereof, private respondent shall deliver the use and
possession of the completed portion to DOTC which shall operate the same (Supplemental Agreement, Sec. 5; Revised and Restated
Agreement, Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private respondent rentals on a monthly basis through an Irrevocable
Letter of Credit. The rentals shall be determined by an independent and internationally accredited inspection firm to be appointed by
the parties (Supplemental Agreement, Sec. 6; Rollo, pp. 85-86) As agreed upon, private respondent's capital shall be recovered from
the rentals to be paid by the DOTC which, in turn, shall come from the earnings of the EDSA LRT III (Revised and Restated
Agreement, Sec. 1, p. 5; Rollo, p. 54). After 25 years and DOTC shall have completed payment of the rentals, ownership of the project
shall be transferred to the latter for a consideration of only U.S. $1.00 (Revised and Restated Agreement, Sec. 11.1; Rollo, p. 67).

On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes" was
signed into law by the President. The law was published in two newspapers of general circulation on May 12, 1994, and took effect 15
days thereafter or on May 28, 1994. The law expressly recognizes BLT scheme and allows direct negotiation of BLT contracts.

II

In their petition, petitioners argued that:

(1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL AGREEMENT OF
MAY 6, 1993, INSOFAR AS IT GRANTS EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION,
THE OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY, VIOLATES THE CONSTITUTION AND, HENCE,
IS UNCONSTITUTIONAL;

(2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR
RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS
ILLEGAL;

(3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957 AND,
HENCE, IS UNLAWFUL;

(4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT CORPORATION, LTD.
VIOLATES THE REQUIREMENTS PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS OF
THE BOT LAW AND, HENCE, IS ILLEGAL;

(5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO BEAR
PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL AND INEFFECTIVE; AND

(6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT (Rollo, pp. 15-16).

Secretary Garcia and private respondent filed their comments separately and claimed that:

(1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition;

(2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;

(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law;

(4) The nationality requirement for public utilities mandated by the Constitution does not apply to private respondent;

(5) The Agreements executed by and between respondents have been approved by President Ramos and are not disadvantageous to the
government;
(6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the BOT Law; and

(7) Granting that the BOT Law requires public bidding, this has been amended by R.A No. 7718 passed by the Legislature On May
12, 1994, which provides for direct negotiation as a mode of award of infrastructure projects.

III

Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners, however, countered that the action
was filed by them in their capacity as Senators and as taxpayers.

The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the national government or
government-owned or controlled corporations allegedly in contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110
[1994]) and to disallow the same when only municipal contracts are involved (Bugnay Construction and Development Corporation v.
Laron, 176 SCRA. 240 [1989]).

For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal
standing of petitioners as taxpayers to institute the present action.

IV

In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the Supplemental Agreement of May
6, 1993 are unconstitutional and invalid for the following reasons:

(1) the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the Constitution to
Filipino citizens and domestic corporations, not foreign corporations like private respondent;

(2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT Scheme under the
law;

(3) the contract to construct the EDSA LRT III was awarded to private respondent not through public bidding which
is the only mode of awarding infrastructure projects under the BOT law; and

(4) the agreements are grossly disadvantageous to the government.

1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was awarded by public
respondent, is admittedly a foreign corporation "duly incorporated and existing under the laws of Hongkong" (Rollo, pp. 50, 79).
There is also no dispute that once the EDSA LRT III is constructed, private respondent, as lessor, will turn it over to DOTC, as lessee,
for the latter to operate the system and pay rentals for said use.

The question posed by petitioners is:

Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility? (Rollo, p.
17).

The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks, rolling stocks like the
coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve
the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but their use to
serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]).

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a
franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public.

Section 11 of Article XII of the Constitution provides:

No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at
least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive character or for a longer period than fifty years . . . (Emphasis supplied).

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to
serve the public.

Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in
everything not prohibited by law or the concurrence with the rights of another (Tolentino, II Commentaries and Jurisprudence on the
Civil Code of the Philippines 45 [1992]).

The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the
public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their loading and unloading at designated places and the movement of the
trains at pre-scheduled times (cf. Arizona Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919] ;United
States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).

The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own
said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities
used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof
who may not necessarily be the owner thereof.

This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the public can be very well
appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their aircraft and
vessels instead of owning them themselves.

While private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is not enfranchised to
operate a public utility (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of this incapacity, private respondent and
DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease for
25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical
maintenance and repair services to DOTC (Revised and Restated Agreement, Secs. 3.2, 5.1 and 5.2; Rollo, pp. 57-58, 61-62).
Technical maintenance consists of providing (1) repair and maintenance facilities for the depot and rail lines, services for routine
clearing and security; and (2) producing and distributing maintenance manuals and drawings for the entire system (Revised and
Restated Agreement, Annex F).

Private respondent shall also train DOTC personnel for familiarization with the operation, use, maintenance and repair of the rolling
stock, power plant, substations, electrical, signaling, communications and all other equipment as supplied in the agreement (Revised
and Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training consists of theoretical and live training of DOTC operational personnel
which includes actual driving of light rail vehicles under simulated operating conditions, control of operations, dealing with
emergencies, collection, counting and securing cash from the fare collection system (Revised and Restated Agreement, Annex E, Secs.
2-3). Personnel of DOTC will work under the direction and control of private respondent only during training (Revised and Restated
Agreement, Annex E, Sec. 3.1). The training objectives, however, shall be such that upon completion of the EDSA LRT III and upon
opening of normal revenue operation, DOTC shall have in their employ personnel capable of undertaking training of all new and
replacement personnel (Revised and Restated Agreement, Annex E Sec. 5.1). In other words, by the end of the three-year construction
period and upon commencement of normal revenue operation, DOTC shall be able to operate the EDSA LRT III on its own and train
all new personnel by itself.

Fees for private respondent' s services shall be included in the rent, which likewise includes the project cost, cost of replacement of
plant equipment and spare parts, investment and financing cost, plus a reasonable rate of return thereon (Revised and Restated
Agreement, Sec. 1; Rollo, p. 54).

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier. For this purpose,
DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries or death which may be claimed in the
operation or implementation of the system, except losses, damages, injury or death due to defects in the EDSA LRT III on account of
the defective condition of equipment or facilities or the defective maintenance of such equipment facilities (Revised and Restated
Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the
public and the public will have no right to demand any services from it.

It is well to point out that the role of private respondent as lessor during the lease period must be distinguished from the role of the
Philippine Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v. Guingona, 232 SCRA 110 (1994). Therein,
the Contract of Lease between PGMC and the Philippine Charity Sweepstakes Office (PCSO) was actually a collaboration or joint
venture agreement prescribed under the charter of the PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build, at its
own expense, all the facilities necessary to operate and maintain a nationwide on-line lottery system from whom PCSO was to lease
the facilities and operate the same. Upon due examination of the contract, the Court found that PGMC's participation was not confined
to the construction and setting up of the on-line lottery system. It spilled over to the actual operation thereof, becoming indispensable
to the pursuit, conduct, administration and control of the highly technical and sophisticated lottery system. In effect, the PCSO leased
out its franchise to PGMC which actually operated and managed the same.

Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence and W.R. Co. v. United
States, 46 F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246
[1925]; Ellis v. Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of
tank, refrigerator, wine, poultry and beer cars who supply cars under contract to railroad companies considered as public utilities
(Crystal Car Line v. State Tax Commission, 174 p. 2d 984, 987 [1946]).

Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one operating a public
utility. The moment for determining the requisite Filipino nationality is when the entity applies for a franchise, certificate or any other
form of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).

2. Petitioners further assert that the BLT scheme under the Agreements in question is not recognized in the BOT Law and its
Implementing Rules and Regulations.

Section 2 of the BOT Law defines the BOT and BT schemes as follows:
 (a) Build-operate-and-transfer scheme — A contractual arrangement whereby the contractor undertakes the
construction including financing, of a given infrastructure facility, and the operation and maintenance thereof. The
contractor operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls,
fees, rentals and charges sufficient to enable the contractor to recover its operating and maintenance expenses and its
investment in the project plus a reasonable rate of return thereon. The contractor transfers the facility to the
government agency or local government unit concerned at the end of the fixed term which shall not exceed fifty (50)
years. For the construction stage, the contractor may obtain financing from foreign and/or domestic sources and/or
engage the services of a foreign and/or Filipino constructor [sic]: Provided, That the ownership structure of the
contractor of an infrastructure facility whose operation requires a public utility franchise must be in accordance
with the Constitution: Provided, however, That in the case of corporate investors in the build-operate-and-transfer
corporation, the citizenship of each stockholder in the corporate investors shall be the basis for the computation of
Filipino equity in the said corporation: Provided, further, That, in the case of foreign constructors [sic], Filipino
labor shall be employed or hired in the different phases of the construction where Filipino skills are available:
Provided, furthermore, that the financing of a foreign or foreign-controlled contractor from Philippine government
financing institutions shall not exceed twenty percent (20%) of the total cost of the infrastructure facility or project:
Provided, finally, That financing from foreign sources shall not require a guarantee by the Government or by
government-owned or controlled corporations. The build-operate-and-transfer scheme shall include a supply-and-
operate situation which is a contractual agreement whereby the supplier of equipment and machinery for a given
infrastructure facility, if the interest of the Government so requires, operates the facility providing in the process
technology transfer and training to Filipino nationals.

(b) Build-and-transfer scheme — "A contractual arrangement whereby the contractor undertakes the construction
including financing, of a given infrastructure facility, and its turnover after completion to the government agency or
local government unit concerned which shall pay the contractor its total investment expended on the project, plus a
reasonable rate of return thereon. This arrangement may be employed in the construction of any infrastructure
project including critical facilities which for security or strategic reasons, must be operated directly by the
government (Emphasis supplied).

The BOT scheme is expressly defined as one where the contractor undertakes the construction and financing in infrastructure facility,
and operates and maintains the same. The contractor operates the facility for a fixed period during which it may recover its expenses
and investment in the project plus a reasonable rate of return thereon. After the expiration of the agreed term, the contractor transfers
the ownership and operation of the project to the government.

In the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion, the ownership and
operation thereof are turned over to the government. The government, in turn, shall pay the contractor its total investment on the
project in addition to a reasonable rate of return. If payment is to be effected through amortization payments by the government
infrastructure agency or local government unit concerned, this shall be made in accordance with a scheme proposed in the bid and
incorporated in the contract (R.A. No. 6957, Sec. 6).

Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply with the citizenship
requirement of the Constitution on the operation of a public utility. No such a requirement is imposed in the BT scheme.

There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the payment by the government of
the project cost. The law must not be read in such a way as to rule out or unduly restrict any variation within the context of the two
schemes. Indeed, no statute can be enacted to anticipate and provide all the fine points and details for the multifarious and complex
situations that may be encountered in enforcing the law (Director of Forestry v. Munoz, 23 SCRA 1183 [1968]; People v. Exconde,
101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil. 119 [1914]).

The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law.

As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter by allowing it to amortize
payments out of the income from the operation of the LRT System.

In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis according to a schedule of
rates through and under the terms of a confirmed Irrevocable Revolving Letter of Credit (Supplemental Agreement, Sec. 6; Rollo, p.
85). At the end of 25 years and when full payment shall have been made to and received by private respondent, it shall transfer to
DOTC, free from any lien or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and Restated
Agreement, Sec. 11.1; Supplemental Agreement, Sec; 7; Rollo, pp. 67, .87).

A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for a certain price and for
a period which may be definite or indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643). There is no
transfer of ownership at the end of the lease period. But if the parties stipulate that title to the leased premises shall be transferred to
the lessee at the end of the lease period upon the payment of an agreed sum, the lease becomes a lease-purchase agreement.

Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine pesos. The EDSA LRT III
Project is a high priority project certified by Congress and the National Economic and Development Authority as falling under the
Investment Priorities Plan of Government (Rollo, pp. 310-311). It is, therefore, outside the application of the Uniform Currency Act
(R.A. No. 529), which reads as follows:

Sec. 1. — Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation
contracted in the Philippines which provisions purports to give the obligee the right to require payment in gold or in
a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines
 measured thereby, be as it is hereby declared against public policy, and null, void, and of no effect, and no such
provision shall be contained in, or made with respect to, any obligation hereafter incurred. The above prohibition
shall not apply to (a) . . .; (b) transactions affecting high-priority economic projects for agricultural, industrial and
power development as may be determined by
the National Economic Council which are financed by or through foreign funds; . . . .

3. The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation and before congressional
approval on January 22 and 23, 1992 of the List of National Projects to be undertaken by the private sector pursuant to the BOT Law
(Rollo, pp. 309-312) does not suffice to invalidate the award.

Subsequent congressional approval of the list including "rail-based projects packaged with commercial development opportunities"
(Rollo, p. 310) under which the EDSA LRT III projects falls, amounts to a ratification of the prior award of the EDSA LRT III
contract under the BOT Law.

Petitioners insist that the prequalifications process which led to the negotiated award of the contract appears to have been rigged from
the very beginning to do away with the usual open international public bidding where qualified internationally known applicants could
fairly participate.

The records show that only one applicant passed the prequalification process. Since only one was left, to conduct a public bidding in
accordance with Section 5 of the BOT Law for that lone participant will be an absurb and pointless exercise (cf. Deloso v.
Sandiganbayan, 217 SCRA 49, 61 [1993]).

Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in relation to Presidential Decree No. 1594
allows the negotiated award of government infrastructure projects.

Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts,"
allows the negotiated award of government projects in exceptional cases. Sections 4 of the said law reads as follows:

Bidding. — Construction projects shall generally be undertaken by contract after competitive public
bidding. Projects may be undertaken by administration or force account or by negotiated contract only in
exceptional cases where time is of the essence, or where there is lack of qualified bidders or contractors, or where
there is conclusive evidence that greater economy and efficiency would be achieved through this arrangement, and
in accordance with provision of laws and acts on the matter, subject to the approval of the Minister of Public Works
and Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case
may be, if the project cost is less than P1 Million, and the President of the Philippines, upon recommendation of the
Minister, if the project cost is P1 Million or more (Emphasis supplied).

xxx xxx xxx

Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may he made by
negotiation. Presidential Decree No. 1594 is the general law on government infrastructure contracts while the BOT Law governs
particular arrangements or schemes aimed at encouraging private sector participation in government infrastructure projects. The two
laws are not inconsistent with each other but are in pari materia and should be read together accordingly.

In the instant case, if the prequalification process was actually tainted by foul play, one wonders why none of the competing firms ever
brought the matter before the PBAC, or intervened in this case before us (cf. Malayan Integrated Industries Corp. v. Court of Appeals,
213 SCRA 640 [1992]; Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).

The challenged agreements have been approved by President Ramos himself. Although then Executive Secretary Drilon may have
disapproved the "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws that
prohibits parties to a contract from renegotiating and modifying in good faith the terms and conditions thereof so as to meet legal,
statutory and constitutional requirements. Under the circumstances, to require the parties to go back to step one of the prequalification
process would just be an idle ceremony. Useless bureaucratic "red tape" should be eschewed because it discourages private sector
participation, the "main engine" for national growth and development (R.A. No. 6957, Sec. 1), and renders the BOT Law nugatory.

Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:

(e) Build-lease-and-transfer — A contractual arrangement whereby a project proponent is authorized to finance and
construct an infrastructure or development facility and upon its completion turns it over to the government agency or
local government unit concerned on a lease arrangement for a fixed period after which ownership of the facility is
automatically transferred to the government unit concerned.

Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:

Direct Negotiation of Contracts. — Direct negotiation shall be resorted to when there is only one complying bidder
left as defined hereunder.

(a) If, after advertisement, only one contractor applies for prequalification and it meets the prequalification
requirements, after which it is required to submit a bid proposal which is subsequently found by the agency/local
government unit (LGU) to be complying.
 (b) If, after advertisement, more than one contractor applied for prequalification but only one meets the
prequalification requirements, after which it submits bid/proposal which is found by the agency/local government
unit (LGU) to be complying.

(c) If, after prequalification of more than one contractor only one submits a bid which is found by the agency/LGU
to be complying.

(d) If, after prequalification, more than one contractor submit bids but only one is found by the agency/LGU to be
complying. Provided, That, any of the disqualified prospective bidder [sic] may appeal the decision of the
implementing agency, agency/LGUs prequalification bids and awards committee within fifteen (15) working days to
the head of the agency, in case of national projects or to the Department of the Interior and Local Government, in
case of local projects from the date the disqualification was made known to the disqualified bidder: Provided,
furthermore, That the implementing agency/LGUs concerned should act on the appeal within forty-five (45)
working days from receipt thereof.

Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been
rendered moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government infrastructure agencies, government-
owned and controlled corporations and local government units to enter into contract with any duly prequalified proponent for the
financing, construction, operation and maintenance of any financially viable infrastructure or development facility through a BOT,
BT, BLT, BOO (Build-own-and-operate), CAO (Contract-add-operate), DOT (Develop-operate-and-transfer), ROT (Rehabilitate-
operate-and-transfer), and ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).

From the law itself, once and applicant has prequalified, it can enter into any of the schemes enumerated in Section 2 thereof,
including a BLT arrangement, enumerated and defined therein (Sec. 3).

Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of minimum government
regulations and procedures and specific government undertakings in support of the private sector" (Sec. 1). A curative statute makes
valid that which before enactment of the statute was invalid. Thus, whatever doubts and alleged procedural lapses private respondent
and DOTC may have engendered and committed in entering into the questioned contracts, these have now been cured by R.A. No.
7718 (cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos V. Duata, 14 SCRA 1041 [1965];
Adong V. Cheong Seng Gee, 43 Phil. 43 [1922].

4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the government because the rental rates are excessive
and private respondent's development rights over the 13 stations and the depot will rob DOTC of the best terms during the most
productive years of the project.

It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a period of 25 years, exclusive
rights over the depot and the air space above the stations for development into commercial premises for lease, sublease, transfer, or
advertising (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in consideration of these development rights, private
respondent shall pay DOTC in Philippine currency guaranteed revenues generated therefrom in the amounts set forth in the
Supplemental Agreement (Sec. 11; Rollo, p. 93). In the event that DOTC shall be unable to collect the guaranteed revenues, DOTC
shall be allowed to deduct any shortfalls from the monthly rent due private respondent for the construction of the EDSA LRT III
(Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles, interests and income over all contracts on the commercial
spaces shall revert to DOTC upon expiration of the 25-year period. (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).

The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper administrative
agencies and officials who have acquired expertise, specialized skills and knowledge in the performance of their functions should be
accorded respect absent any showing of grave abuse of discretion (Felipe Ysmael, Jr. & Co. v. Deputy Executive Secretary, 190
SCRA 673 [1990]; Board of Medical Education v. Alfonso, 176 SCRA 304 [1989]).

Government officials are presumed to perform their functions with regularity and strong evidence is necessary to rebut this
presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the parties to each other. The matter of
valuation is an esoteric field which is better left to the experts and which this Court is not eager to undertake.

That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the profits if it
engages in the business itself, is not worthy of being raised as an issue. In all cases where a party enters into a contract with the
government, he does so, not out of charity and not to lose money, but to gain pecuniarily.

5. Definitely, the agreements in question have been entered into by DOTC in the exercise of its governmental function. DOTC is the
primary policy, planning, programming, regulating and administrative entity of the Executive branch of government in the promotion,
development and regulation of dependable and coordinated networks of transportation and communications systems as well as in the
fast, safe, efficient and reliable postal, transportation and communications services (Administrative Code of 1987, Book IV, Title XV,
Sec. 2). It is the Executive department, DOTC in particular that has the power, authority and technical expertise determine whether or
not a specific transportation or communication project is necessary, viable and beneficial to the people. The discretion to award a
contract is vested in the government agencies entrusted with that function (Bureau Veritas v. Office of the President, 205 SCRA 705
[1992]).

WHEREFORE, the petition is DISMISSED.

G.R. No. 156364             September 3, 2007

JACOBUS BERNHARD HULST, petitioner, 
vs.
PR BUILDERS, INC., respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision1 dated
October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981.

The facts:

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract to
Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's townhouse project
in Barangay Niyugan, Laurel, Batangas.

When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst filed before the
Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with interest, damages and attorney's fees,
docketed as HLRB Case No. IV6-071196-0618.

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision2 in favor of spouses Hulst, the
dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant, rescinding the Contract to
Sell and ordering respondent to:

1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by the complainants to P.R.
Builders, plus interest thereon at the rate of twelve percent (12%) per annum from the time complaint was filed;

2) Pay complainant the sum of P297,000.00 as actual damages;

3) Pay complainant the sum of P100,000.00 by way of moral damages;

4) Pay complainant the sum of P150,000.00 as exemplary damages;

5) P50,000.00 as attorney's fees and for other litigation expenses; and

6) Cost of suit.

SO ORDERED.3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner.4 From then on, petitioner alone
pursued the case.

On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the Regional Trial Court
of Tanauan, Batangas directing the latter to execute its judgment.5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon complaint of respondent
with the CA on a Petition for Certiorari and Prohibition, the levy made by the Sheriff was set aside, requiring the Sheriff to levy first
on respondent's personal properties.6 Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was returned
unsatisfied.7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution.8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer Certificates of Title
(TCT)9 in Barangay Niyugan, Laurel, Batangas.10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28, 2000 at 10:00 a.m..11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion to Quash Writ of Levy with
the HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied properties at P6,500.00
per sq m is P83,616,000.00, based on the Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over
and above the judgment award.13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the public auction on
the ground that respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent any restraining order from the
HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15
parcels of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the petitioner in satisfaction of the
judgment award after deducting the legal fees.14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative to the auction sale and to
submit the Certificates of Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB Director), he received the Order
dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the matter.16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff's levy on
respondent's real properties,17 reasoning as follows:

While we are not making a ruling that the fair market value of the levied properties is PhP6,500.00 per square meter (or an
aggregate value of PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we definitely cannot agree with
the position of the Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied properties is
only around PhP6,000,000.00. The disparity between the two valuations are [sic] so egregious that the Sheriff should have
looked into the matter first before proceeding with the execution sale of the said properties, especially when the auction sale
proceedings was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of resolving first the
objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised and, posthaste, issued the
corresponding Certificate of Sale even prior to the payment of the legal fees (pars. 7 & 8, Sheriff's Return).

While we agree with the Complainants that what is material in an execution sale proceeding is the amount for which the
properties were bidded and sold during the public auction and that, mere inadequacy of the price is not a sufficient ground to
annul the sale, the court is justified to intervene where the inadequacy of the price shocks the conscience (Barrozo vs.
Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is PhP77,616,000.00 and it
definitely invites our attention to look into the proceedings had especially so when there was only one bidder, the HOLLY
PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction sale
proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the Urgent Motion
to Quash the Writ of Levy which was filed prior to the execution sale.

Besides, what is at issue is not the value of the subject properties as determined during the auction sale, but the
determination of the value of the properties levied upon by the Sheriff taking into consideration Section 9(b) of the
1997 Rules of Civil Procedure x x x.

xxxx

It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair market value of the properties
levied upon to determine whether they are sufficient to satisfy the judgment, and any levy in excess of the judgment award is
void (Buan v. Court of Appeals, 235 SCRA 424).

x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads:

WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, is
hereby SET ASIDE and the said Sheriff is hereby directed to levy instead Respondent's real properties that are reasonably
sufficient to enforce its final and executory judgment, this time, taking into consideration not only the value of the properties
as indicated in their respective tax declarations, but also all the other determinants at arriving at a fair market value, namely:
the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of lands, their
size, shape or location, and the tax declarations thereon.

SO ORDERED.19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and Procedure,
petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000.

On October 30, 2002, the CA rendered herein assailed Decision20 dismissing the petition. The CA held that petitioner's insistence
that Barrozo v. Macaraeg21 does not apply since said case stated that "when there is a right to redeem inadequacy of price should not
be material" holds no water as what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses;
that Buan v. Court of Appeals22 properly applies since the questioned levy covered 15 parcels of land posited to have an aggregate
value of P83,616,000.00 which shockingly exceeded the judgment debt of only around P6,000,000.00.

Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground that:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ARBITER'S ORDER SETTING
ASIDE THE LEVY MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy made by the sheriff, it
behooves this Court to address a matter of public and national importance which completely escaped the attention of the HLURB
Arbiter and the CA: petitioner and his wife are foreign nationals who are disqualified under the Constitution from owning real
property in their names.

Section 7 of Article XII of the 1987 Constitution provides:

 Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain. (Emphasis supplied).

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land
may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution
reserved the right to participate in the disposition, exploitation, development and utilization of lands of the public domain for Filipino
citizens25 or corporations at least 60 percent of the capital of which is owned by Filipinos.26 Aliens, whether individuals or
corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private
lands.27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it
is unequivocal that the Contract to Sell entered into by petitioner together with his wife and respondent is void. Under Article 1409 (1)
and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly
prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action
or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces
no civil effect.28 It does not create, modify or extinguish a juridical relation.29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in
pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an
illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the
money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will
be given to one against the other."31

This rule, however, is subject to exceptions32 that permit the return of that which may have been given under a void contract to: (a) the
innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art. 1413, Civil Code);34 (c) the party
repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if
public interest is subserved by allowing recovery (Art. 1414, Civil Code);35 (d) the incapacitated party if the interest of justice so
demands (Art. 1415, Civil Code);36 (e) the party for whose protection the prohibition by law is intended if the agreement is not
illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f)
the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts.
1418-1419, Civil Code).39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A
distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or
vendee and, ultimately, the resolution of the question on whether the constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the
ownership of the property until and unless the contract of sale is itself resolved and set aside.40 On the other hand, a contract to sell is
akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the
happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed.41 In other words, in a contract to sell, the prospective seller agrees to transfer ownership of
the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the
fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to
convey title to the prospective buyer by executing a contract of absolute sale.42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for
rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the
execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract
before the execution of the final deed transferring ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money
before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the
basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private land
under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00, representing the
purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement
produces no juridical tie between the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral
and exemplary damages and attorney's fees.

The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and executory. Nothing
is more settled in the law than that a decision that has acquired finality becomes immutable and unalterable and may no longer be
modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it was made by
the court that rendered it or by the highest court of the land.45The only recognized exceptions to the general rule are the correction of
clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever
circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.46 None of the exceptions is
present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with jurisdiction
over the subject matter of the complaint.47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent. Petitioner received
more than what he is entitled to recover under the circumstances.

Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man ought to be made rich
out of another's injury), states:
 Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession
of something at the expense of the latter without just or legal ground, shall return the same to him.

The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as
basic principles to be observed for the rightful relationship between human beings and for the stability of the social order; designed to
indicate certain norms that spring from the fountain of good conscience; guides for human conduct that should run as golden threads
through society to the end that law may approach its supreme ideal which is the sway and dominance of justice.48 There is unjust
enrichment when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good conscience.49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering into a contract to sell
that violates the constitutional proscription.

This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is exercised in this case
"as the complement of legal jurisdiction [that] seeks to reach and to complete justice where courts of law, through the inflexibility of
their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so."50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Equity
jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its judgments to the special circumstances of a
case because of the inflexibility of its statutory or legal jurisdiction.51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount is P5,450,653.33) of the
auction sale after deducting the legal fees in the amount of P137,613.33.52 Petitioner is only entitled to P3,187,500.00, the amount of
the purchase price of the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the exercise of its
equity jurisdiction may validly order petitioner to return the excess amount of P2,125,540.00.

The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously erred in affirming the
HLURB Order setting aside the levy made by the Sheriff on the subject properties.

Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the levied properties
at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced since the appraisal was based on the
value of land in neighboring developed subdivisions and on the assumption that the residential unit appraised had already been built;
that the Sheriff need not determine the fair market value of the subject properties before levying on the same since what is material is
the amount for which the properties were bidded and sold during the public auction; that the pendency of any motion is not a valid
ground for the Sheriff to suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff from
proceeding with the execution.

Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not categorically state the exact
value of the levied properties, said properties cannot just amount to P6,000,000.00; that the HLURB Arbiter and Director correctly
held that the value indicated in the tax declaration is not the sole determinant of the value of the property.

The petition is impressed with merit.

If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the provisions of Section 9,
Rule 39 of the Revised Rules of Court, viz:

Sec. 9. Execution of judgments for money, how enforced. –

(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for money by demanding from the
judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. x x x

(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other
mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of
every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution,
giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the
judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any,
and then on the real properties if the personal properties are insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been
levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he
must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal
property, may be levied upon in like manner and with like effect as under a writ of attachment(Emphasis supplied).53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall levy on all property
belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and sell the same paying to the judgment
creditor so much of the proceeds as will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be
delivered to the judgment debtor unless otherwise directed by the judgment or order of the court.54
Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale.

Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a judgment debtor's
property for the purpose of satisfying the command of the writ of execution.55 The object of a levy is to take property into the custody
of the law, and thereby render it liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any
other use or purpose.56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ of execution of the
levied property of the debtor.57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy conducted by the Sheriff
for the reason that the auction sale conducted by the sheriff rendered moot and academic the motion to quash the levy. The HLURB
Arbiter lost jurisdiction to act on the motion to quash the levy by virtue of the consummation of the auction sale. Absent any order
from the HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale. The winning bidder had already
paid the winning bid. The legal fees had already been remitted to the HLURB. The judgment award had already been turned over to
the judgment creditor. What was left to be done was only the issuance of the corresponding certificates of sale to the winning bidder.
In fact, only the signature of the HLURB Director for that purpose was needed58 – a purely ministerial act.

A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in
obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment upon the propriety or
impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty
shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires
neither the exercise of official discretion nor judgment.59 In the present case, all the requirements of auction sale under the Rules have
been fully complied with to warrant the issuance of the corresponding certificates of sale.

And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following grounds:

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg60 and Buan v. Court of
Appeals61 is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor who wanted to
repurchase properties sold at execution beyond the one-year redemption period. The statement of the Court in Barrozo, that "only
where such inadequacy shocks the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be
taken in the context of the other declarations of the Court in Barrozo,to wit:

Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock the conscience of the
court. Supposing that this issue is open even after the one-year period has expired and after the properties have passed into
the hands of third persons who may have paid a price higher than the auction sale money, the first thing to consider is that the
stipulation contains no statement of the reasonable value of the properties; and although defendant' answer avers that the
assessed value was P3,960 it also avers that their real market value was P2,000 only. Anyway, mere inadequacy of price –
which was the complaint' allegation – is not sufficient ground to annul the sale. It is only where such inadequacy
shocks the conscience that the courts will intervene. x x x Another consideration is that the assessed value being P3,960
and the purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the
conscience is not shocked upon examining the prices paid in the sales in National Bank v. Gonzales, 45 Phil., 693
and Guerrero v. Guerrero, 57 Phil., 445, sales which were left undisturbed by this Court.

Furthermore, where there is the right to redeem – as in this case – inadequacy of price should not be material because
the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims
to have suffered by reason of the price obtained at the execution sale.

x x x x (Emphasis supplied).62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction
may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts to
interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction,63 upon the
theory that the lesser the price, the easier it is for the owner to effect redemption.64 When there is a right to redeem, inadequacy of
price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover
any loss he claims to have suffered by reason of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than
be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. More importantly, the
subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.

The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a decision, no specific
portion thereof should be isolated and resorted to, but the decision must be considered in its entirety.66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land owned by the
judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment, such that the levy and attempted
execution of the second parcel of land was declared void for being in excess of and beyond the original judgment award granted in
favor of the judgment creditor.

In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to "sell only a
sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees." Each of the 15 levied
properties was successively bidded upon and sold, one after the other until the judgment debt and the lawful fees were fully satisfied.
Holly Properties Realty Corporation successively bidded upon and bought each of the levied properties for the total amount
of P5,450,653.33 in full satisfaction of the judgment award and legal fees.67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the judgment debt; it can be
less or more than the amount of debt. This is the contingency addressed by Section 9, Rule 39 of the Rules of Court. In the levy of
property, the Sheriff does not determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with
Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect a levy upon a realty: (a) file
with the register of deeds a copy of the order of execution, together with the description of the levied property and notice of execution;
and (b) leave with the occupant of the property copy of the same order, description and notice.68 Records do not show that respondent
alleged non-compliance by the Sheriff of said requisites.

Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution, the Sheriff is left to
his own judgment. He may exercise a reasonable discretion, and must exercise the care which a reasonably prudent person would
exercise under like conditions and circumstances, endeavoring on the one hand to obtain sufficient property to satisfy the purposes of
the writ, and on the other hand not to make an unreasonable and unnecessary levy.69 Because it is impossible to know the precise
quantity of land or other property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin between the
value of the property levied upon and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary
to satisfy the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate safeguards against excessive
levying. The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the judgment and lawful fees.

In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in proceeding with the
auction sale despite the pending motion to quash the levy filed by the respondents with the HLURB. It is elementary that sheriffs, as
officers charged with the delicate task of the enforcement and/or implementation of judgments, must, in the absence of a restraining
order, act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the decisions, orders, or other
processes of the courts of justice and the like would be futile.71 It is not within the jurisdiction of the Sheriff to consider, much less
resolve, respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to
suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the auction sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention.72 In the determination
of whether a levy of execution is excessive, it is proper to take into consideration encumbrances upon the property, as well as the fact
that a forced sale usually results in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for
determining the excessiveness of the levy.73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property. Respondent only
submitted an Appraisal Report, based merely on surmises. The Report was based on the projected value of the townhouse project after
it shall have been fully developed, that is, on the assumption that the residential units appraised had already been built. The Appraiser
in fact made this qualification in its Appraisal Report: "[t]he property subject of this appraisal has not been constructed. The basis of
the appraiser is on the existing model units."74 Since it is undisputed that the townhouse project did not push through, the projected
value did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal Report is not the
best proof to accurately show the value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6-071196-0618
which set aside the sheriff's levy on respondent's real properties, was clearly issued with grave abuse of discretion. The CA erred in
affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court of Appeals in CA-G.R. SP No.
60981 is REVERSED and SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director
Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is declared NULL and VOID.HLURB Arbiter Aquino and Director Ceniza are
directed to issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties Realty Corporation. Petitioner
is ordered to return to respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the auction sale delivered
to petitioner. After the finality of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.

[G.R. No. L-27170. November 22, 1977.]

IN RE APPLICATION FOR THE REGISTRATION OF LAND. EUGENE MOSS, through his Administrator, DR.
TEODORICO H. JACELDO, Applicant-Appellant, v. DIRECTOR OF LANDS, Oppositor-Appellee.

Estanislao L. Granados for Appellant.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Eulogio Raquel-Santos and Solicitor Salvador C. Jacob
for Appellee.

DECISION

AQUINO, J.:
Eugene Moss appealed from the decision of the Court of First Instance of Leyte, Carigara Branch VI, denying his application for the
registration of a ten-hectare island on the ground that, being an American citizen or an alien, he is disqualified to acquire lands under
section 5, Article XIII of the 1935 Constitution, as held in Krivenko v. Register of Deeds, 79 Phil. 461 (Land Registration Case No. N-
68, LRC Record No. N-27971).

The Solicitor General, disagreeing with the trial court, recommends in his brief for the Director of Lands that the decision be reversed
and that the application of Moss be granted.

On Carigara Bay there is an islet known as Calumpihan Island within the jurisdiction of Barrio Calumpihan, Capoocan, Leyte. It is
planted to coconuts more than sixty to eighty years old in 1966. Fruit trees, corn and tobacco are also grown on the land.chanrobles
virtual lawlibrary

That land was already declared for tax purposes in 1930. It was then owned by Vicente Pragas who had possessed and cultivated it
since 1894. On November 14, 1932 Pragas sold the island to Eduardo Cecilio. On March 23, 1937 Cecilio sold it to Catalina Pabilion.
Then, on December 23, 1944 the spouses Catalina Pabilion and Guillermo Dadizon sold the land to Rufino M. Pascual who, in turn,
sold it on January 20, 1945 for P1,200 to Eugene Moss and Albert Boyd Cassidy, American nationals.

In an action to quiet title filed by Moss against Cassidy, an absentee, Moss was adjudged the sole owner of the and in a decision dated
March 27, 1962 rendered by the Court of First Instance of Leyte in Civil Case No. 645.

Moss declared the land for tax purposes on June 27, 1950. He paid the realty taxes on the said land for the years 1945 to 1966. He had
it surveyed on November 20, 1962.

On April 3, 1965 Moss, through Dr. Teodorico H. Jaceldo, his administrator and attorney-in-fact, filed an application for the
registration of the said land. Moss is a retired army colonel, an American citizen, married to Eileen Moss, and a former resident of 504
Glen Park Drive, Nashville, Tennessee and now Los Fresnos, Texas.

As already stated, the trial court denied the application for registration because Moss is an alien. That holding is erroneous. It is
erroneous because while aliens are disqualified to acquire lands under the 1935 Constitution (Levy Hermanos v. Ledesma, 69 Phil. 49;
Krivenko v. Register of Deeds, supra), citizens of the United States can acquire lands like Filipino citizens.

The trial court overlooked the Ordinance which was appended to the 1935 Constitution by Resolution No. 39 of the National
Assembly dated September 15, 1939. That resolution was approved by the President of the United States on November 10, 1939. It
provides as follows:chanrobles lawlibrary : rednad

"ORDINANCE APPENDED TO THE CONSTITUTION

"SECTION 1. Notwithstanding the provisions of the foregoing Constitution, pending the final and complete withdrawal of the
sovereignty of the United States over the Philippines —

x       x       x

"(17) Citizens and corporations of the United States shall enjoy in the Commonwealth of the Philippines all the civil rights of the
citizens and corporations, respectively, thereof." (1 Philippine Annotated Laws, pp. 31-34)

That Ordinance was made a part of the 1935 Constitution as directed in section 2 of the Tydings-McDuffie Law or the Independence
law. Subsection (17) quoted above is a reproduction of subsection (16) of section 2(a) of the Independence Law.

Moss validly acquired the island in question under the provisions of subsection (17), section 1 of the aforementioned Ordinance (See
sec. 127 of Public Land Law; Republic v. Quasha, L-30299, August 17, 1972, 46 SCRA 160, 172-173. Note that the instant case is not
covered by section 11, Article XVII of the 1973 Constitution and by Presidential Decree No. 713 dated May 27, 1975, 71 O.G. 4115
re residential lands of American citizens).

The proclamation of Philippine independence on July 4, 1946 did not impair Moss’ proprietary rights over the said land because the
1935 Constitution provides that upon the proclamation of Philippine independence "all existing property rights of citizens or
corporations of the United States shall be acknowledged, respected, and safeguarded to the same extent as property rights of citizens
of the Philippines" (Sec. 1[1], Article XVII).

That constitutional provision is implemented in Article VI of the Treaty of General Relations entered into between the Republic of the
Philippines and the United States on July 4, 1946 which provides that all existing property rights of citizens and corporations of the
United States in the Republic of the Philippines shall be acknowledged, respected and safeguarded to the same extent as property
rights of citizens and corporations of the Republic of the Philippines (42 O.G. 1651. See Republic Act No. 76).

When Moss purchased the land, Leyte was already liberated as shown in the proclamation of General Douglas MacArthur dated
October 23, 1944. (Moss and Cassidy were allegedly members of the American liberation forces that landed in Leyte). See 41 O.G.
147.

Since Moss and his predecessors in interest have been in possession en concepto de dueño of Calumpihan Island for more than thirty
years immediately preceding the filing of his application for confirmation of his title, he is entitled to the registration of his title to the
island (Sec. 48[b], Public Land Law, as amended by Republic Act No. 1942).chanrobles virtual lawlibrary

WHEREFORE, the trial court’s decision is reversed and set aside and the application of Eugene Moss, of age, citizen of the United
States, married to Eillen Moss, P. O. Box 184, Los Fresnos, Texas, U. S. A., for the confirmation and registration of his title to the
land shown in the plan Psu-198022, is hereby granted.

SO ORDERED.

 
EN BANC
 
 
THE SECRETARY OF THE G.R. No. 167707
DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES, THE
REGIONAL EXECUTIVE Present:
DIRECTOR, DENR-REGION VI,
REGIONAL TECHNICAL PUNO, C.J.,
DIRECTOR FOR LANDS, QUISUMBING,
LANDS MANAGEMENT BUREAU, YNARES-SANTIAGO,
REGION VI PROVINCIAL CARPIO,
ENVIRONMENT AND NATURAL AUSTRIA-MARTINEZ,
RESOURCES OFFICER OF KALIBO, CORONA,*
AKLAN, REGISTER OF DEEDS, CARPIO MORALES,
DIRECTOR OF LAND AZCUNA,
REGISTRATION AUTHORITY, TINGA,
DEPARTMENT OF TOURISM CHICO-NAZARIO,
SECRETARY, DIRECTOR OF VELASCO, JR.,
PHILIPPINE TOURISM NACHURA,**
AUTHORITY, REYES,
Petitioners, LEONARDO-DE CASTRO, and
BRION, JJ.
- versus -
 
 
MAYOR JOSE S. YAP, LIBERTAD
TALAPIAN, MILA Y. SUMNDAD, and
ANICETO YAP, in their behalf and Promulgated:
in behalf of all those similarly situated,
Respondents. October 8, 2008
 
x--------------------------------------------------x
 
DR. ORLANDO SACAY and G.R. No. 173775
WILFREDO GELITO, joined by
THE LANDOWNERS OF
BORACAY SIMILARLY
SITUATED NAMED IN A LIST,
ANNEX A OF THIS PETITION,
Petitioners,
 
 
- versus -
 
THE SECRETARY OF THE
DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES, THE
REGIONAL TECHNICAL
DIRECTOR FOR LANDS, LANDS
MANAGEMENT BUREAU,
REGION VI, PROVINCIAL
ENVIRONMENT AND NATURAL
RESOURCES OFFICER, KALIBO,
AKLAN,
Respondents.
 
x--------------------------------------------------x
 
DECISION
 
 
REYES, R.T., J.:
 
 
AT stake in these consolidated cases is the right of the present occupants of Boracay Island to secure titles over their
occupied lands.
 
There are two consolidated petitions. The first is G.R. No. 167707, a petition for review on certiorari of the Decision[1] of the
Court of Appeals (CA) affirming that[2] of the Regional Trial Court (RTC) in Kalibo, Aklan, which granted the petition for declaratory
relief filed by respondents-claimants Mayor Jose Yap, et al. and ordered the survey of Boracay for titling purposes. The second is G.R.
No. 173775, a petition for prohibition, mandamus, and nullification of Proclamation No. 1064 [3] issued by President Gloria
Macapagal-Arroyo classifying Boracay into reserved forest and agricultural land.
 
The Antecedents
 
G.R. No. 167707
 
Boracay Island in the Municipality of Malay, Aklan, with its powdery white sand beaches and warm crystalline waters, is
reputedly a premier Philippine tourist destination. The island is also home to 12,003 inhabitants[4] who live in the bone-shaped islands
three barangays.[5]
 
On April 14, 1976, the Department of Environment and Natural Resources (DENR) approved the National
Reservation Survey of Boracay
Island,[6] which identified several lots as being occupied or claimed by named persons.[7]
 
On November 10, 1978, then President Ferdinand Marcos issued Proclamation No. 1801[8] declaring Boracay Island, among
other islands, caves and peninsulas in the Philippines, as tourist zones and marine reserves under the administration of the
Philippine Tourism Authority (PTA). President Marcos later approved the issuance of PTACircular 3-82[9] dated September 3, 1982,
to implement Proclamation No. 1801.
 
Claiming that Proclamation No. 1801 and PTA Circular No 3-82 precluded them from filing an application for judicial
confirmation of imperfect title or survey of land for titling purposes, respondents-claimants 
Mayor Jose S. Yap, Jr., Libertad Talapian, Mila Y. Sumndad, and Aniceto Yap filed a petition for declaratory relief with the RTC in
Kalibo, Aklan.
 
In their petition, respondents-claimants alleged that Proclamation No. 1801 and PTA Circular No. 3-82 raised doubts on their
right to secure titles over their occupied lands. They declared that they themselves, or through their predecessors-in-interest, had been
in open, continuous, exclusive, and notorious possession and occupation in Boracay since June 12, 1945, or earlier since time
immemorial. They declared their lands for tax purposes and paid realty taxes on them.[10]
 
Respondents-claimants posited that Proclamation No. 1801 and its implementing Circular did not place Boracay beyond the
commerce of man. Since the Island was classified as a tourist zone, it was susceptible of private ownership. Under Section 48(b) of
Commonwealth Act (CA) No. 141, otherwise known as the Public Land Act, they had the right to have the lots registered in their
names through judicial confirmation of imperfect titles.
 
The Republic, through the Office of the Solicitor General (OSG), opposed the petition for declaratory
relief. The OSG countered that Boracay Island was an unclassified landof the public domain. It formed part of the mass of lands
classified as public forest, which was not available for disposition pursuant to Section 3(a) of Presidential Decree (PD) No. 705 or the
Revised Forestry Code,[11] as amended.
 
The OSG maintained that respondents-claimants reliance on PD No. 1801 and PTA Circular No. 3-82 was misplaced. Their
right to judicial confirmation of title was governed by CA No. 141 and PD No. 705. Since Boracay Island had not been classified as
alienable and disposable, whatever possession they had cannot ripen into ownership.
 
 During pre-trial, respondents-claimants and the OSG stipulated on the following facts: (1) respondents-claimants were
presently in possession of parcels of land in Boracay Island; (2) these parcels of land were planted with coconut trees and other natural
growing trees; (3) the coconut trees had heights of more or less twenty (20) meters and were planted more or less fifty (50) years ago;
and (4) respondents-claimants declared the land they were occupying for tax purposes.[12]
 
The parties also agreed that the principal issue for resolution was purely legal: whether Proclamation No. 1801 posed any
legal hindrance or impediment to the titling of the lands in Boracay. They decided to forego with the trial and to submit the case for
resolution upon submission of their respective memoranda.[13]
 
The RTC took judicial notice[14] that certain parcels of land in Boracay Island, more particularly Lots 1 and 30, Plan PSU-
5344, were covered by Original Certificate of Title No. 19502 (RO 2222) in the name of the Heirs of Ciriaco S. Tirol. These lots were
involved in Civil Case Nos. 5222 and 5262 filed before the RTC of Kalibo, Aklan.[15] The titleswere issued on
August 7, 1933.[16]
 
RTC and CA Dispositions
 
On July 14, 1999, the RTC rendered a decision in favor of respondents-claimants, with a fallo reading:
 
WHEREFORE, in view of the foregoing, the Court declares that Proclamation No. 1801 and PTA Circular
No. 3-82 pose no legal obstacle to the petitioners and those similarly situated to acquire title to their lands in
Boracay, in accordance with the applicable laws and in the manner prescribed therein; and to have their lands
surveyed and approved by respondent Regional Technical Director of Lands as the approved survey does not in
itself constitute a title to the land.
 
SO ORDERED.[17]
 
The RTC upheld respondents-claimants right to have their occupied lands titled in their name. It ruled that neither
Proclamation No. 1801 nor PTA Circular No. 3-82 mentioned that lands in Boracay were inalienable or could not be the subject of
disposition.[18] The Circular itself recognized private ownership of lands.[19] The trial court cited Sections 87[20] and 53[21] of the Public
Land Act as basis for acknowledging private ownership of lands in Boracay and that only those forested areas in public lands were
declared as part of the forest reserve.[22]
 
The OSG moved for reconsideration but its motion was denied.[23] The Republic then appealed to the CA.
 
On December 9, 2004, the appellate court affirmed in toto the RTC decision, disposing as follows:
 
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DENYING the
appeal filed in this case and AFFIRMING the decision of the lower court.[24]
 
 
The CA held that respondents-claimants could not be prejudiced by a declaration that the lands they occupied since time
immemorial were part of a forest reserve.
 
Again, the OSG sought reconsideration but it was similarly denied.[25] Hence, the present petition under Rule 45.
 
G.R. No. 173775
 
On May 22, 2006, during the pendency of G.R. No. 167707, President Gloria Macapagal-Arroyo issued Proclamation No.
1064[26] classifying Boracay Island into four hundred (400) hectares of reserved forest land (protection purposes) and six hundred
twenty-eight and 96/100 (628.96) hectares of agricultural land (alienable and disposable). The Proclamation likewise provided for a
fifteen-meter buffer zone on each side of the centerline of roads and trails, reserved for right-of-way and which shall form part of the
area reserved for forest land protection purposes.
 
On August 10, 2006, petitioners-claimants Dr. Orlando Sacay,[27] Wilfredo Gelito,[28] and other landowners[29] in Boracay filed
with this Court an original petition for prohibition, mandamus, and nullification of Proclamation No. 1064.[30] They allege that the
Proclamation infringed on their prior vested rights over portions of Boracay. They have been in continued possession of their
respective lots in Boracay since time immemorial. They have also invested billions of pesos in developing their lands and building
internationally renowned first class resorts on their lots.[31]
 
 
Petitioners-claimants contended that there is no need for a proclamation reclassifying Boracay into agricultural land. Being
classified as neither mineral nor timber land, the island is deemed agricultural pursuant to the Philippine Bill of 1902 and Act No.
926, known as the first Public Land Act.[32] Thus, their possession in the concept of owner for the required period entitled them to
judicial confirmation of imperfect title.
 
Opposing the petition, the OSG argued that petitioners-claimants do not have a vested right over their occupied portions in
the island. Boracay is an unclassified public forest land pursuant to Section 3(a) of PD No. 705. Being public forest, the claimed
portions of the island are inalienable and cannot be the subject of judicial confirmation of imperfect title. It is only the executive
department, not the courts, which has authority to reclassify lands of the public domain into alienable and disposable lands. There is a
need for a positive government act in order to release the lots for disposition.
 
On November 21, 2006, this Court ordered the consolidation of the two petitions as they principally involve the same issues
on the land classification of Boracay Island.[33]
 
Issues
 
G.R. No. 167707
 
The OSG raises the lone issue of whether Proclamation No. 1801 and PTA Circular No. 3-82 pose any legal obstacle for
respondents, and all those similarly situated, to acquire title to their occupied lands in Boracay Island.[34]
 
 
 
G.R. No. 173775
 
Petitioners-claimants hoist five (5) issues, namely:
 
I.
AT THE TIME OF THE ESTABLISHED POSSESSION OF PETITIONERS IN CONCEPT OF OWNER OVER
THEIR RESPECTIVE AREAS IN BORACAY, SINCE TIME IMMEMORIAL OR AT THE LATEST SINCE 30
YRS. PRIOR TO THE FILING OF THE PETITION FOR DECLARATORY RELIEF ON NOV. 19, 1997, WERE
THE AREAS OCCUPIED BY THEM PUBLIC AGRICULTURAL LANDS AS DEFINED BY LAWS THEN ON
JUDICIAL CONFIRMATION OF IMPERFECT TITLES OR PUBLIC FOREST AS DEFINED BY SEC. 3a, PD
705?
 
II.
HAVE PETITIONERS OCCUPANTS ACQUIRED PRIOR VESTED RIGHT OF PRIVATE OWNERSHIP OVER
THEIR OCCUPIED PORTIONS OF BORACAY LAND, DESPITE THE FACTTHAT THEY HAVE NOT
APPLIED YET FOR JUDICIAL CONFIRMATION OF IMPERFECT TITLE?
 
III.
IS THE EXECUTIVE DECLARATION OF THEIR AREAS AS
ALIENABLE AND DISPOSABLE UNDER SEC 6, CA 141 [AN] INDISPENSABLE PRE-REQUISITE FOR
PETITIONERS TO OBTAIN TITLE UNDER THE TORRENS SYSTEM?
  
IV.
IS THE ISSUANCE OF PROCLAMATION 1064 ON MAY 22, 2006, VIOLATIVE OF THE PRIOR VESTED
RIGHTS TO PRIVATE OWNERSHIP OF PETITIONERS OVER THEIR LANDS IN BORACAY, PROTECTED
BY THE DUE PROCESS CLAUSE OF THE CONSTITUTION OR IS PROCLAMATION 1064 CONTRARY
TO SEC. 8, CA 141, OR SEC. 4(a) OF RA 6657.
 
V.
CAN RESPONDENTS BE COMPELLED BY MANDAMUS TO ALLOW THE SURVEY AND TO APPROVE
THE SURVEY PLANS FOR PURPOSES OF THE APPLICATION FOR TITLING OF THE LANDS OF
PETITIONERS IN BORACAY?[35] (Underscoring supplied)
 
In capsule, the main issue is whether private claimants (respondents-claimants in G.R. No. 167707 and petitioners-claimants
in G.R. No. 173775) have a right to secure titles over their occupied portions in Boracay. The twin petitions pertain to their right, if
any, to judicial confirmation of imperfect title under CA No. 141, as amended. They do not involve their right to secure title under
other pertinent laws.
 
Our Ruling
 
Regalian Doctrine and power of the executive
to reclassify lands of the public domain
 
Private claimants rely on three (3) laws and executive acts in their bid for judicial confirmation of imperfect title, namely: (a)
Philippine Bill of 1902[36] in relation to Act No. 926, later amended and/or superseded by Act No. 2874 and CA No. 141;[37] (b)
Proclamation No. 1801[38] issued by then President Marcos; and (c) Proclamation No. 1064 [39]issued by President Gloria Macapagal-
Arroyo. We shall proceed to determine their rights to apply for judicial confirmation of imperfect title under these laws and executive
acts.
 
But first, a peek at the Regalian principle and the power of the executive to reclassify lands of the public domain.
 
The 1935 Constitution classified lands of the public domain into agricultural, forest or timber. [40] Meanwhile, the 1973
Constitution provided the following divisions: agricultural, industrial or commercial, residential, resettlement, mineral, timber or
forest and grazing lands, and such other classes as may be provided by law, [41] giving the government great leeway for classification.
[42]
 Then the 1987 Constitution reverted to the 1935 Constitution classification with one addition: national parks. [43] Of
these, onlyagricultural lands may be alienated.[44] Prior to Proclamation No. 1064 of May 22, 2006, Boracay Island had never been
expressly and administratively classified under any of these grand divisions. Boracay was an unclassified land of the public domain.
 
The Regalian Doctrine dictates that all lands of the public domain belong to the State, that the State is the source of any
asserted right to ownership of land and charged with the conservation of such patrimony. [45] The doctrine has been consistently
adopted under the 1935, 1973, and 1987 Constitutions.[46]
 
All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. [47] Thus, all
lands that have not been acquired from the government, either by purchase or by grant, belong to the State as part of the inalienable
public domain.[48] Necessarily, it is up to the State to determine if lands of the public domain will be disposed of for private ownership.
The government, as the agent of the state, is possessed of the plenary power as the persona in law to determine who shall be the
favored recipients of public lands, as well as under what terms they may be granted such privilege, not excluding the placing of
obstacles in the way of their exercise of what otherwise would be ordinary acts of ownership.[49]
 
Our present land law traces its roots to the Regalian Doctrine. Upon the Spanish conquest of the Philippines, ownership of all
lands, territories and possessions in the Philippines passed to the Spanish Crown.[50] The Regalian doctrine was first introduced in
the Philippines through the Laws of the Indies and the Royal Cedulas, which laid the foundation that all lands that were not acquired
from the Government, either by purchase or by grant, belong to the public domain.[51]
 
The Laws of the Indies was followed by the Ley Hipotecaria or the Mortgage Law of 1893. The Spanish Mortgage Law
provided for the systematic registration of titles and deeds as well as possessory claims.[52]
 
The Royal Decree of 1894 or the Maura Law[53] partly amended the Spanish Mortgage Law and the Laws of the Indies. It
established possessory information as the method of legalizing possession of vacant Crown land, under certain conditions which were
set forth in said decree.[54] Under Section 393 of the Maura Law, an informacion posesoria or possessory information title,[55] when
duly inscribed in the Registry of Property, is converted into a title of ownership only after the lapse of twenty (20) years of
uninterrupted possession which must be actual, public, and adverse, [56] from the date of its inscription.[57] However, possessory
information title had to be perfected one year after the promulgation of the Maura Law, or until April 17, 1895. Otherwise, the lands
would revert to the State.[58]
 
In sum, private ownership of land under the Spanish regime could only be founded on royal concessions which took various
forms, namely: (1) titulo real or royal grant; (2) concesion especial or special grant; (3) composicion con el estado or adjustment title;
(4) titulo de compra or title by purchase; and (5) informacion posesoria or possessory information title.[59]
 
The first law governing the disposition of public lands in the Philippines under American rule was embodied in the
Philippine Bill of 1902.[60] By this law, lands of the public domain in the Philippine Islands were classified into three (3) grand
divisions, to wit: agricultural, mineral, and timber or forest lands. [61] The act provided for, among others, the disposal of mineral lands
by means of absolute grant (freehold system) and by lease (leasehold system). [62] It also provided the definition by exclusion of
agricultural public lands.[63] Interpreting the meaning of agricultural lands under the Philippine Bill of 1902, the Court declared
in Mapa v. Insular Government:[64]
 
 
x x x In other words, that the phrase agricultural land as used in Act No. 926 means those public lands
acquired from Spain which are not timber or mineral lands. x x x[65] (Emphasis Ours)
 
On February 1, 1903, the Philippine Legislature passed Act No. 496, otherwise known as the Land Registration Act. The act
established a system of registration by which recorded title becomes absolute, indefeasible, and imprescriptible. This is known as
the Torrens system.[66]
 
Concurrently, on October 7, 1903, the Philippine Commission passed Act No. 926, which was the first Public Land Act. The
Act introduced the homestead system and made provisions for judicial and administrative confirmation of imperfect titles and for the
sale or lease of public lands. It permitted corporations regardless of the nationality of persons owning the controlling stock to lease or
purchase lands of the public domain.[67] Under the Act, open, continuous, exclusive, and notorious possession and occupation of
agricultural lands for the next ten (10) years preceding July 26, 1904 was sufficient for judicial confirmation of imperfect title.[68]
 
On November 29, 1919, Act No. 926 was superseded by Act No. 2874, otherwise known as the second Public Land Act.
This new, more comprehensive law limited the exploitation of agricultural lands to Filipinos and Americans and citizens of other
countries which gave Filipinos the same privileges. For judicial confirmation of title, possession and occupation en concepto
dueo since time immemorial, or since July 26, 1894, was required.[69]
 
After the passage of the 1935 Constitution, CA No. 141 amended Act No. 2874 on December 1, 1936. To this day, CA No.
141, as amended, remains as the existing general law governing the classification and disposition of lands of the public domain other
than timber and mineral lands,[70] and privately owned lands which reverted to the State.[71]
 
Section 48(b) of CA No. 141 retained the requirement under Act No. 2874 of possession and occupation of lands of the
public domain since time immemorial or since July 26, 1894. However, this provision was superseded by Republic Act (RA) No.
1942,[72] which provided for a simple thirty-year prescriptive period for judicial confirmation of imperfect title. The provision was last
amended by PD No. 1073,[73] which now provides for possession and occupation of the land applied for since June 12, 1945, or
earlier.[74]
 
The issuance of PD No. 892[75] on February 16, 1976 discontinued the use of Spanish titles as evidence in land registration
proceedings.[76] Under the decree, all holders of Spanish titles or grants should apply for registration of their lands under Act No. 496
within six (6) months from the effectivity of the decree on February 16, 1976. Thereafter, the recording of all unregistered
lands[77] shall be governed by Section 194 of the Revised Administrative Code, as amended by Act No. 3344.
 
On June 11, 1978, Act No. 496 was amended and updated by PD No. 1529, known as the Property Registration Decree. It
was enacted to codify the various laws relative to registration of property. [78] It governs registration of lands under the Torrens system
as well as unregistered lands, including chattel mortgages.[79]
 
A positive act declaring land as alienable and disposable is required. In keeping with the presumption of State ownership,
the Court has time and again emphasized that there must be a positive act of the government, such as an official proclamation,
[80]
 declassifying inalienable public land into disposable land for agricultural or other purposes. [81] In fact, Section 8 of CA No. 141
limits alienable or disposable lands only to those lands which have been officially delimited and classified.[82]
 
The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person
applying for registration (or claiming ownership), who must prove that the land subject of the application is alienable or disposable.
[83]
 To overcome this presumption, incontrovertible evidence must be established that the land subject of the application (or claim) is
alienable or disposable.[84] There must still be a positive act declaring land of the public domain as alienable and disposable. To prove
that the land subject of an application for registration is alienable, the applicant must establish the existence of a positive act of the
government such as a presidential proclamation or an executive order; an administrative action; investigation reports of Bureau of
Lands investigators; and a legislative act or a statute. [85] The applicant may also secure a certification from the government that the
land claimed to have been possessed for the required number of years is alienable and disposable.[86]
 
In the case at bar, no such proclamation, executive order, administrative action, report, statute, or certification was presented
to the Court. The records are bereft of evidence showing that, prior to 2006, the portions of Boracay occupied by private claimants
were subject of a government proclamation that the land is alienable and disposable. Absent such well-nigh incontrovertible evidence,
the Court cannot accept the submission that lands occupied by private claimants were already open to disposition before 2006. Matters
of land classification or reclassification cannot be assumed. They call for proof.[87]
 
Ankron and De Aldecoa did not make the whole of Boracay Island, or portions of it, agricultural lands . Private claimants
posit that Boracay was already an agricultural land pursuant to the old cases Ankron v. Government of the Philippine Islands (1919)
[88]
 and De Aldecoa v. The Insular Government (1909).[89] These cases were decided under the provisions of the Philippine Bill of 1902
and Act No. 926. There is a statement in these old cases that in the absence of evidence to the contrary, that in each case the lands are
agricultural lands until the contrary is shown.[90]
 
Private claimants reliance on Ankron and De Aldecoa is misplaced. These cases did not have the effect of converting the
whole of Boracay Island or portions of it into agricultural lands. It should be stressed that the Philippine Bill of 1902 and Act No. 926
merely provided the manner through which land registration courts would classify lands of the public domain. Whether the land would
be classified as timber, mineral, or agricultural depended on proof presented in each case.
 
Ankron and De Aldecoa were decided at a time when the President of the Philippines had no power to classify lands of the
public domain into mineral, timber, and agricultural. At that time, the courts were free to make corresponding classifications in
justiciable cases, or were vested with implicit power to do so, depending upon the preponderance of the evidence. [91] This was the
Courts ruling in Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic,[92] in which it stated,
through Justice Adolfo Azcuna, viz.:
 
x x x Petitioners furthermore insist that a particular land need not be formally released by an act of the
Executive before it can be deemed open to private ownership, citing the cases of Ramos v. Director of
Lands and Ankron v. Government of the Philippine Islands.
 
xxxx
 
Petitioners reliance upon Ramos v. Director of Lands and Ankron v. Government is misplaced. These cases
were decided under the Philippine Bill of 1902 and the first Public Land Act No. 926 enacted by the Philippine
Commission on October 7, 1926, under which there was no legal provision vesting in the Chief Executive or
President of the Philippines the power to classify lands of the public domain into mineral, timber and agricultural so
that the courts then were free to make corresponding classifications in justiciable cases, or were vested with implicit
power to do so, depending upon the preponderance of the evidence.[93]
 
To aid the courts in resolving land registration cases under Act No. 926, it was then necessary to devise a presumption on
land classification. Thus evolved the dictum in Ankron that the courts have a right to presume, in the absence of evidence to the
contrary, that in each case the lands are agricultural lands until the contrary is shown.[94]
 
 
 
But We cannot unduly expand the presumption in Ankron and De Aldecoa to an argument that all lands of the public domain
had been automatically reclassified as disposable and alienable agricultural lands. By no stretch of imagination did the presumption
convert all lands of the public domain into agricultural lands.
 
If We accept the position of private claimants, the Philippine Bill of 1902 and Act No. 926 would have automatically made
all lands in the Philippines, except those already classified as timber or mineral land, alienable and disposable lands. That would
take these lands out of State ownership and worse, would be utterly inconsistent with and totally repugnant to the long-entrenched
Regalian doctrine.
 
The presumption in Ankron and De Aldecoa attaches only to land registration cases brought under the provisions of Act No.
926, or more specifically those cases dealing with judicial and administrative confirmation of imperfect titles. The presumption
applies to an applicant for judicial or administrative conformation of imperfect title under Act No. 926. It certainly cannot apply to
landowners, such as private claimants or their predecessors-in-interest, who failed to avail themselves of the benefits of Act No.
926. As to them, their land remained unclassified and, by virtue of the Regalian doctrine, continued to be owned by the State.
 
In any case, the assumption in Ankron and De Aldecoa was not absolute. Land classification was, in the end, dependent on
proof. If there was proof that the land was better suited for non-agricultural uses, the courts could adjudge it as a mineral or timber
land despite the presumption. In Ankron, this Court stated:
 
In the case of Jocson vs. Director of Forestry (supra), the Attorney-General admitted in effect that whether
the particular land in question belongs to one class or another is a question of fact. The mere fact that a tract of land
has trees upon it or has mineral within it is not of itself sufficient to declare that one is forestry land and the other,
mineral land. There must be some proof of the extent and present or future value of the forestry and of the
minerals. While, as we have just said, many definitions have been given for agriculture, forestry, and mineral lands,
and that in each case it is a question of fact, we think it is safe to say that in order to be forestry or mineral land the
proof must show that it is more valuable for the forestry or the mineral which it contains than it is for agricultural
purposes. (Sec. 7, Act No. 1148.) It is not sufficient to show that there exists some trees upon the land or that it bears
some mineral. Land may be classified as forestry or mineral today, and, by reason of the exhaustion of the timber or
mineral, be classified as agricultural land tomorrow. And vice-versa, by reason of the rapid growth of timber or the
discovery of valuable minerals, lands classified as agricultural today may be differently classified tomorrow. Each
case must be decided upon the proof in that particular case, having regard for its present or future value for
one or the other purposes. We believe, however, considering the fact that it is a matter of public knowledge that a
majority of the lands in the Philippine Islands are agricultural lands that the courts have a right to presume, in the
absence of evidence to the contrary, that in each case the lands are agricultural lands until the contrary is
shown. Whatever the land involved in a particular land registration case is forestry or mineral land must,
therefore, be a matter of proof. Its superior value for one purpose or the other is a question of fact to be
 settled by the proof in each particular case. The fact that the land is a manglar [mangrove swamp] is not sufficient
for the courts to decide whether it is agricultural, forestry, or mineral land. It may perchance belong to one or the
other of said classes of land. The Government, in the first instance, under the provisions of Act No. 1148, may, by
reservation, decide for itself what portions of public land shall be considered forestry land, unless private interests
have intervened before such reservation is made. In the latter case, whether the land is agricultural, forestry, or
mineral, is a question of proof. Until private interests have intervened, the Government, by virtue of the terms of
said Act (No. 1148), may decide for itself what portions of the public domain shall be set aside and reserved as
forestry or mineral land. (Ramos vs. Director of Lands, 39 Phil. 175; Jocson vs. Director of Forestry, supra)
[95]
 (Emphasis ours)
 
Since 1919, courts were no longer free to determine the classification of lands from the facts of each case, except those that
have already became private lands.[96] Act No. 2874, promulgated in 1919 and reproduced in Section 6 of CA No. 141, gave the
Executive Department, through the President, the exclusive prerogative to classify or reclassify public lands into alienable or
disposable, mineral or forest.96-a Since then, courts no longer had the authority, whether express or implied, to determine the
classification of lands of the public domain.[97]
 
Here, private claimants, unlike the Heirs of Ciriaco Tirol who were issued their title in 1933,[98] did not present a justiciable
case for determination by the land registration court of the propertys land classification. Simply put, there was no opportunity for the
courts then to resolve if the land the Boracay occupants are now claiming were agricultural lands. When Act No. 926 was supplanted
by Act No. 2874 in 1919, without an application for judicial confirmation having been filed by private claimants or their predecessors-
in-interest, the courts were no longer authorized to determine the propertys land classification. Hence, private claimants cannot bank
on Act No. 926.
 
We note that the RTC decision[99] in G.R. No. 167707 mentioned Krivenko v. Register of Deeds of Manila,[100] which was
decided in 1947 when CA No. 141, vesting the Executive with the sole power to classify lands of the public domain was already in
effect. Krivenko cited the old cases Mapa v. Insular Government,[101] De Aldecoa v. The Insular Government,[102] and Ankron v.
Government of the Philippine Islands.[103]
 
Krivenko, however, is not controlling here because it involved a totally different issue. The pertinent issue in Krivenko was
whether residential lots were included in the general classification of agricultural lands; and if so, whether an alien could acquire a
residential lot. This Court ruled that as an alien, Krivenko was prohibited by the 1935 Constitution [104]from acquiring agricultural land,
which included residential lots. Here, the issue is whether unclassified lands of the public domain are automatically deemed
agricultural.
 
 
Notably, the definition of agricultural public lands mentioned in Krivenko relied on the old cases decided prior to the
enactment of Act No. 2874, including Ankron and De Aldecoa.[105] As We have already stated, those cases cannot apply here, since
they were decided when the Executive did not have the authority to classify lands as agricultural, timber, or mineral.
 
Private claimants continued possession under Act No. 926 does not create a presumption that the land is alienable . Private
claimants also contend that their continued possession of portions of Boracay Island for the requisite period of ten (10) years under
Act No. 926[106] ipso facto converted the island into private ownership. Hence, they may apply for a title in their name.
 
A similar argument was squarely rejected by the Court in Collado v. Court of Appeals.[107] Collado, citing the separate
opinion of now Chief Justice Reynato S. Puno in Cruz v. Secretary of Environment and Natural Resources,107-a ruled:
 
Act No. 926, the first Public Land Act, was passed in pursuance of the provisions of the
Philippine Bill of 1902. The law governed the disposition of lands of the public domain. It
prescribed rules and regulations for the homesteading, selling and leasing of portions of the public
domain of the Philippine Islands, and prescribed the terms and conditions to enable persons to
perfect their titles to public lands in the Islands. It also provided for the issuance of patents to
certain native settlers upon public lands, for the establishment of town sites and sale of lots
therein, for the completion of imperfect titles, and for the cancellation or confirmation of Spanish
concessions and grants in the Islands. In short, the Public Land Act operated on the assumption
that title to public lands in the Philippine Islands remained in the government; and that the
 governments title to public land sprung from the Treaty of Paris and other subsequent treaties
between Spain and the United States. The term public land referred to all lands of the public
domain whose title still remained in the government and are thrown open to private appropriation
and settlement, and excluded the patrimonial property of the government and the friar lands.
 
Thus, it is plain error for petitioners to argue that under the Philippine Bill of 1902 and Public Land Act No.
926, mere possession by private individuals of lands creates the legal presumption that the lands are alienable
and disposable.[108] (Emphasis Ours)
 
Except for lands already covered by existing titles, Boracay was an unclassified land of the public domain prior to
Proclamation No. 1064. Such unclassified lands are considered public forest under PD No. 705. The DENR[109] and the National
Mapping and Resource Information Authority[110] certify that Boracay Island is an unclassified land of the public domain.
 
PD No. 705 issued by President Marcos categorized all unclassified lands of the public domain as public forest. Section 3(a)
of PD No. 705 defines a public forest as a mass of lands of the public domain which has not been the subject of the present system of
classification for the determination of which lands are needed for forest purpose and which are not.Applying PD No. 705, all
unclassified lands, including those in Boracay Island, are ipso facto considered public forests. PD No. 705, however, respects titles
already existing prior to its effectivity.
 
The Court notes that the classification of Boracay as a forest land under PD No. 705 may seem to be out of touch with the
present realities in the island. Boracay, no doubt, has been partly stripped of its forest cover to pave the way for commercial
developments. As a premier tourist destination for local and foreign tourists, Boracay appears more of a commercial island resort,
rather than a forest land.
 
Nevertheless, that the occupants of Boracay have built multi-million peso beach resorts on the island; [111] that the island has
already been stripped of its forest cover; or that the implementation of Proclamation No. 1064 will destroy the islands tourism
industry, do not negate its character as public forest.
 
Forests, in the context of both the Public Land Act and the Constitution [112] classifying lands of the public domain
into agricultural, forest or timber, mineral lands, and national parks, do not necessarily refer to large tracts of wooded land or
expanses covered by dense growths of trees and underbrushes. [113] The discussion in Heirs of Amunategui v. Director of Forestry [114] is
particularly instructive:
 
A forested area classified as forest land of the public domain does not lose such classification simply
because loggers or settlers may have stripped it of its forest cover. Parcels of land classified as forest land may
actually be covered with grass or planted to crops by kaingin cultivators or other farmers. Forest lands do not have to
be on mountains or in out of the way places. Swampy areas covered by mangrove trees, nipa palms, and other trees
growing in brackish or sea water may also be classified as forest land. The classification is descriptive of its legal
nature or status and does not have to be descriptive of what the land actually looks like. Unless and until the
land classified as forest is released in an official proclamation to that effect so that it may form part of the disposable
agricultural lands of the public domain, the rules on confirmation of imperfect title do not apply. [115] (Emphasis
supplied)
 
There is a big difference between forest as defined in a dictionary and forest or timber land as a classification of lands of the public
domain as appearing in our statutes. One is descriptive of what appears on the land while the other is a legal status, a classification for
legal purposes.[116] At any rate, the Court is tasked to determine the legal status of Boracay Island, and not look into its physical
layout. Hence, even if its forest cover has been replaced by beach resorts, restaurants and other commercial establishments, it has not
been automatically converted from public forest to alienable agricultural land.
 
Private claimants cannot rely on Proclamation No. 1801 as basis for judicial confirmation of imperfect title.  The
proclamation did not convert Boracay into an agricultural land. However, private claimants argue that Proclamation No. 1801
issued by then President Marcos in 1978 entitles them to judicial confirmation of imperfect title. The Proclamation classified Boracay,
among other islands, as a tourist zone. Private claimants assert that, as a tourist spot, the island is susceptible of private ownership.
 
 Proclamation No. 1801 or PTA Circular No. 3-82 did not convert the whole of Boracay into an agricultural land. There is
nothing in the law or the Circular which made Boracay Island an agricultural land. The reference in Circular No. 3-82 to private
lands[117] and areas declared as alienable and disposable[118] does not by itself classify the entire island as agricultural. Notably, Circular
No. 3-82 makes reference not only to private lands and areas but also to public forested lands. Rule VIII, Section 3 provides:
 
No trees in forested private lands may be cut without prior authority from the PTA. All forested areas
in public lands are declared forest reserves. (Emphasis supplied)
 
Clearly, the reference in the Circular to both private and public lands merely recognizes that the island can be classified by
the Executive department pursuant to its powers under CA No. 141. In fact, Section 5 of the Circular recognizes the then Bureau of
Forest Developments authority to declare areas in the island as alienable and disposable when it provides:
 
Subsistence farming, in areas declared as alienable and disposable by the Bureau of Forest Development.
 
Therefore, Proclamation No. 1801 cannot be deemed the positive act needed to classify Boracay Island as alienable and
disposable land. If President Marcos intended to classify the island as alienable and disposable or forest, or both, he would have
identified the specific limits of each, as President Arroyo did in Proclamation No. 1064. This was not done in Proclamation No. 1801.
 
The Whereas clauses of Proclamation No. 1801 also explain the rationale behind the declaration of Boracay Island, together
with other islands, caves and peninsulas in the Philippines, as a tourist zone and marine reserve to be administered by the PTA to
ensure the concentrated efforts of the public and private sectors in the development of the areas tourism potential with due regard for
ecological balance in the marine environment. Simply put, the proclamation is aimed at administering the islands for tourism and
ecological purposes. It does not address the areas alienability.[119]
 
More importantly, Proclamation No. 1801 covers not only Boracay Island, but sixty-four (64) other islands, coves, and
peninsulas in the Philippines, such as Fortune and Verde Islands in Batangas, Port Galera in Oriental Mindoro, Panglao and Balicasag
Islands in Bohol, Coron Island, Puerto Princesa and surrounding areas in Palawan, Camiguin Island in Cagayan de Oro, and Misamis
Oriental, to name a few. If the designation of Boracay Island as tourist zone makes it alienable and disposable by virtue of
Proclamation No. 1801, all the other areas mentioned would likewise be declared wide open for private disposition. That could not
have been, and is clearly beyond, the intent of the proclamation.
 
It was Proclamation No. 1064 of 2006 which positively declared part of Boracay as alienable and opened the same to
private ownership. Sections 6 and 7 of CA No. 141[120] provide that it is only the President, upon the recommendation of the proper
department head, who has the authority to classify the lands of the public domain into alienable or disposable, timber and mineral
lands.[121]
 
In issuing Proclamation No. 1064, President Gloria Macapagal-Arroyo merely exercised the authority granted to her to
classify lands of the public domain, presumably subject to existing vested rights. Classification of public lands is the exclusive
prerogative of the Executive Department, through the Office of the President. Courts have no authority to do so.[122] Absent such
classification, the land remains unclassified until released and rendered open to disposition.[123]
 
Proclamation No. 1064 classifies Boracay into 400 hectares of reserved forest land and 628.96 hectares of agricultural land.
The Proclamation likewise provides for a 15-meter buffer zone on each side of the center line of roads and trails, which are reserved
for right of way and which shall form part of the area reserved for forest land protection purposes.
Contrary to private claimants argument, there was nothing invalid or irregular, much less unconstitutional, about the
classification of Boracay Island made by the President through Proclamation No. 1064. It was within her authority to make such
classification, subject to existing vested rights.
 
 Proclamation No. 1064 does not violate the Comprehensive Agrarian Reform Law. Private claimants further assert that
Proclamation No. 1064 violates the provision of the Comprehensive Agrarian Reform Law (CARL) or RA No. 6657 barring
conversion of public forests into agricultural lands. They claim that since Boracay is a public forest under PD No. 705, President
Arroyo can no longer convert it into an agricultural land without running afoul of Section 4(a) of RA No. 6657, thus:
 
SEC. 4. Scope. The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless of tenurial
arrangement and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131
and Executive Order No. 229, including other lands of the public domain suitable for agriculture.
 
More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program:
 
(a) All alienable and disposable lands of the public domain devoted to or suitable for
agriculture. No reclassification of forest or mineral lands to agricultural lands shall be
undertaken after the approval of this Act until Congress, taking into account ecological,
developmental and equity considerations, shall have determined by law, the specific limits of
the public domain.
 
That Boracay Island was classified as a public forest under PD No. 705 did not bar the Executive from later converting it into
agricultural land. Boracay Island still remained an unclassified land of the public domain despite PD No. 705.
 
In Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols v. Republic,[124] the Court stated that unclassified lands
are public forests.
 
 
While it is true that the land classification map does not categorically state that the islands are public
forests, the fact that they were unclassified lands leads to the same result. In the absence of the classification as
mineral or timber land, the land remains unclassified land until released and rendered open to disposition.
[125]
 (Emphasis supplied)
 
Moreover, the prohibition under the CARL applies only to a reclassification of land. If the land had never been previously
classified, as in the case of Boracay, there can be no prohibited reclassification under the agrarian law. We agree with the opinion of
the Department of Justice[126] on this point:
 
Indeed, the key word to the correct application of the prohibition in Section 4(a) is the word
reclassification. Where there has been no previous classification of public forest [referring, we repeat, to the mass
of the public domain which has not been the subject of the present system of classification for purposes of
determining which are needed for forest purposes and which are not] into permanent forest or forest reserves or
some other forest uses under the Revised Forestry Code, there can be no reclassification of forest lands to speak of
within the meaning of Section 4(a).
 
Thus, obviously, the prohibition in Section 4(a) of the CARL against the reclassification of forest lands to
agricultural lands without a prior law delimiting the limits of the public domain, does not, and cannot, apply to those
lands of the public domain, denominated as public forest under the Revised Forestry Code, which have not been
previously determined, or classified, as needed for forest purposes in accordance with the provisions of the Revised
Forestry Code.[127]
 
Private claimants are not entitled to apply for judicial confirmation of imperfect title under CA No. 141.  Neither do they
have vested rights over the occupied lands under the said law. There are two requisites for judicial confirmation of imperfect or
incomplete title under CA No. 141, namely: (1) open, continuous, exclusive, and notorious possession and occupation of the subject
land by himself or through his predecessors-in-interest under a bona fide claim of ownership since time immemorial or from June 12,
1945; and (2) the classification of the land as alienable and disposable land of the public domain.[128]
 
As discussed, the Philippine Bill of 1902, Act No. 926, and Proclamation No. 1801 did not convert portions
of Boracay Island into an agricultural land. The island remained an unclassified land of the public domain and, applying the Regalian
doctrine, is considered State property.
 
 Private claimants bid for judicial confirmation of imperfect title, relying on the Philippine Bill of 1902, Act No. 926, and
Proclamation No. 1801, must fail because of the absence of the second element of alienable and disposable land. Their entitlement to a
government grant under our present Public Land Act presupposes that the land possessed and applied for is already alienable and
disposable. This is clear from the wording of the law itself. [129] Where the land is not alienable and disposable, possession of the land,
no matter how long, cannot confer ownership or possessory rights.[130]
 
Neither may private claimants apply for judicial confirmation of imperfect title under Proclamation No. 1064, with respect to
those lands which were classified as agricultural lands. Private claimants failed to prove the first element of open, continuous,
exclusive, and notorious possession of their lands in Boracay since June 12, 1945.
 
We cannot sustain the CA and RTC conclusion in the petition for declaratory relief that private claimants complied with the
requisite period of possession.
 
The tax declarations in the name of private claimants are insufficient to prove the first element of possession. We note that
the earliest of the tax declarations in the name of private claimants were issued in 1993. Being of recent dates, the tax declarations are
not sufficient to convince this Court that the period of possession and occupation commenced on June 12, 1945.
 
Private claimants insist that they have a vested right in Boracay, having been in possession of the island for a long time. They
have invested millions of pesos in developing the island into a tourist spot. They say their continued possession and investments give
them a vested right which cannot be unilaterally rescinded by Proclamation No. 1064.
 
The continued possession and considerable investment of private claimants do not automatically give them a vested right in
Boracay. Nor do these give them a right to apply for a title to the land they are presently occupying. This Court is constitutionally
bound to decide cases based on the evidence presented and the laws applicable. As the law and jurisprudence stand, private claimants
are ineligible to apply for a judicial confirmation of title over their occupied portions in Boracay even with their continued possession
and considerable investment in the island.
 
One Last Note
 
The Court is aware that millions of pesos have been invested for the development of Boracay Island, making it a by-word in
the local and international tourism industry. The Court also notes that for a number of years, thousands of people have called the
island their home. While the Court commiserates with private claimants plight, We are bound to apply the law strictly and
judiciously. This is the law and it should prevail. Ito ang batas at ito ang dapat umiral.
 
All is not lost, however, for private claimants. While they may not be eligible to apply for judicial confirmation of imperfect
title under Section 48(b) of CA No. 141, as amended, this does not denote their automatic ouster from the residential, commercial, and
other areas they possess now classified as agricultural. Neither will this mean the loss of their substantial investments on their
occupied alienable lands. Lack of title does not necessarily mean lack of right to possess.
 
For one thing, those with lawful possession may claim good faith as builders of improvements. They can take steps to
preserve or protect their possession. For another, they may look into other modes of applying for original registration of title, such as
by homestead[131] or sales patent,[132] subject to the conditions imposed by law.
 
More realistically, Congress may enact a law to entitle private claimants to acquire title to their occupied lots or to exempt
them from certain requirements under the present land laws. There is one such bill[133] now pending in the House of
Representatives. Whether that bill or a similar bill will become a law is for Congress to decide.
 
 In issuing Proclamation No. 1064, the government has taken the step necessary to open up the island to private
ownership. This gesture may not be sufficient to appease some sectors which view the classification of the island partially into a forest
reserve as absurd. That the island is no longer overrun by trees, however, does not becloud the vision to protect its remaining forest
cover and to strike a healthy balance between progress and ecology. Ecological conservation is as important as economic progress.
 
To be sure, forest lands are fundamental to our nations survival. Their promotion and protection are not just fancy rhetoric for
politicians and activists. These are needs that become more urgent as destruction of our environment gets prevalent and difficult to
control. As aptly observed by Justice Conrado Sanchez in 1968 in Director of Forestry v. Munoz:[134]
 
The view this Court takes of the cases at bar is but in adherence to public policy that should be followed
with respect to forest lands. Many have written much, and many more have spoken, and quite often, about the
pressing need for forest preservation, conservation, protection, development and reforestation. Not without
justification. For, forests constitute a vital segment of any country's natural resources. It is of common knowledge by
now that absence of the necessary green cover on our lands produces a number of adverse or ill effects of serious
proportions. Without the trees, watersheds dry up; rivers and lakes which they supply are emptied of their contents.
The fish disappear. Denuded areas become dust bowls. As waterfalls cease to function, so will hydroelectric plants.
With the rains, the fertile topsoil is washed away; geological erosion results. With erosion come the dreaded floods
that wreak havoc and destruction to property crops, livestock, houses, and highways not to mention precious human
lives. Indeed, the foregoing observations should be written down in a lumbermans decalogue.[135]
 
WHEREFORE, judgment is rendered as follows:
 
1. The petition for certiorari in G.R. No. 167707 is GRANTED and the Court of Appeals Decision in CA-G.R. CV No.
71118 REVERSED AND SET ASIDE.
 
2. The petition for certiorari in G.R. No. 173775 is DISMISSED for lack of merit.
 
SO ORDERED.

G.R. No. L-32049 June 25, 1984

MATAAS NA LUPA TENANTS ASSOCIATION, INC., NICOLAS AGLABAY, and Those Mentioned in Annex "A" of
Complaint, Petitioners, vs. CARLOS DIMAYUGA and JULIANA DIEZ Vda. de GABRIEL, Respondents.

Ramon Gonzales for petitioners.chanrobles virtual law library

The Solicitor General and Magno T. Bueses for respondents.

MAKASIAR, J.:

This petition for review on certiorari presents for review the order dated October 30, 1969 of the defunct Court of First Instance of
Manila, Branch IV, which granted the motion to dismiss the complaint of petitioners in Civil Case No. 75391 on the ground that the
same failed to state a cause of action (p. 16, rec.; pp. 1, 100, CFI rec.).chanroblesvirtualawlibrarychanrobles virtual law library

The undisputed facts are as follows: chanrobles virtual law library

On January 17, 1969, petitioners filed a complaint for the exercise of preferential rights with the then Court of First Instance of
Manila, Branch IV, docketed as Civil Case No. 75391 (p. 32, rec.; p. 1, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law
library

The said complaint alleged that petitioner association has for its members Nicolas Aglabay, et al., named and listed in Annex "A" of
said complaint, which members are heads of 110 tenant families, and who have been, for more than ten years prior to 1959, occupants
of a parcel of land (with their 110 houses built thereon), formerly owned by the respondent, Juliana Diez Vda. de Gabriel, to whom
petitioners have been paying rents for the lease thereof, but who, on May 14, 1968, without notice to petitioners, sold the same to
respondent Carlos Dimayuga, who, in turn, mortgaged the same to her for the balance of the purchase price; that according to
Republic Act 1162, as amended by Republic Act 2342, a parcel of land in Manila and suburbs, with at least fifty (50) houses of
tenants erected thereon and actually leased to said tenants for at least ten (10) years prior to June 20, 1959, may not be sold by the
landowner to any person other than such tenants, unless the latter renounced their rights in a public instrument; that without said
tenants-appellants having renounced their preferential rights in public instrument, respondent Vda. de Gabriel sold the land to
respondent Dimayuga; that petitioners-tenants are willing to purchase said land at the same price and on the same terms and conditions
observed in the contract of sale with respondent Dimayuga; and that since aforesaid contract of sale is expressly prohibited by law, the
same is null and void, while it is mandatory for respondent Vda. de Gabriel to execute such sale to petitioners, Petitioners therefore
prayed that said contract of sale be declared void, and that respondent Vda. de Gabriel be ordered to execute a deed of sale in favor of
petitioners at the same price and conditions followed in the contract with respondent Dimayuga, plus attorney's fees and damages (p.
32, rec.; p. 1, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law library

On January 31, 1969, respondent Vda. de Gabriel filed a motion to dismiss on the ground that the complaint stated no cause of action
because the land subject of the complaint is not a landed estate, and not being such, the same cannot be expropriated, and not being
expropriable, no preferential rights could be availed of by the tenants (p. 41, rec.; p. 22, CFI
rec.).chanroblesvirtualawlibrary chanrobles virtual law library

Respondent Dimayuga filed his answer to aforesaid complaint on February 6, 1969 admitting therein certain factual allegations,
denied some averments, interposed the affirmative defenses that plaintiffs had no personality to initiate the action since the Land
Tenure Administration possessed the power to institute the proper expropriation proceedings before the competent court and that the
subject complaint stated no cause of action against respondent, alleged a counterclaim to eject plaintiffs from the property, and prayed
for the dismissal of the complaint and other remedies (p. 44, rec.; p. 155, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law
library

On February 6, 1969, plaintiffs-petitioners filed their opposition to the motion to dismiss, maintaining, among others, that Republic
Act 1162, as amended by Republic Act 2342 (law which respondent Vda. de Gabriel invoked), does not necessarily refer to landed
estates, but to any piece of land occupied by more than 50 families leasing the same for more than ten (10) years prior to June 20,
1959; that their preferential rights are independent of the expropriability of the land; that therefore, said rights may be exercised even
if the land is not expropriable; and that these rights were granted pursuant to the police power of the State for the general welfare, with
prayer that aforesaid motion to dismiss be denied (p. 47, rec.; p. 26, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law library

On February 13, 1969, respondent Vda. de Gabriel replied to the aforesaid opposition to motion to dismiss, reiterating therein her
prayer to dismiss the complaint (p. 57, rec.; p. 38, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law library

Plaintiffs-petitioners filed their rejoinder to above reply to their opposition on February 19, 1969, laying emphasis on the alleged
distinction between the two ways of acquiring occupied land under Republic Act 1162, which are expropriation and voluntary disposal
of the land by the owner thereof, and which are exercisable independently of each other (p. 56, rec.; p. 42, CFI
rec.).chanroblesvirtualawlibrary chanrobles virtual law library

On October 30, 1969, Branch IV of the Court of First Instance of Manila issued the subject order which found respondent's motion to
dismiss well-taken and thereby dismissed the complaint (p. 69, rec.; p. 100, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual
law library

Petitioners moved for reconsideration of the aforecited order on January 7, 1970, which motion was denied in the lower court's order
of January 27, 1970 (p. 111, 190, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law library

On February 9, 1970, petitioners filed a notice of appeal with the lower court to which respondent Vda. de Gabriel moved for
dismissal of the same on February 11, 1970 on the alleged ground that pursuant to Republic Act 5440, petitioners should have
appealed from the questioned order by way of a petition for certiorari to this Court since the matter involved only errors or questions
of law (p. 143, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law library

After a series of motions, reply, rejoinder, sur-rejoinder, and answer between both parties, the lower court issued its order of May 11,
1970 dismissing petitioners' appeal (p. 225, CFI rec.).chanroblesvirtualawlibrary chanrobles virtual law library

Petitioners thus resorted to this petition.chanroblesvirtualawlibrary chanrobles virtual law library

Petitioners contend that the lower court committed an error in dismissing their complaint on the ground that since the land is not
expropriable, it follows that the tenants therein have no preferential rights to buy said land, if the same is sold voluntarily. Petitioners'
contention is anchored on the amendment introduced by Republic Act 3516 into Section 1 of Republic Act 1162, which latter law had
been invoked in the decision of the lower court.chanroblesvirtualawlibrary chanrobles virtual law library

According to petitioners, the phrase "any landed estates or haciendas herein authorized to be expropriated" had been amended to read
"any landed estates or haciendas or lands herein authorized to be expropriated"; hence, Republic Act 1162 does not refer exclusively
to landed estates or haciendas, but even to smaller lands. The particular section as amended reads thus:

The expropriation of landed estates or haciendas, or lands which formerly formed part thereof, or any piece of land in the City of
Manila, Quezon City and suburbs, which have been and are actually being leased to tenants for at least ten years, is hereby
authorized: Provided, That such lands shall have at least forty families of tenants thereon. (Sec. 1 of R. A. 3516).

Petitioners likewise invoke the amended title of Republic Act 1162 which had been introduced by Republic Act 2342 which title now
reads as follows:

An Act Providing for the Expropriation of Landed Estates or Haciendas or Lands Which Formerly Formed Part Thereof or Any Piece
of Land in the City of Manila, Quezon City and Suburbs, Their Subdivision into Small Lots, and the Sale of Such Lots at Cost or
Their Lease on Reasonable Terms, and for Other Purposes (emphasis supplied).

Petitioners further allege that Republic Act 1162 is both an exercise of the power of eminent domain and the police power of the State.
The exercise of the police power of the State refers to the grant of preferential rights to the tenants of such land, if the same is disposed
of voluntarily. Simply stated, petitioners theorize that Republic Act 1162 covers both compulsory and voluntary sale; hence, while
expropriability is pertinent to compulsory sale, the same does not relate to voluntary sale. Even if the land is not expropriable, if the
same is however actually leased to the occupants for more than ten years prior to May 22, 1963 (when R.A. 3516 took effect) with at
least 40 families, said land, if sold voluntarily, is subject to the preferential rights of the tenants.chanroblesvirtualawlibrary chanrobles
virtual law library

Respondent Vda. de Gabriel maintains, on the other hand, that there is no more issue regarding the non-expropriability of subject land,
which condition or status was expressly admitted by petitioners in the lower court; that the title of Republic Act 1162, as amended by
Republic Act Nos. 2342 and 3516 clearly embraces expropriation; that the prohibitive acts enumerated in Section 5 of R.A. 1162, as
amended, are entirely dependent on the expropriability of the land in controversy; that there is nothing in the aforecited law which
validly supports the alleged preferential right of petitioners to purchase the property at the same price and under the same conditions;
that the only reasonable interpretation of the opening lines of Section 5 of Republic Act 1162, as amended, is that pending
expropriation, the landowner shall not sell the land to any other person than the tenant or occupant unless the latter renounces his
rights in a public instrument; but if the land is not expropriable, as petitioners have admitted, the prohibition does not apply; and that
clearly, from the provision of Section 6 of the amended law, Section 5 thereof may be violated only if the land is "herein authorized to
be expropriated" and since petitioners have admitted the non-expropriability of subject land, it necessarily follows that said Section 5
cannot apply.chanroblesvirtualawlibrary chanrobles virtual law library

Respondent Dimayuga avers that Section 9, in relation to the title of R.A. 1162, clearly provides that the preferential right could be
exercised only when the land under question is subject to expropriation, or better still, if the tenanted property which formerly formed
part of an hacienda or is a landed estate, had been expropriated; and, that R.A. 1162, as amended, embraces only landed estates or
haciendas with an extensive area.chanroblesvirtualawlibrary chanrobles virtual law library

The sole issue raised by petitioners is whether or not they have the pre-emptive or preferential rights to buy the land in
question.chanroblesvirtualawlibrary chanrobles virtual law library

WE find for petitioners.chanroblesvirtualawlibrary chanrobles virtual law library

Ichanrobles virtual law library

The third proviso in Section 5 of Republic Act 3516, which law further amended R.A. 1162, reads:

Provided, furthermore, That no lot or portion thereof actually occupied by a tenant or occupant shall be sold by the landowner to any
other person than such tenant or occupant, unless the latter renounce in a public instrument his rights under this Act: Provided, finally,
That if there shall be tenants who have constructed bona fide improvements on the lots leased by them, the rights of these tenants
should be recognized in the sale or in the lease of the lots, the limitation as to area in Section three notwithstanding.

The provision clearly defines the preferential right of herein petitioners to buy the parcel of land. It should be noted that respondent
Vda. de Gabriel voluntarily sold the land to respondent Dimayuga without informing the petitioners of the transaction. Respondent
Vda. de Gabriel did not give the first offer to petitioners who were then tenants-lessees and who would have either accepted or refused
to buy the land in a public 7 document. The fact is that on discovery of the sale to respondent dent Dimayuga, petitioners filed their
original claim for preferential rights eight months after the clandestine sale. Thus, the condition set forth in the aforesaid proviso - that
of offering first the sale of the land to petitioners and the latter's renunciation in a public instrument - were not met when the land was
sold to respondent Dimayuga. Evidently, said sale was made illegally and, therefore, void. Petitioners have still the first option to buy
the land as provided for in the above provision.chanroblesvirtualawlibrary chanrobles virtual law library

IIchanrobles virtual law library

A brief run down of this Court's decisions easily reveal the adherence to the principle that the test for a valid expropriation of private
land for resale to its occupants, is the number of families to be benefited thereby, and not the
area.chanroblesvirtualawlibrary chanrobles virtual law library

In his book on Constitutional Law, Dean Isagani A. Cruz recapitulates thus:

In the earlier case of Rural Progress Administration v. Reyes, the Supreme Court held that the criterion for determining the validity of
expropriation under this provision was not the area of the land sought to be taken but the number of people intended to be
benefited thereby. The land, in other words, could be small provided it was tenanted by a sizable number of people.

This ruling was abandoned in the case of Guido v. Rural Progress Administration where the Supreme Court declared, also by a split
decision as in the Reyes case, that the test to be applied was the area of the land and not the number of people who stood to be
benefitted by the expropriation. The land should be a landed estate or one comprising a very fast area. It was stressed that one of the
purposes of the framers was precisely to break up these estates in the hands of only a few individuals or families and thus more
equitably distribute them along the landless.chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

It has also been held that where a landed estate is broken up into reasonable portions which are thereafter sold to separate purchasers,
the resultant portions cannot be deemed as still subject to expropriation under this provision simply because they used to form part of a
landed estate.chanroblesvirtualawlibrary chanrobles virtual law library

In the case of Tuason v. PHHC, which was a petition for prohibition to nullify a law directing the expropriation of Tatalon Estate in
Quezon City, Justice Fernando suggested a ruling to the Reyes ruling arguing that the propriety of expropriation "could not be
determined on a purely quantitative or area basis," quoting from Justice J.B.L. Reyes in his dissenting opinion in the Baylosis
Case. ... (p 71,1983 Ed.; emphasis supplied).

From the Reyes case where the number of beneficiaries test was applied in determining public use down to the Guido and Baylosis
cases where the land or area size test was invoked, then to the Tuason case where a return to the Reyes decision was made and then up
to the recent case of Pulido vs. Court of Appeals (L-57625, May 3, 1983; 122 SCRA 63) where this Court found it "unfortunate that
petitioner would be deprived of his land holdings, but his interest and that of his family should not stand in the way of progress and the
benefit of the greater majority of the inhabitants of the country," there has evolved a clear pattern of adherence to the "number of
people to be benefited test.chanroblesvirtualawlibrary chanrobles virtual law library

This is made more manifest by the new constitutional provisions on the equitable diffusion of property ownership and profits (Sec. 6,
Art. 11) and the implementation of an agrarian reform program aimed at emancipating the tenant from the bondage of the soil (Sec.
12, Art. XIV).chanroblesvirtualawlibrary chanrobles virtual law library

It has been noted with concern that while respondents raised the issue of expropriability of the parcel of land, petitioners limited
themselves to the issue of preferential or pre-emptive rights.chanroblesvirtualawlibrary chanrobles virtual law library

What petitioners might have failed to realize is that had they invoked the expropriability of subject land, they would have had a
foolproof case. Right from the start, they would have had the upper hand. Ironically, however, instead of anchoring their case on the
expropriability of such land, they concentrated on asserting their preferential right to buy the land. For, Section 1 of R.A. 1162, as
amended by R.A. 3516, specifically authorizes the expropriation of any piece of land in the City of Manila, Quezon City and suburbs
which have been and are actually being leased to tenants for at least ten (10) years, provided said lands have at least forty families of
tenants thereon. The case at bar comes within the coverage of the aforesaid legal provision since the parcel of land is located in Manila
which was then actually leased to 110 tenant families 20 years prior to the commencement of this action in the lower court. Clearly,
therefore, the land in question is capable of expropriation.chanroblesvirtualawlibrary chanrobles virtual law library

The above situation now brings Us back to the case of J.M. Tuason & Co. vs. Land Tenure Administration (L-21064, Feb. 18, 1970,
31 SCRA 413-417) where this Court laid down certain basic doctrines on the power of eminent domain. Thus, this Court, speaking
thru then Justice Fernando, declared:

It does not admit of doubt that the congressional power conferred by the Constitution is far from limited. It is left to the legislative will
to determine what lands may be expropriated so that they could be subdivided for resale to those in need of them. Nor can it be
doubted either that as to when such authority may be exercised is purely for Congress to decide. Its discretion on the matter is not to
be interfered with. This is shown by reference to the historical basis of the provision as reflected in the proceedings of the
Constitutional Convention.chanroblesvirtualawlibrary chanrobles virtual law library

Historical discussion while valuable is not necessarily decisive. It is easy to understand why. The social and economic conditions are
not static. They change with the times. To Identify the text of a written constitution with the circumstances that inspired its inclusion
may render it incapable of being responsive to future needs. Precisely, it is assumed to be one of the virtues of a written constitution
that it suffices to govern the life of the people not only at the time of its framing but far into the indefinite future. It is not to be
considered as so lacking in flexibility and suppleness that it may be a bar to measures, novel and unorthodox, as they may appear to
some, but nonetheless imperatively called for.chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

The framers of the Constitution were seriously concerned with the grave problems of inequality of wealth, with its highly divisive
tendency, resulting in the generous scope accorded the police power and eminent domain prerogatives of the state, even if the exercise
thereof would cover terrain of property right previously thought of as beyond state control, to promote social justice and the general
welfare.chanroblesvirtualawlibrary chanrobles virtual law library

As in the case of the more general provision on eminent domain, the power to expropriate lands under Sec. 4 of Art. XIII of the
Constitution requires the payment of just compensation, the taking to be for the public use, and to meet the exacting standard of due
process and equal protection guaranty of the Constitution.chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

The power granted to Congress by the Constitution to "authorize, upon payment of just compensation, the expropriation of lands to be
subdivided into small lots and conveyed at cost to individuals" is unlimited by any other provision of the Constitution. Just
compensation is in reality a part of the power granted rather than a limitation thereto, just as just compensation is of the essence in any
exercise of the power of eminent domain as, otherwise it would be plain commandeering.chanroblesvirtualawlibrary chanrobles
virtual law library

While the taking must be for public use as a matter of principle, in the judicial proceeding, the Government need not present evidence
of such public use as a fact. The constitutional provision itself declares the public objective, purpose or use of the expropriation
contemplated, hence, it should follow that as long as a congressional legislation declares that the condemnation of a particular land is
for the specific purpose stated in the Constitution, it is not for the judiciary to inquire as to whether or not the taking of such land is for
public use. The Constitution itself which is supposed to be the supreme law on private property rights declares it to be so, and leaves it
to Congress, not to the judiciary, to make the choice of the lands to be taken to attain the objective the constituent assembly aimed to
achieve. The scope and the limit of the power of the judiciary in this regard is only to determine the existence of enabling legislation,
to see to it that the facts are as contemplated in such enabling act and to provide the vehicle for compliance with procedural due
process in the implementation of the congressional act.
On the matter of taking for public use, Chief Justice Fernando summarily observed:

The taking to be valid must be for public use. There was a time when it was felt that a literal meaning should be attached to such a
requirement. Whatever project is undertaken must be for the public to enjoy, as in the case of streets or parks. Otherwise,
expropriation is not allowable. It is not so any more. As long as the purpose of the taking is public, then the power of eminent domain
comes into play. As just noted, the Constitution in at least two cases, to remove any doubt, determines what is public use One is the
expropriation of lands to be subdivided into small lots for resale at cost to individuals. The other is the transfer, through the exercise of
this power, of utilities and other private enterprise to the government. It is accurate to state then that at present whatever may be
beneficially employed for the general welfare satisfies the requirement of public use (The Constitution of the Philippines, 2nd Ed.,
1977, pp. 523-24).

IIIchanrobles virtual law library

This preferential right of petitioners and the power of eminent domain have been further mandated, strengthened and expanded by
recent developments in law and jurisprudence.chanroblesvirtualawlibrary chanrobles virtual law library

It must be recalled that the 1973 Constitution embodies certain original and innovative provisions on eminent domain. The new
Constitution provides thus:

Private property shall not be taken for public use without just compensation" (Sec. 2, Art. IV).chanroblesvirtualawlibrary chanrobles
virtual law library

The Batasang Pambansa may authorize, upon payment of just compensation, the expropriation of private lands to be subdivided into
small lots and conveyed at cost to deserving citizens (See. 13, Art. XIV).chanroblesvirtualawlibrary chanrobles virtual law library

The State shall promote social justice to ensure the dignity, welfare and security of affirmatively the people. Toward this end, the
State shall regulate the acquisition Ownership, use, enjoyment and disposition of private property, and equitably diffuse property
ownership and profits (Sec. 6, Art. 11; emphasis supplied).chanroblesvirtualawlibrary chanrobles virtual law library

The State shall establish, maintain, and ensure adequate social services in the field of education, health, housing, employment,
welfare, and social security to guarantee the enjoyment by the people of a decent standard of living (Sec. 7, Art.
11).chanroblesvirtualawlibrary chanrobles virtual law library

The State shall formulate and implement an agrarian reform program aimed at emancipating the tenant from the bondage of the soil
and achieving the goals enunciated in this Constitution (Sec. 12, Art. XIV).

The aforequoted Section 6 of Article 11, which is a modified version of the original provision of the 1935 Constitution, "emphasizes
the stewardship concept, under which private property is supposed to be held by the individual only as a trustee for the people in
general, who are its real owners. As a mere steward, the individual must exercise his rights to the proper- 4 ty not for his own
exclusive and selfish benefit but for the good of the entire community or nation" (p. 70, Phil. Political Law, Cruz, 1983
ed.).chanroblesvirtualawlibrary chanrobles virtual law library

In the case of Almeda vs. Court of Appeals, et al. (L-43800, 78 SCRA 194 [July 29, 1977]), this Court thus declared:

It is to be noted that under the new Constitution, property ownership is impressed with social function. Property use must not only be
for the benefit of the owner but of society as well. The State, in the promotion of social justice, may "regulate the acquisition,
ownership, use, enjoyment and disposition of private property, and equitably diffuse property - ownership and profits." One
governmental policy of recent date projects the emancipation of tenants from the bondage of the soil and the transfer to them of the
ownership of the land they till.

"The Legislature may regulate 'the acquisition, ownership, use, enjoyment and disposition of private property,' to the end that
maximum advantage can be derived from it by the people as a whole. Thus, it may limit the size of private landholdings, impose
higher taxes on agricultural lands that are not being tilled, or provide for a wider distribution of land among the landless. ... (p. 70,
Phil. Political Law, Cruz, 1983 ed.).chanroblesvirtualawlibrary chanrobles virtual law library

It is obviously in the spirit of Sections 6 and 7 of Article 11 that P.D. No. 1517 on urban land reform was enacted and the subsequent
implementing Proclamation No. 1967 was issued. Significantly also, the latest amendment to the Constitution on urban land reform
and social housing program which has been proclaimed by the President as having been approved in the recent plebiscite on January
17, 1984 all the more emphasizes and strengthens the constitutional base for urban land reform consistent with the provisions on social
justice.chanroblesvirtualawlibrary chanrobles virtual law library

Even as we have consistently and explicitly pronounced that the power of eminent domain is a basic and inherent power of
government which does not have to be spelled out by the Constitution, still our legislators felt such urgent demands for redistribution
of land in this country that they had to incorporate into the 1935 and 1973 Constitutions a specific provision on expropriation of land
for resale. Section 13, Article IV of the 1973 Constitution specially authorizes the expropriation of private lands for
resale.chanroblesvirtualawlibrary chanrobles virtual law library

Thus, as earlier mentioned, P.D. No. 1517 entitled "Proclaiming Urban Land Reform in the Philippines and Providing for the
Implementing Machinery Thereof" was enacted and beer effective on June 1 1, 1978 and Proclamation No. 1967 was issued on May
14, 1980 as an implementing law. This decree, which is firmly based on Section 6, Article 11 of the new Constitution, undoubtedly
adopts and crystallizes the greater number of people criterion when it speaks of tenants and residents in declared urban land reform
zones or areas without any mention of the land area covered by such zones. The focus, therefore, is on people who would stand to
benefit and not on the size of the land involved.chanroblesvirtualawlibrarychanrobles virtual law library

It should now be clarified that Section 22 of the aforecited decree declares thus:

Sec. 22. Repealing Clause. - All laws, decrees, executive orders, rules and regulations inconsistent herewith are hereby repealed,
amended or modified accordingly.

The decree has, therefore, superseded R.A. Nos. 1162, 2342 and 3516.chanroblesvirtualawlibrary chanrobles virtual law library

The issue of pre-emptive or preferential rights still remains for Our resolution within the purview of the said
decree.chanroblesvirtualawlibrary chanrobles virtual law library

The pertinent provisions of P.D. No. 1517 are as follows:

Sec. 4. Proclamation of Urban Land Reform Zones. - The President shall proclaim specific parcels of urban and urbanizable lands as
Urban Land Reform Zones, otherwise known as Urban Zones for purposes of this Decree, which may include Bagong Lipunan Sites,
as defined in P.D. 1396 (par. 1 of the section).chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

Sec. 6. Land Tenancy in Urban Land Reform A Teas. Within the Urban Zones legitimate tenants who have resided on the land for ten
years or more who have built their homes on the land and residents who have legally occupied the lands by contract, continuously for
the last ten years shall not be dispossessed of the land and shall be allowed the right of first refusal to purchase the same within a
reasonable time and at reasonable prices, under terms and conditions to be determined by the Urban Zone Expropriation and Land
Management Committee created by Section 8 of the Decree.chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxxchanrobles virtual law library

Sec. 9. Compulsory Declaration of Sale and Preemptive Rights. Upon the proclamation by the President of an area as an Urban Land
Reform Zone, all landowners, tenants and residents thereupon are required to declare to the Ministry any proposal to sell, lease or
encumber lands and improvements thereon, including the proposed price, rent or value of encumbrances and secure approval of said
proposed transactions.

The Ministry shag have the pre-emptive right to acquire the above-mentioned lands and improvements thereon which shall include,
but shag not be limited to lands occupied by tenants as provided for in Section 6 of this Decree (emphasis supplied).

Pursuant to the above decree and for purposes of making specific the applicability of the same and other subsequent laws on the
matter, the President issued Proclamation No. 1967 dated May 14, 1980 declaring Metropolitan Manila Area as Urban Land Reform
Zone. Thus, on page 2, No. 14 of said proclamation, Mataas na Lupa, the land in controversy, (an area bounded on the northwest by
Quirino Avenue, South Superhighway on the east, San Andres Street on the south, and on the west, by Anak Bayan Street) was
declared as an area for priority development and urban land reform zone.

The aforequoted provisions of P.D. 1517 and the declaration in the aforesaid proclamation are clear and leave no room for any
interpretation. Evidently, petitioners' case falls squarely within the law. Under Section 6 of the decree, the 110 tenant-families have
been vested with the right of first refusal to purchase the land in question within a reasonable time and reasonable prices, subject to
Ministry of Human Settlements rules and regulations.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, THE ORDER DATED OCTOBER 30, 1969 OF THE THEN MANILA COURT OF FIRST INSTANCE, BRANCH
IV, IS HEREBY SET ASIDE AND THE MINISTRY OF HUMAN SETTLEMENTS IS HEREBY DIRECTED TO FACILITATE
AND ADMINISTER THE IMPLEMENTATION OF THE RIGHTS OF HEREIN PETITIONERS. COSTS AGAINST
RESPONDENTS.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

G.R. No. 155001            May 5, 2003

DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL ANTONIO B. BOÑE,
MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON, CONRADO G. DIMAANO, LOLITA R.
HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO, MIASCOR WORKERS UNION - NATIONAL LABOR
UNION (MWU-NLU), and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), petitioners, 
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, in
his capacity as Head of the Department of Transportation and Communications, respondents,
MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS CORPORATION,
MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT SERVICES CORPORATION, MIASCOR
CATERING SERVICES CORPORATION, MIASCOR AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR
LOGISTICS CORPORATION, petitioners-in-intervention,
x---------------------------------------------------------x

G.R. No. 155547 May 5, 2003

SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA, petitioners, 

vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and
Communications, and SECRETARY SIMEON A. DATUMANONG, in his capacity as Head of the Department of Public
Works and Highways, respondents,
JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C.
NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST ABAYON, and BENASING O. MACARANBON, respondents-
intervenors,

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

G.R. No. 155661 May 5, 2003

CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE
LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD SCHLOBOM, ANGELITO SANTOS, MA. LUISA M.
PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP), petitioners, 
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in his
capacity as Head of the Department of Transportation and Communications, respondents.

PUNO, J.:

Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of the Revised Rules of Court
seeking to prohibit the Manila International Airport Authority (MIAA) and the Department of Transportation and Communications
(DOTC) and its Secretary from implementing the following agreements executed by the Philippine Government through the DOTC
and the MIAA and the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the Concession Agreement signed on July 12,
1997, (2) the Amended and Restated Concession Agreement dated November 26, 1999, (3) the First Supplement to the Amended and
Restated Concession Agreement dated August 27, 1999, (4) the Second Supplement to the Amended and Restated Concession
Agreement dated September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession Agreement dated June
22, 2001 (collectively, the PIATCO Contracts).

The facts are as follows:

In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy
Aquino International Airport (NAIA) and determine whether the present airport can cope with the traffic development up to
the year 2010. The study consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future
requirements, proposed master plans and development plans; and second, presentation of the preliminary design of the
passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989.

Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George
Ty and Alfonso Yuchengco met with then President Fidel V. Ramos to explore the possibility of investing in the construction
and operation of a new international airport terminal. To signify their commitment to pursue the project, they formed the
Asia's Emerging Dragon Corp. (AEDC) which was registered with the Securities and Exchange Commission (SEC) on
September 15, 1993.

On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the
development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement
pursuant to RA 6957 as amended by RA 7718 (BOT Law).1

On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification Bids and Awards Committee
(PBAC) for the implementation of the NAIA IPT III project.

On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the National Economic and Development
Authority (NEDA). A revised proposal, however, was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996,
the NEDA Investment Coordinating Council (NEDA ICC) – Technical Board favorably endorsed the project to the ICC – Cabinet
Committee which approved the same, subject to certain conditions, on January 19, 1996. On February 13, 1996, the NEDA passed
Board Resolution No. 2 which approved the NAIA IPT III project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or
comparative proposals on AEDC's unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders
were required to submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain
the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope the Financial Proposal of the
proponent.
On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents and the submission of the
comparative bid proposals. Interested firms were permitted to obtain the Request for Proposal Documents beginning June 28, 1996,
upon submission of a written application and payment of a non-refundable fee of P50,000.00 (US$2,000).

The Bid Documents issued by the PBAC provided among others that the proponent must have adequate capability to sustain the
financing requirement for the detailed engineering, design, construction, operation, and maintenance phases of the project. The
proponent would be evaluated based on its ability to provide a minimum amount of equity to the project, and its capacity to secure
external financing for the project.

On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference on July 29, 1996.

On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The following amendments were made on
the Bid Documents:

a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its financial proposal an additional
percentage of gross revenue share of the Government, as follows:

i. First 5 years 5.0%

ii. Next 10 years 7.5%
iii. Next 10 years 10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge. Proponent may offer an
Annual Guaranteed Payment which need not be of equal amount, but payment of which shall start upon site possession.

c. The project proponent must have adequate capability to sustain the financing requirement for the detailed engineering,
design, construction, and/or operation and maintenance phases of the project as the case may be. For purposes of pre-
qualification, this capability shall be measured in terms of:

i. Proof of the availability of the project proponent and/or the consortium to provide the minimum amount of equity
for the project; and

ii. a letter testimonial from reputable banks attesting that the project proponent and/or the members of the
consortium are banking with them, that the project proponent and/or the members are of good financial standing,
and have adequate resources.

d. The basis for the prequalification shall be the proponent's compliance with the minimum technical and financial
requirements provided in the Bid Documents and the IRR of the BOT Law. The minimum amount of equity shall be 30% of
the Project Cost.

e. Amendments to the draft Concession Agreement shall be issued from time to time. Said amendments shall only cover
items that would not materially affect the preparation of the proponent's proposal.

On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were made. Upon the request of
prospective bidder People's Air Cargo & Warehousing Co., Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of
the Implementing Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by the
challengers would be revealed to AEDC, and that the challengers' technical and financial proposals would remain confidential. The
PBAC also clarified that the list of revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and that
other revenue sources may be included by the proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that
only those fees and charges denominated as Public Utility Fees would be subject to regulation, and those charges which would be
actually deemed Public Utility Fees could still be revised, depending on the outcome of PBAC's query on the matter with the
Department of Justice.

In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of PAIRCARGO as Per Letter Dated
September 3 and 10, 1996." Paircargo's queries and the PBAC's responses were as follows:

1. It is difficult for Paircargo and Associates to meet the required minimum equity requirement as prescribed in Section 8.3.4
of the Bid Documents considering that the capitalization of each member company is so structured to meet the requirements
and needs of their current respective business undertaking/activities. In order to comply with this equity requirement,
Paircargo is requesting PBAC to just allow each member of (sic) corporation of the Joint Venture to just execute an
agreement that embodies a commitment to infuse the required capital in case the project is awarded to the Joint Venture
instead of increasing each corporation's current authorized capital stock just for prequalification purposes.

In prequalification, the agency is interested in one's financial capability at the time of prequalification, not future or potential
capability.

A commitment to put up equity once awarded the project is not enough to establish that "present" financial capability.
However, total financial capability of all member companies of the Consortium, to be established by submitting the
respective companies' audited financial statements, shall be acceptable.
 2. At present, Paircargo is negotiating with banks and other institutions for the extension of a Performance Security to the
joint venture in the event that the Concessions Agreement (sic) is awarded to them. However, Paircargo is being required to
submit a copy of the draft concession as one of the documentary requirements. Therefore, Paircargo is requesting that they'd
(sic) be furnished copy of the approved negotiated agreement between the PBAC and the AEDC at the soonest possible time.

A copy of the draft Concession Agreement is included in the Bid Documents. Any material changes would be made known to
prospective challengers through bid bulletins. However, a final version will be issued before the award of contract.

The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of
Rights to Enjoin Project) and to submit the same with the required Bid Security.

On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and
Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their
competitive proposal to the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the prequalification
documents of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the Paircargo Consortium.

On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the Paircargo Consortium, which include:

a. The lack of corporate approvals and financial capability of PAIRCARGO;

b. The lack of corporate approvals and financial capability of PAGS;

c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount that Security Bank could
legally invest in the project;

d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for prequalification purposes; and

e. The appointment of Lufthansa as the facility operator, in view of the Philippine requirement in the operation of a public
utility.

The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues raised by the latter, and that based on
the documents submitted by Paircargo and the established prequalification criteria, the PBAC had found that the challenger, Paircargo,
had prequalified to undertake the project. The Secretary of the DOTC approved the finding of the PBAC.

The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium which contained its Technical
Proposal.

On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial capability, in view of the
restrictions imposed by Section 21-B of the General Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks
and Other Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and requested that it be furnished with
excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the issues they raised were addressed.

On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the Paircargo Consortium containing their
respective financial proposals. Both proponents offered to build the NAIA Passenger Terminal III for at least $350 million at no cost
to the government and to pay the government: 5% share in gross revenues for the first five years of operation, 7.5% share in gross
revenues for the next ten years of operation, and 10% share in gross revenues for the last ten years of operation, in accordance with the
Bid Documents. However, in addition to the foregoing, AEDC offered to pay the government a total of P135 million as guaranteed
payment for 27 years while Paircargo Consortium offered to pay the government a total of P17.75 billion for the same period.

Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the Paircargo Consortium, and gave
AEDC 30 working days or until November 28, 1996 within which to match the said bid, otherwise, the project would be awarded to
Paircargo.

As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado Lagdameo, on December 11, 1996,
issued a notice to Paircargo Consortium regarding AEDC's failure to match the proposal.

On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport Terminals Co., Inc. (PIATCO).

AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the
prequalification of PIATCO.

On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of the NEDA-ICC.

On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity of the Proceedings,
Mandamus and Injunction against the Secretary of the DOTC, the Chairman of the PBAC, the voting members of the PBAC and
Pantaleon D. Alvarez, in his capacity as Chairman of the PBAC Technical Committee.

On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a no-objection basis, of the BOT
agreement between the DOTC and PIATCO. As the ad referendum gathered only four (4) of the required six (6) signatures, the
NEDA merely noted the agreement.
On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.

On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go,
signed the "Concession Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport
Passenger Terminal III" (1997 Concession Agreement). The Government granted PIATCO the franchise to operate and maintain the
said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules
stipulated in the 1997 Concession Agreement. The Agreement provided that the concession period shall be for twenty-five (25) years
commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding twenty-five
(25) years. At the end of the concession period, PIATCO shall transfer the development facility to MIAA.

On November 26, 1998, the Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). Among the
provisions of the 1997 Concession Agreement that were amended by the ARCA were: Sec. 1.11 pertaining to the definition of
"certificate of completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the exclusivity of the
franchise given to the Concessionaire; Sec. 4.04 concerning the assignment by Concessionaire of its interest in the Development
Facility; Sec. 5.08 (c) dealing with the proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-over of
operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may be levied on the Concessionaire; Sec. 6.03 as
regards the periodic adjustment of public utility fees and charges; the entire Article VIII concerning the provisions on the termination
of the contract; and Sec. 10.02 providing for the venue of the arbitration proceedings in case a dispute or controversy arises between
the parties to the agreement.

Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First Supplement was signed on August 27,
1999; the Second Supplement on September 4, 2000; and the Third Supplement on June 22, 2001 (collectively, Supplements).

The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross Revenues"; Sec. 2.05 (d) of the
ARCA referring to the obligation of MIAA to provide sufficient funds for the upkeep, maintenance, repair and/or replacement of all
airport facilities and equipment which are owned or operated by MIAA; and further providing additional special obligations on the
part of GRP aside from those already enumerated in Sec. 2.05 of the ARCA. The First Supplement also provided a stipulation as
regards the construction of a surface road to connect NAIA Terminal II and Terminal III in lieu of the proposed access tunnel crossing
Runway 13/31; the swapping of obligations between GRP and PIATCO regarding the improvement of Sales Road; and the changes in
the timetable. It also amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of Terminal Fees; Sec. 6.02 of the ARCA by
inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of Percentage Share in Gross
Revenues.

The Second Supplement to the ARCA contained provisions concerning the clearing, removal, demolition or disposal of subterranean
structures uncovered or discovered at the site of the construction of the terminal by the Concessionaire. It defined the scope of works;
it provided for the procedure for the demolition of the said structures and the consideration for the same which the GRP shall pay
PIATCO; it provided for time extensions, incremental and consequential costs and losses consequent to the existence of such
structures; and it provided for some additional obligations on the part of PIATCO as regards the said structures.

Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the construction of the surface road
connecting Terminals II and III.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession
contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling,
ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several
international airlines at the NAIA. Some of these service providers are the Miascor Group, DNATA-Wings Aviation Systems Corp.,
and the MacroAsia Group. Miascor, DNATA and MacroAsia, together with Philippine Airlines (PAL), are the dominant players in the
industry with an aggregate market share of 70%.

On September 17, 2002, the workers of the international airline service providers, claiming that they stand to lose their employment
upon the implementation of the questioned agreements, filed before this Court a petition for prohibition to enjoin the enforcement of
said agreements.2

On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a motion for intervention and a petition-
in-intervention.

On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula filed a similar petition with this
Court.3

On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality of the various agreements.4

On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B.
Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in
the case as Respondents-Intervenors. They filed their Comment-In-Intervention defending the validity of the assailed agreements and
praying for the dismissal of the petitions.

During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on November 29, 2002, in her speech at the
2002 Golden Shell Export Awards at Malacañang Palace, stated that she will not "honor (PIATCO) contracts which the Executive
Branch's legal offices have concluded (as) null and void."5
Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002. The Office of the Solicitor General and
the Office of the Government Corporate Counsel filed their respective Comments in behalf of the public respondents.

On December 10, 2002, the Court heard the case on oral argument. After the oral argument, the Court then resolved in open court to
require the parties to file simultaneously their respective Memoranda in amplification of the issues heard in the oral arguments within
30 days and to explore the possibility of arbitration or mediation as provided in the challenged contracts.

In their consolidated Memorandum, the Office of the Solicitor General and the Office of the Government Corporate Counsel prayed
that the present petitions be given due course and that judgment be rendered declaring the 1997 Concession Agreement, the ARCA
and the Supplements thereto void for being contrary to the Constitution, the BOT Law and its Implementing Rules and Regulations.

On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO commenced arbitration proceedings
before the International Chamber of Commerce, International Court of Arbitration (ICC) by filing a Request for Arbitration with the
Secretariat of the ICC against the Government of the Republic of the Philippines acting through the DOTC and MIAA.

In the present cases, the Court is again faced with the task of resolving complicated issues made difficult by their intersecting legal
and economic implications. The Court is aware of the far reaching fall out effects of the ruling which it makes today. For more than a
century and whenever the exigencies of the times demand it, this Court has never shirked from its solemn duty to dispense justice and
resolve "actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there
has been grave abuse of discretion amounting to lack or excess of jurisdiction."6 To be sure, this Court will not begin to do otherwise
today.

We shall first dispose of the procedural issues raised by respondent PIATCO which they allege will bar the resolution of the instant
controversy.

Petitioners' Legal Standing to File

the present Petitions

a. G.R. Nos. 155001 and 155661

In G.R. No. 155001 individual petitioners are employees of various service providers7 having separate concession contracts with
MIAA and continuing service agreements with various international airlines to provide in-flight catering, passenger handling, ramp
and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services. Also included as
petitioners are labor unions MIASCOR Workers Union-National Labor Union and Philippine Airlines Employees Association. These
petitioners filed the instant action for prohibition as taxpayers and as parties whose rights and interests stand to be violated by the
implementation of the PIATCO Contracts.

Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine laws engaged in the business of
providing in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and
warehousing and other services to several international airlines at the Ninoy Aquino International Airport. Petitioners-Intervenors
allege that as tax-paying international airline and airport-related service operators, each one of them stands to be irreparably injured by
the implementation of the PIATCO Contracts. Each of the petitioners-intervenors have separate and subsisting concession agreements
with MIAA and with various international airlines which they allege are being interfered with and violated by respondent PIATCO.

In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa Paliparan ng Pilipinas - a legitimate
labor union and accredited as the sole and exclusive bargaining agent of all the employees in MIAA. Petitioners anchor their petition
for prohibition on the nullity of the contracts entered into by the Government and PIATCO regarding the build-operate-and-transfer of
the NAIA IPT III. They filed the petition as taxpayers and persons who have a legitimate interest to protect in the implementation of
the PIATCO Contracts.

Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which directly contravene numerous
provisions of the Constitution, specific provisions of the BOT Law and its Implementing Rules and Regulations, and public policy.
Petitioners contend that the DOTC and the MIAA, by entering into said contracts, have committed grave abuse of discretion
amounting to lack or excess of jurisdiction which can be remedied only by a writ of prohibition, there being no plain, speedy or
adequate remedy in the ordinary course of law.

In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA which grant PIATCO the exclusive
right to operate a commercial international passenger terminal within the Island of Luzon, except those international airports already
existing at the time of the execution of the agreement. The contracts further provide that upon the commencement of operations at the
NAIA IPT III, the Government shall cause the closure of Ninoy Aquino International Airport Passenger Terminals I and II as
international passenger terminals. With respect to existing concession agreements between MIAA and international airport service
providers regarding certain services or operations, the 1997 Concession Agreement and the ARCA uniformly provide that such
services or operations will not be carried over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over
except through a separate agreement duly entered into with PIATCO.8

With respect to the petitioning service providers and their employees, upon the commencement of operations of the NAIA IPT III,
they allege that they will be effectively barred from providing international airline airport services at the NAIA Terminals I and II as
all international airlines and passengers will be diverted to the NAIA IPT III. The petitioning service providers will thus be compelled
to contract with PIATCO alone for such services, with no assurance that subsisting contracts with MIAA and other international
airlines will be respected. Petitioning service providers stress that despite the very competitive market, the substantial capital
investments required and the high rate of fees, they entered into their respective contracts with the MIAA with the understanding that
the said contracts will be in force for the stipulated period, and thereafter, renewed so as to allow each of the petitioning service
providers to recoup their investments and obtain a reasonable return thereon.

Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the other hand allege that with the
closure of the NAIA Terminals I and II as international passenger terminals under the PIATCO Contracts, they stand to lose
employment.

The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of
difficult constitutional questions."9 Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute
must be direct and personal. He must be able to show, not only that the law or any government act is invalid, but also that he sustained
or is in imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some
indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.10

We hold that petitioners have the requisite standing. In the above-mentioned cases, petitioners have a direct and substantial interest to
protect by reason of the implementation of the PIATCO Contracts. They stand to lose their source of livelihood, a property right
which is zealously protected by the Constitution. Moreover, subsisting concession agreements between MIAA and petitioners-
intervenors and service contracts between international airlines and petitioners-intervenors stand to be nullified or terminated by the
operation of the NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the PIATCO Contracts on
petitioners and petitioners-intervenors in these cases are legitimate interests sufficient to confer on them the requisite standing to file
the instant petitions.

b. G.R. No. 155547

In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of Representatives, citizens and taxpayers.
They allege that as members of the House of Representatives, they are especially interested in the PIATCO Contracts, because the
contracts compel the Government and/or the House of Representatives to appropriate funds necessary to comply with the provisions
therein.11 They cite provisions of the PIATCO Contracts which require disbursement of unappropriated amounts in compliance with
the contractual obligations of the Government. They allege that the Government obligations in the PIATCO Contracts which compel
government expenditure without appropriation is a curtailment of their prerogatives as legislators, contrary to the mandate of the
Constitution that "[n]o money shall be paid out of the treasury except in pursuance of an appropriation made by law."12

Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been personally
injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the
public interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of Imus13 and Gonzales v.
Raquiza14 wherein this Court held that appropriation must be made only on amounts immediately demandable, public interest
demands that we take a more liberal view in determining whether the petitioners suing as legislators, taxpayers and citizens
have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona,15 this Court held "[i]n line with the liberal policy of
this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and non-profit civic
organizations were allowed to initiate and prosecute actions before this Court to question the constitutionality or validity of laws, acts,
decisions, rulings, or orders of various government agencies or instrumentalities."16 Further, "insofar as taxpayers' suits are concerned .
. . (this Court) is not devoid of discretion as to whether or not it should be entertained."17 As such ". . . even if, strictly speaking, they
[the petitioners] are not covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so
remove the impediment to its addressing and resolving the serious constitutional questions raised."18 In view of the serious legal
questions involved and their impact on public interest, we resolve to grant standing to the petitioners.

Other Procedural Matters

Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases as factual issues are involved
which this Court is ill-equipped to resolve. Moreover, PIATCO alleges that submission of this controversy to this Court at the first
instance is a violation of the rule on hierarchy of courts. They contend that trial courts have concurrent jurisdiction with this Court
with respect to a special civil action for prohibition and hence, following the rule on hierarchy of courts, resort must first be had before
the trial courts.

After a thorough study and careful evaluation of the issues involved, this Court is of the view that the crux of the instant controversy
involves significant legal questions. The facts necessary to resolve these legal questions are well established and, hence, need not be
determined by a trial court.

The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the cases at bar. The said rule may be
relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances
justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction.19

It is easy to discern that exceptional circumstances exist in the cases at bar that call for the relaxation of the rule. Both petitioners and
respondents agree that these cases are of transcendental importance as they involve the construction and operation of the country's
premier international airport. Moreover, the crucial issues submitted for resolution are of first impression and they entail the proper
legal interpretation of key provisions of the Constitution, the BOT Law and its Implementing Rules and Regulations. Thus,
considering the nature of the controversy before the Court, procedural bars may be lowered to give way for the speedy disposition of
the instant cases.

Legal Effect of the Commencement

of Arbitration Proceedings by

PIATCO

There is one more procedural obstacle which must be overcome. The Court is aware that arbitration proceedings pursuant to Section
10.02 of the ARCA have been filed at the instance of respondent PIATCO. Again, we hold that the arbitration step taken by PIATCO
will not oust this Court of its jurisdiction over the cases at bar.

In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration clause in the Distributorship Agreement
in question is valid and the dispute between the parties is arbitrable, this Court affirmed the trial court's decision denying petitioner's
Motion to Suspend Proceedings pursuant to the arbitration clause under the contract. In so ruling, this Court held that as contracts
produce legal effect between the parties, their assigns and heirs, only the parties to the Distributorship Agreement are bound by its
terms, including the arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be called for
but only with respect to the parties to the contract in question. Considering that there are parties to the case who are neither parties to
the Distributorship Agreement nor heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal
Realty Corporation,21 held that to tolerate the splitting of proceedings by allowing arbitration as to some of the parties on the one hand
and trial for the others on the other hand would, in effect, result in multiplicity of suits, duplicitous procedure and unnecessary
delay.22 Thus, we ruled that the interest of justice would best be served if the trial court hears and adjudicates the case in a single and
complete proceeding.

It is established that petitioners in the present cases who have presented legitimate interests in the resolution of the controversy
are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA
and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in
the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of
arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to allow
the parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the
arbitral tribunal will not be equipped to resolve.

Now, to the merits of the instant controversy.

Is PIATCO a qualified bidder?

Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly pre-qualified bidder on the unsolicited
proposal submitted by AEDC as the Paircargo Consortium failed to meet the financial capability required under the BOT Law and the
Bid Documents. They allege that in computing the ability of the Paircargo Consortium to meet the minimum equity requirements for
the project, the entire net worth of Security Bank, a member of the consortium, should not be considered.

PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996 issued by the DOTC Undersecretary
Primitivo C. Cal stating that the Paircargo Consortium is found to have a combined net worth of P3,900,000,000.00, sufficient to meet
the equity requirements of the project. The said Memorandum was in response to a letter from Mr. Antonio Henson of AEDC to
President Fidel V. Ramos questioning the financial capability of the Paircargo Consortium on the ground that it does not have the
financial resources to put up the required minimum equity of P2,700,000,000.00. This contention is based on the restriction under
R.A. No. 337, as amended or the General Banking Act that a commercial bank cannot invest in any single enterprise in an amount
more than 15% of its net worth. In the said Memorandum, Undersecretary Cal opined:

The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that financial capability will be evaluated based
on total financial capability of all the member companies of the [Paircargo] Consortium. In this connection, the Challenger
was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13
Billion.

It is not a requirement that the net worth must be "unrestricted." To impose that as a requirement now will be nothing less
than unfair.

The financial statement or the net worth is not the sole basis in establishing financial capability. As stated in Bid Bulletin No.
3, financial capability may also be established by testimonial letters issued by reputable banks. The Challenger has complied
with this requirement.

To recap, net worth reflected in the Financial Statement should not be taken as the amount of the money to be used to answer
the required thirty percent (30%) equity of the challenger but rather to be used in establishing if there is enough basis to
believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of
the conditions for award of contract (Section 12.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the same
document).23

Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder "who,
having satisfied the minimum financial, technical, organizational and legal standards" required by the law, has submitted
the lowest bid and most favorable terms of the project.24 Further, the 1994 Implementing Rules and Regulations of the BOT
Law provide:

Section 5.4 Pre-qualification Requirements.

 xxx           xxx           xxx

c. Financial Capability: The project proponent must have adequate capability to sustain the financing requirements for the
detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be. For
purposes of pre-qualification, this capability shall be measured in terms of (i) proof of the ability of the project proponent
and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from
reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that
they are in good financial standing, and that they have adequate resources. The government agency/LGU concerned
shall determine on a project-to-project basis and before pre-qualification, the minimum amount of equity needed. (emphasis
supplied)

Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996 amending the financial capability
requirements for pre-qualification of the project proponent as follows:

6. Basis of Pre-qualification

The basis for the pre-qualification shall be on the compliance of the proponent to the minimum technical and financial
requirements provided in the Bid Documents and in the IRR of the BOT Law, R.A. No. 6957, as amended by R.A. 7718.

The minimum amount of equity to which the proponent's financial capability will be based shall be thirty percent (30%) of
the project cost instead of the twenty percent (20%) specified in Section 3.6.4 of the Bid Documents. This is to correlate
with the required debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession agreement. The debt portion of the
project financing should not exceed 70% of the actual project cost.

Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger to the unsolicited proposal of AEDC
has to show that it possesses the requisite financial capability to undertake the project in the minimum amount of 30% of the
project cost through (i) proof of the ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from
reputable banks attesting that the project proponent or members of the consortium are banking with them, that they are in good
financial standing, and that they have adequate resources.

As the minimum project cost was estimated to be US$350,000,000.00 or roughly P9,183,650,000.00,25 the Paircargo Consortium had
to show to the satisfaction of the PBAC that it had the ability to provide the minimum equity for the project in the amount of at
least P2,755,095,000.00.

Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of P2,783,592.00 and P3,123,515.00
respectively.26 PAGS' Audited Financial Statements as of 1995 indicate that it has approximately P26,735,700.00 to invest as its equity
for the project.27 Security Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital funds in
the amount of P3,523,504,377.00.28

We agree with public respondents that with respect to Security Bank, the entire amount of its net worth could not be invested in a
single undertaking or enterprise, whether allied or non-allied in accordance with the provisions of R.A. No. 337, as amended or the
General Banking Act:

Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding, the Monetary Board, whenever it shall
deem appropriate and necessary to further national development objectives or support national priority projects, may
authorize a commercial bank, a bank authorized to provide commercial banking services, as well as a government-
owned and controlled bank, to operate under an expanded commercial banking authority and by virtue thereof
exercise, in addition to powers authorized for commercial banks, the powers of an Investment House as provided in
Presidential Decree No. 129, invest in the equity of a non-allied undertaking, or own a majority or all of the equity in a
financial intermediary other than a commercial bank or a bank authorized to provide commercial banking services: Provided,
That (a) the total investment in equities shall not exceed fifty percent (50%) of the net worth of the bank; (b) the equity
investment in any one enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of the net worth
of the bank; (c) the equity investment of the bank, or of its wholly or majority-owned subsidiary, in a single non-allied
undertaking shall not exceed thirty-five percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five
percent (35%) of the voting stock in that enterprise; and (d) the equity investment in other banks shall be deducted from the
investing bank's net worth for purposes of computing the prescribed ratio of net worth to risk assets.

xxx           xxx           xxx

Further, the 1993 Manual of Regulations for Banks provides:

SECTION X383. Other Limitations and Restrictions. — The following limitations and restrictions shall also apply regarding
equity investments of banks.

a. In any single enterprise. — The equity investments of banks in any single enterprise shall not exceed at any time fifteen
percent (15%) of the net worth of the investing bank as defined in Sec. X106 and Subsec. X121.5.

Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528,525,656.55,
representing 15% of its entire net worth. The total net worth therefore of the Paircargo Consortium, after considering the maximum
amounts that may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the project cost,29 an amount
substantially less than the prescribed minimum equity investment required for the project in the amount of P2,755,095,000.00 or 30%
of the project cost.

The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to undertake
the project. Thus, with respect to the bidder's financial capacity at the pre-qualification stage, the law requires the government agency
to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that
each bidder may invest in the project at the time of pre-qualification.

The PBAC has determined that any prospective bidder for the construction, operation and maintenance of the NAIA IPT III project
should prove that it has the ability to provide equity in the minimum amount of 30% of the project cost, in accordance with the 70:30
debt-to-equity ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should determine
the maximum amounts that each member of the consortium may commit for the construction, operation and maintenance of the
NAIA IPT III project at the time of pre-qualification. With respect to Security Bank, the maximum amount which may be invested
by it would only be 15% of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the investment
ceilings provided by applicable law would not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the
project as for all intents and purposes, such ceiling or legal restriction determines the true maximum amount which a bidder may
invest in the project.

Further, the determination of whether or not a bidder is pre-qualified to undertake the project requires an evaluation of the financial
capacity of the said bidder at the time the bid is submitted based on the required documents presented by the bidder. The PBAC
should not be allowed to speculate on the future financial ability of the bidder to undertake the project on the basis of documents
submitted. This would open doors to abuse and defeat the very purpose of a public bidding. This is especially true in the case at bar
which involves the investment of billions of pesos by the project proponent. The relevant government authority is duty-bound to
ensure that the awardee of the contract possesses the minimum required financial capability to complete the project. To allow the
PBAC to estimate the bidder's future financial capability would not secure the viability and integrity of the project. A restrictive and
conservative application of the rules and procedures of public bidding is necessary not only to protect the impartiality and regularity of
the proceedings but also to ensure the financial and technical reliability of the project. It has been held that:

The basic rule in public bidding is that bids should be evaluated based on the required documents submitted before and not
after the opening of bids. Otherwise, the foundation of a fair and competitive public bidding would be defeated. Strict
observance of the rules, regulations, and guidelines of the bidding process is the only safeguard to a fair, honest and
competitive public bidding.30

Thus, if the maximum amount of equity that a bidder may invest in the project at the time the bids are submittedfalls short of the
minimum amounts required to be put up by the bidder, said bidder should be properly disqualified. Considering that at the pre-
qualification stage, the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum
amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a qualified bidder. Thus the award of the contract by the
PBAC to the Paircargo Consortium, a disqualified bidder, is null and void.

While it would be proper at this juncture to end the resolution of the instant controversy, as the legal effects of the disqualification of
respondent PIATCO's predecessor would come into play and necessarily result in the nullity of all the subsequent contracts entered by
it in pursuance of the project, the Court feels that it is necessary to discuss in full the pressing issues of the present controversy for a
complete resolution thereof.

II

Is the 1997 Concession Agreement valid?

Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it contains provisions that substantially
depart from the draft Concession Agreement included in the Bid Documents. They maintain that a substantial departure from the draft
Concession Agreement is a violation of public policy and renders the 1997 Concession Agreement null and void.

PIATCO maintains, however, that the Concession Agreement attached to the Bid Documents is intended to be a draft, i.e., subject to
change, alteration or modification, and that this intention was clear to all participants, including AEDC, and DOTC/MIAA. It argued
further that said intention is expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states:

6. Amendments to the Draft Concessions Agreement

Amendments to the Draft Concessions Agreement shall be issued from time to time. Said amendments shall only cover items
that would not materially affect the preparation of the proponent's proposal.

By its very nature, public bidding aims to protect the public interest by giving the public the best possible advantages through open
competition. Thus:

Competition must be legitimate, fair and honest. In the field of government contract law, competition requires, not only
`bidding upon a common standard, a common basis, upon the same thing, the same subject matter, the same undertaking,' but
also that it be legitimate, fair and honest; and not designed to injure or defraud the government.31

An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not simply in terms of application of
the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon.
Each bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or modify
certain provisions in the contract awarded such that the contract is altered in any material respect, then the essence of fair competition
in the public bidding is destroyed. A public bidding would indeed be a farce if after the contract is awarded, the winning bidder may
modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders.
Thus:

It is inherent in public biddings that there shall be a fair competition among the bidders. The specifications in such biddings
provide the common ground or basis for the bidders. The specifications should, accordingly, operate equally or
indiscriminately upon all bidders.32

The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:

The law is well settled that where, as in this case, municipal authorities can only let a contract for public work to the lowest
responsible bidder, the proposals and specifications therefore must be so framed as to permit free and full competition. Nor
can they enter into a contract with the best bidder containing substantial provisions beneficial to him, not included or
contemplated in the terms and specifications upon which the bids were invited. 33

In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft concession agreement is subject to
amendment, the pertinent portion of which was quoted above, the PBAC also clarified that "[s]aid amendments shall only cover
items that would not materially affect the preparation of the proponent's proposal."

While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon,
such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and
would constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether
or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when
taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or
financial proposals previously submitted by other bidders. The alterations and modifications in the contract executed between the
government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the
one that was bidded upon.

In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this Court quoted with approval the ruling of the trial court that
an amendment to a contract awarded through public bidding, when such subsequent amendment was made without a new public
bidding, is null and void:

The Court agrees with the contention of counsel for the plaintiffs that the due execution of a contract after public bidding is a
limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what
would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties
may alter or amend the contract, or even cancel it, at their will?Public biddings are held for the protection of the public,
and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers
the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to
the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another
previous public bidding.35

Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same agreement that was offered for public
bidding, i.e., the draft Concession Agreement attached to the Bid Documents? A close comparison of the draft Concession Agreement
attached to the Bid Documents and the 1997 Concession Agreement reveals that the documents differ in at least two material respects:

a. Modification on the Public

Utility Revenues and Non-Public

Utility Revenues that may be

collected by PIATCO

The fees that may be imposed and collected by PIATCO under the draft Concession Agreement and the 1997 Concession Agreement
may be classified into three distinct categories: (1) fees which are subject to periodic adjustment of once every two years in
accordance with a prescribed parametric formula and adjustments are made effective only upon written approval by MIAA; (2) fees
other than those included in the first category which maybe adjusted by PIATCO whenever it deems necessary without need for
consent of DOTC/MIAA; and (3) new fees and charges that may be imposed by PIATCO which have not been previously imposed or
collected at the Ninoy Aquino International Airport Passenger Terminal I, pursuant to Administrative Order No. 1, Series of 1993, as
amended. The glaring distinctions between the draft Concession Agreement and the 1997 Concession Agreement lie in the types of
fees included in each category and the extent of the supervision and regulation which MIAA is allowed to exercise in relation thereto.

For fees under the first category, i.e., those which are subject to periodic adjustment in accordance with a prescribed parametric
formula and effective only upon written approval by MIAA, the draft Concession Agreementincludes the following:36

(1) aircraft parking fees;

(2) aircraft tacking fees;

(3) groundhandling fees;

 (4) rentals and airline offices;

(5) check-in counter rentals; and

(6) porterage fees.

Under the 1997 Concession Agreement, fees which are subject to adjustment and effective upon MIAA approval are classified as
"Public Utility Revenues" and include:37

(1) aircraft parking fees;

(2) aircraft tacking fees;

(3) check-in counter fees; and

(4) Terminal Fees.

The implication of the reduced number of fees that are subject to MIAA approval is best appreciated in relation to fees included in
the second category identified above. Under the 1997 Concession Agreement, fees which PIATCO may adjust whenever it deems
necessary without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as "all other income not
classified as Public Utility Revenues derived from operations of the Terminal and the Terminal Complex."38 Thus, under the 1997
Concession Agreement, ground handling fees, rentals from airline offices and porterage fees are no longer subject to MIAA
regulation.

Further, under Section 6.03 of the draft Concession Agreement, MIAA reserves the right to regulate (1) lobby and vehicular parking
fees and (2) other new fees and charges that may be imposed by PIATCO. Such regulation may be made by periodic adjustment and is
effective only upon written approval of MIAA. The full text of said provision is quoted below:

Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the aircraft parking fees, aircraft tacking fees,
groundhandling fees, rentals and airline offices, check-in-counter rentals and porterage fees shall be allowed only once every
two years and in accordance with the Parametric Formula attached hereto as Annex F. Provided that adjustments shall be
made effective only after the written express approval of the MIAA. Provided, further, that such approval of the MIAA, shall
be contingent only on the conformity of the adjustments with the above said parametric formula. The first adjustment shall be
made prior to the In-Service Date of the Terminal.

The MIAA reserves the right to regulate under the foregoing terms and conditions the lobby and vehicular parking
fees and other new fees and charges as contemplated in paragraph 2 of Section 6.01 if in its judgment the users of the
airport shall be deprived of a free option for the services they cover. 39

On the other hand, the equivalent provision under the 1997 Concession Agreement reads:

Section 6.03 Periodic Adjustment in Fees and Charges.

xxx           xxx           xxx

(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order
to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and
greeter/well wisher fee constitute Non-Public Utility Revenues of Concessionaire, GRP may intervene and require
Concessionaire to explain and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said
fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services.40

Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2) porterage fee and (3) greeter/well wisher
fee, all that MIAA can do is to require PIATCO to explain and justify the fees set by PIATCO. In the draft Concession
Agreement, vehicular parking fee is subject to MIAA regulation and approval under the second paragraph of Section 6.03 thereof
while porterage fee is covered by the first paragraph of the same provision. There is an obvious relaxation of the extent of control and
regulation by MIAA with respect to the particular fees that may be charged by PIATCO.

Moreover, with respect to the third category of fees that may be imposed and collected by PIATCO, i.e., new fees and charges that
may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport
Passenger Terminal I, under Section 6.03 of the draft Concession Agreement MIAA has reserved the right to regulate the same
under the same conditions that MIAA may regulate fees under the first category, i.e., periodic adjustment of once every two years in
accordance with a prescribed parametric formula and effective only upon written approval by MIAA. However, under the 1997
Concession Agreement, adjustment of fees under the third category is not subject to MIAA regulation.

With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was included within the category of "Public
Utility Revenues" under the 1997 Concession Agreement. This classification is significant because under the 1997 Concession
Agreement, "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain extraordinary
events specified in the agreement.42 However, under the draft Concession Agreement, terminal fees are not included in the types of
fees that may be subject to "Interim Adjustment."43
Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal fees, are denominated in US
Dollars44 while payments to the Government are in Philippine Pesos. In the draft Concession Agreement,no such stipulation was
included. By stipulating that "Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the
Government are in Philippine currency under the 1997 Concession Agreement, PIATCO is able to enjoy the benefits of depreciations
of the Philippine Peso, while being effectively insulated from the detrimental effects of exchange rate fluctuations.

When taken as a whole, the changes under the 1997 Concession Agreement with respect to reduction in the types of fees that are
subject to MIAA regulation and the relaxation of such regulation with respect to other fees are significant amendments that
substantially distinguish the draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession Agreement,
in this respect, clearly gives PIATCO more favorable terms than what was available to other bidders at the time the contract
was bidded out. It is not very difficult to see that the changes in the 1997 Concession Agreement translate to direct and concrete
financial advantages for PIATCO which were not available at the time the contract was offered for bidding. It cannot be denied that
under the 1997 Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation. Adjustments of all other fees
imposed and collected by PIATCO are entirely within its control. Moreover, with respect to terminal fees, under the 1997 Concession
Agreement, the same is further subject to "Interim Adjustments" not previously stipulated in the draft Concession Agreement. Finally,
the change in the currency stipulated for "Public Utility Revenues" under the 1997 Concession Agreement, except terminal fees, gives
PIATCO an added benefit which was not available at the time of bidding.

b. Assumption by the

Government of the liabilities of

PIATCO in the event of the latter's

default thereof

Under the draft Concession Agreement, default by PIATCO of any of its obligations to creditors who have provided, loaned or
advanced funds for the NAIA IPT III project does not result in the assumption by the Government of these liabilities. In fact, nowhere
in the said contract does default of PIATCO's loans figure in the agreement. Such default does not directly result in any concomitant
right or obligation in favor of the Government.

However, the 1997 Concession Agreement provides:

Section 4.04 Assignment.

xxx           xxx           xxx

(b) In the event Concessionaire should default in the payment of an Attendant Liability, and the default has resulted in the
acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall, within one hundred eighty (180) Days
from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development
Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to be substituted as
concessionaire and operator of the Development Facility in accordance with the terms and conditions hereof, or designate a
qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this
Agreement; Provided that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and
Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with
the concomitant assumption of Attendant Liabilities.

(c) If GRP should, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and
organize a concession company qualified to take over the operation of the Development Facility. If the concession company
should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and
designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice.
If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the
aforesaid period, then GRP shall at the end of the 180-day period take over the Development Facility and assume Attendant
Liabilities.

The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:

Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as
owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all
interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further
including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors.

Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant Liabilities," default by PIATCO of its
loans used to finance the NAIA IPT III project triggers the occurrence of certain events that leads to the assumption by the
Government of the liability for the loans. Only in one instance may the Government escape the assumption of PIATCO's liabilities,
i.e., when the Government so elects and allows a qualified operator to take over as Concessionaire. However, this circumstance is
dependent on the existence and availability of a qualified operator who is willing to take over the rights and obligations of
PIATCO under the contract, a circumstance that is not entirely within the control of the Government.
Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of the 1997 Concession Agreement
may be considered a form of security for the loans PIATCO has obtained to finance the project, an option that was not made available
in the draft Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it grants
PIATCO a financial advantage or benefit which was not previously made available during the bidding process. This financial
advantage is a significant modification that translates to better terms and conditions for PIATCO.

PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft Concession Agreement is subject to
amendment because the Bid Documents permit financing or borrowing. They claim that it was the lenders who proposed the
amendments to the draft Concession Agreement which resulted in the 1997 Concession Agreement.

We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the project proponent or the winning
bidder to obtain financing for the project, especially in this case which involves the construction, operation and maintenance of the
NAIA IPT III. Expectedly, compliance by the project proponent of its undertakings therein would involve a substantial amount of
investment. It is therefore inevitable for the awardee of the contract to seek alternate sources of funds to support the project. Be that as
it may, this Court maintains that amendments to the contract bidded upon should always conform to the general policy on public
bidding if such procedure is to be faithful to its real nature and purpose. By its very nature and characteristic, competitive public
bidding aims to protect the public interest by giving the public the best possible advantages through open competition.45 It has been
held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for competition; and (3) a basis for the
exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the
system and thwarts the purpose of its adoption.46 These are the basic parameters which every awardee of a contract bidded out must
conform to, requirements of financing and borrowing notwithstanding. Thus, upon a concrete showing that, as in this case, the contract
signed by the government and the contract-awardee is an entirely different contract from the contract bidded, courts should not
hesitate to strike down said contract in its entirety for violation of public policy on public bidding. A strict adherence on the principles,
rules and regulations on public bidding must be sustained if only to preserve the integrity and the faith of the general public on the
procedure.

Public bidding is a standard practice for procuring government contracts for public service and for furnishing supplies and other
materials. It aims to secure for the government the lowest possible price under the most favorable terms and conditions, to curtail
favoritism in the award of government contracts and avoid suspicion of anomalies and it places all bidders in equal footing.47 Any
government action which permits any substantial variance between the conditions under which the bids are invited and the
contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which
warrants proper judicial action.

In view of the above discussion, the fact that the foregoing substantial amendments were made on the 1997 Concession
Agreement renders the same null and void for being contrary to public policy. These amendments convert the 1997 Concession
Agreement to an entirely different agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to
see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and
(2) the assumption by the Government, under certain conditions, of the liabilities of PIATCO directly translates concrete financial
advantages to PIATCO that were previously not available during the bidding process. These amendments cannot be taken as
merely supplements to or implementing provisions of those already existing in the draft Concession Agreement. The amendments
discussed above present new terms and conditions which provide financial benefit to PIATCO which may have altered the technical
and financial parameters of other bidders had they known that such terms were available.

III

Direct Government Guarantee

Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement provides:

Section 4.04 Assignment

xxx           xxx           xxx

(b) In the event Concessionaire should default in the payment of an Attendant Liability, and the default resulted in the
acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall within one hundred eighty (180) days
from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development
Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be substituted as
concessionaire and operator of the Development facility in accordance with the terms and conditions hereof, or designate a
qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this
Agreement; Provided, that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and
Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility
with the concomitant assumption of Attendant Liabilities.

(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and
organize a concession company qualified to takeover the operation of the Development Facility. If the concession company
should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and
designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice.
If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the
aforesaid period, then GRP shall at the end of the 180-day period take over the Development Facility and assume
Attendant Liabilities.
 ….

Section 1.06. Attendant Liabilities

Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire
as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all
interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further
including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors.48

It is clear from the above-quoted provisions that Government, in the event that PIATCO defaults in its loan obligations, is
obligated to pay "all amounts recorded and from time to time outstanding from the books" of PIATCO which the latter owes to its
creditors.49 These amounts include "all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other
related expenses."50 This obligation of the Government to pay PIATCO's creditors upon PIATCO's default would arise if the
Government opts to take over NAIA IPT III. It should be noted, however, that even if the Government chooses the second option,
which is to allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO's
creditors should the latter be unable to designate a qualified operator within the prescribed period.51 In effect, whatever option the
Government chooses to take in the event of PIATCO's failure to fulfill its loan obligations, the Government is still at a risk of
assuming PIATCO's outstanding loans. This is due to the fact that the Government would only be free from assuming PIATCO's
debts if the unpaid creditors would be able to designate a qualified operator within the period provided for in the contract. Thus, the
Government's assumption of liability is virtually out of its control. The Government under the circumstances provided for in the
1997 Concession Agreement is at the mercy of the existence, availability and willingness of a qualified operator. The above
contractual provisions constitute a direct government guarantee which is prohibited by law.

One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct the infrastructure and
development projects necessary for economic growth and development. This is why private sector resources are being tapped in order
to finance these projects. The BOT law allows the private sector to participate, and is in fact encouraged to do so by way of incentives,
such as minimizing the unstable flow of returns,52 provided that the government would not have to unnecessarily expend scarcely
available funds for the project itself. As such, direct guarantee, subsidy and equity by the government in these projects are strictly
prohibited.53 This is but logical for if the government would in the end still be at a risk of paying the debts incurred by the
private entity in the BOT projects, then the purpose of the law is subverted.

Section 2(n) of the BOT Law defines direct guarantee as follows:

(n) Direct government guarantee — An agreement whereby the government or any of its agencies or local government units
assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the
project in case of a loan default.

Clearly by providing that the Government "assumes" the attendant liabilities, which consists of PIATCO's unpaid debts, the 1997
Concession Agreement provided for a direct government guarantee for the debts incurred by PIATCO in the implementation of the
NAIA IPT III project. It is of no moment that the relevant sections are subsumed under the title of "assignment". The provisions
providing for direct government guarantee which is prohibited by law is clear from the terms thereof.

The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect. Article IV, Section 4.04(c), in
relation to Article I, Section 1.06, of the ARCA provides:

Section 4.04 Security

xxx           xxx           xxx

(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and enter into direct agreement with
the Senior Lenders, or with an agent of such Senior Lenders (which agreement shall be subject to the approval of the
Bangko Sentral ng Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior Lenders, with regard,
inter alia, to the following parameters:

xxx           xxx           xxx

(iv) If the Concessionaire [PIATCO] is in default under a payment obligation owed to the Senior Lenders, and
as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall
have the right to notify GRP of the same, and without prejudice to any other rights of the Senior Lenders or any
Senior Lenders' agent may have (including without limitation under security interests granted in favor of the Senior
Lenders), to either in good faith identify and designate a nominee which is qualified under sub-clause (viii)(y) below
to operate the Development Facility [NAIA Terminal 3] or transfer the Concessionaire's [PIATCO] rights and
obligations under this Agreement to a transferee which is qualified under sub-clause (viii) below;

xxx           xxx           xxx

(vi) if the Senior Lenders, acting in good faith and using reasonable efforts, are unable to designate a nominee or
effect a transfer in terms and conditions satisfactory to the Senior Lenders within one hundred eighty (180) days
after giving GRP notice as referred to respectively in (iv) or (v) above, then GRP and the Senior Lenders shall
endeavor in good faith to enter into any other arrangement relating to the Development Facility [NAIA Terminal 3]
(other than a turnover of the Development Facility [NAIA Terminal 3] to GRP) within the following one hundred
 eighty (180) days. If no agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP
and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility [NAIA
Terminal 3] shall be transferred by the Concessionaire [PIATCO] to GRP or its designee and GRP shall
make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter
defined) of the Development Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities, if greater.
Notwithstanding Section 8.01(c) hereof, this Agreement shall be deemed terminated upon the transfer of the
Development Facility [NAIA Terminal 3] to GRP pursuant hereto;

xxx           xxx           xxx

Section 1.06. Attendant Liabilities

Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which
may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have
provided, loaned, or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA
Terminal 3], including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other
related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether
payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire [PIATCO] to its
professional consultants and advisers, suppliers, contractors and sub-contractors.54

It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan obligations to its Senior
Lenders, the Government is obligated to directly negotiate and enter into an agreement relating to NAIA IPT III with the Senior
Lenders, should the latter fail to appoint a qualified nominee or transferee who will take the place of PIATCO. If the Senior Lenders
and the Government are unable to enter into an agreement after the prescribed period, the Government must then pay PIATCO, upon
transfer of NAIA IPT III to the Government, termination payment equal to the appraised value of the project or the value of the
attendant liabilities whichever is greater. Attendant liabilities as defined in the ARCA includes all amounts owed or thereafter may
be owed by PIATCO not only to the Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons
who may have loaned, advanced funds or provided any other type of financial facilities to PIATCO for NAIA IPT III. The amount of
PIATCO's debt that the Government would have to pay as a result of PIATCO's default in its loan obligations -- in case no qualified
nominee or transferee is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has been reached between
the Government and the Senior Lenders -- includes, but is not limited to, "all principal, interest, associated fees, charges,
reimbursements, and other related expenses . . . whether payable at maturity, by acceleration or otherwise."55

It is clear from the foregoing that the ARCA provides for a direct guarantee by the government to pay PIATCO's loans not
only to its Senior Lenders but all other entities who provided PIATCO funds or services upon PIATCO's default in its loan
obligation with its Senior Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's obligation
would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee does not detract from the fact that, should
the conditions as stated in the contract occur, the ARCA still obligates the Government to pay any and all amounts owed by PIATCO
to its lenders in connection with NAIA IPT III. Worse, the conditions that would make the Government liable for PIATCO's debts is
triggered by PIATCO's own default of its loan obligations to its Senior Lenders to which loan contracts the Government was never a
party to. The Government was not even given an option as to what course of action it should take in case PIATCO defaulted in the
payment of its senior loans. The Government, upon PIATCO's default, would be merely notified by the Senior Lenders of the same
and it is the Senior Lenders who are authorized to appoint a qualified nominee or transferee. Should the Senior Lenders fail to make
such an appointment, the Government is then automatically obligated to "directly deal and negotiate" with the Senior Lenders
regarding NAIA IPT III. The only way the Government would not be liable for PIATCO's debt is for a qualified nominee or transferee
to be appointed in place of PIATCO to continue the construction, operation and maintenance of NAIA IPT III. This "pre-condition",
however, will not take the contract out of the ambit of a direct guarantee by the government as the existence, availability and
willingness of a qualified nominee or transferee is totally out of the government's control. As such the Government is virtually at
the mercy of PIATCO (that it would not default on its loan obligations to its Senior Lenders), the Senior Lenders (that they would
appoint a qualified nominee or transferee or agree to some other arrangement with the Government) and the existence of a qualified
nominee or transferee who is able and willing to take the place of PIATCO in NAIA IPT III.

The proscription against government guarantee in any form is one of the policy considerations behind the BOT Law. Clearly,
in the present case, the ARCA obligates the Government to pay for all loans, advances and obligations arising out of financial
facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its
Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the Government liable for
PIATCO's loans should the conditions as set forth in the ARCA arise. This is a form of direct government guarantee.

The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT project may be accepted, the
following conditions must first be met: (1) the project involves a new concept in technology and/or is not part of the list of priority
projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government
unit has invited by publication other interested parties to a public bidding and conducted the same.56 The failure to meet any of the
above conditions will result in the denial of the proposal. It is further provided that the presence of direct government guarantee,
subsidy or equity will "necessarily disqualify a proposal from being treated and accepted as an unsolicited proposal."57 The BOT Law
clearly and strictly prohibits direct government guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of a
provision to that effect is fatal and is sufficient to deny the proposal. It stands to reason therefore that if a proposal can be denied by
reason of the existence of direct government guarantee, then its inclusion in the contract executed after the said proposal has been
accepted is likewise sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would result in the denial
of a proposal cannot, and should not, be allowed to later on be inserted in the contract resulting from the said proposal. The basic rules
of justice and fair play alone militate against such an occurrence and must not, therefore, be countenanced particularly in this instance
where the government is exposed to the risk of shouldering hundreds of million of dollars in debt.
This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly.58 To
declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government guarantee would not
only make a mockery of what the BOT Law seeks to prevent -- which is to expose the government to the risk of incurring a
monetary obligation resulting from a contract of loan between the project proponent and its lenders and to which the
Government is not a party to -- but would also render the BOT Law useless for what it seeks to achieve –- to make use of the
resources of the private sector in the "financing, operation and maintenance of infrastructure and development
projects"59which are necessary for national growth and development but which the government, unfortunately, could ill-
afford to finance at this point in time.

IV

Temporary takeover of business affected with public interest

Article XII, Section 17 of the 1987 Constitution provides:

Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and
under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or
business affected with public interest.

The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to
temporarily take over the operation of any business affected with public interest. In the 1986 Constitutional Commission, the term
"national emergency" was defined to include threat from external aggression, calamities or national disasters, but not strikes "unless it
is of such proportion that would paralyze government service."60 The duration of the emergency itself is the determining factor as to
how long the temporary takeover by the government would last.61 The temporary takeover by the government extends only to the
operation of the business and not to the ownership thereof. As such the government is not required to compensate the private
entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner
affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the
temporary takeover by the government is in exercise of its police power and not of its power of eminent domain.

Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:

Section 5.10 Temporary Take-over of operations by GRP.

….

(c) In the event the development Facility or any part thereof and/or the operations of Concessionaire or any part thereof,
become the subject matter of or be included in any notice, notification, or declaration concerning or relating to acquisition,
seizure or appropriation by GRP in times of war or national emergency, GRP shall, by written notice to Concessionaire,
immediately take over the operations of the Terminal and/or the Terminal Complex. During such take over by GRP, the
Concession Period shall be suspended; provided, that upon termination of war, hostilities or national emergency, the
operations shall be returned to Concessionaire, at which time, the Concession period shall commence to run
again. Concessionaire shall be entitled to reasonable compensation for the duration of the temporary take over by
GRP, which compensation shall take into account the reasonable cost for the use of the Terminal and/or Terminal
Complex, (which is in the amount at least equal to the debt service requirements of Concessionaire, if the temporary
take over should occur at the time when Concessionaire is still servicing debts owed to project lenders), any loss or damage
to the Development Facility, and other consequential damages. If the parties cannot agree on the reasonable compensation of
Concessionaire, or on the liability of GRP as aforesaid, the matter shall be resolved in accordance with Section 10.01
[Arbitration]. Any amount determined to be payable by GRP to Concessionaire shall be offset from the amount next payable
by Concessionaire to GRP.62

PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover
and obligate the government to pay "reasonable cost for the use of the Terminal and/or Terminal Complex." 63 Article XII,
section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to
"temporarily take over or direct the operation of any privately owned public utility or business affected with public interest." It is the
welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a
particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the "most
essential, insistent, and illimitable of powers."64 Its exercise therefore must not be unreasonably hampered nor its exercise be a source
of obligation by the government in the absence of damage due to arbitrariness of its exercise.65 Thus, requiring the government to pay
reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution.

Regulation of Monopolies

A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right (or
power) to carry on a particular business or trade, manufacture a particular article, or control the sale of a particular commodity."66 The
1987 Constitution strictly regulates monopolies, whether private or public, and even provides for their prohibition if public interest
so requires. Article XII, Section 19 of the 1987 Constitution states:

Sec. 19. The state shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed.
Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an
enterprise or to aid in the performance of various services and functions in the interest of the public.67 Nonetheless, a determination
must first be made as to whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict severe
prejudice to the public, they are subject to a higher level of State regulation than an ordinary business undertaking.

In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted the "exclusive rightto operate a
commercial international passenger terminal within the Island of Luzon" at the NAIA IPT III.68 This is with the exception of already
existing international airports in Luzon such as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark
Special Economic Zone ("CSEZ") and in Laoag City.69 As such, upon commencement of PIATCO's operation of NAIA IPT III,
Terminals 1 and 2 of NAIA would cease to function as international passenger terminals. This, however, does not prevent MIAA to
use Terminals 1 and 2 as domestic passenger terminals or in any other manner as it may deem appropriate except those activities that
would compete with NAIA IPT III in the latter's operation as an international passenger terminal.70 The right granted to PIATCO
to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years from the In-Service Date71 and renewable for
another twenty-five (25) years at the option of the government.72 Both the 1997 Concession Agreement and the ARCA further
provide that, in view of the exclusive right granted to PIATCO, the concession contracts of the service providers currently
servicing Terminals 1 and 2 would no longer be renewed and those concession contracts whose expiration are subsequent to
the In-Service Date would cease to be effective on the said date. 73

The operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. In entering into a
Build–Operate-and-Transfer contract for the construction, operation and maintenance of NAIA IPT III, the government has
determined that public interest would be served better if private sector resources were used in its construction and an exclusive right to
operate be granted to the private entity undertaking the said project, in this case PIATCO. Nonetheless, the privilege given to PIATCO
is subject to reasonable regulation and supervision by the Government through the MIAA, which is the government agency authorized
to operate the NAIA complex, as well as DOTC, the department to which MIAA is attached.74

This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be regulated.75 While it is the declared
policy of the BOT Law to encourage private sector participation by "providing a climate of minimum government regulations,"76 the
same does not mean that Government must completely surrender its sovereign power to protect public interest in the operation of a
public utility as a monopoly. The operation of said public utility can not be done in an arbitrary manner to the detriment of the public
which it seeks to serve. The right granted to the public utility may be exclusive but the exercise of the right cannot run riot. Thus,
while PIATCO may be authorized to exclusively operate NAIA IPT III as an international passenger terminal, the Government,
through the MIAA, has the right and the duty to ensure that it is done in accord with public interest. PIATCO's right to operate NAIA
IPT III cannot also violate the rights of third parties.

Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:

3.01 Concession Period

xxx           xxx           xxx

(e) GRP confirms that certain concession agreements relative to certain services and operations currently being
undertaken at the Ninoy Aquino International Airport passenger Terminal I have a validity period extending beyond the
In-Service Date. GRP through DOTC/MIAA, confirms that these services and operations shall not be carried over to the
Terminal and the Concessionaire is under no legal obligation to permit such carry-over except through a separate
agreement duly entered into with Concessionaire. In the event Concessionaire becomes involved in any litigation initiated by
any such concessionaire or operator, GRP undertakes and hereby holds Concessionaire free and harmless on full indemnity
basis from and against any loss and/or any liability resulting from any such litigation, including the cost of litigation and the
reasonable fees paid or payable to Concessionaire's counsel of choice, all such amounts shall be fully deductible by way of an
offset from any amount which the Concessionaire is bound to pay GRP under this Agreement.

During the oral arguments on December 10, 2002, the counsel for the petitioners-in-intervention for G.R. No. 155001 stated
that there are two service providers whose contracts are still existing and whose validity extends beyond the In-Service Date.
One contract remains valid until 2008 and the other until 2010.77

We hold that while the service providers presently operating at NAIA Terminal 1 do not have an absolute right for the renewal or the
extension of their respective contracts, those contracts whose duration extends beyond NAIA IPT III's In-Service-Date should not be
unduly prejudiced. These contracts must be respected not just by the parties thereto but also by third parties. PIATCO cannot, by law
and certainly not by contract, render a valid and binding contract nugatory. PIATCO, by the mere expedient of claiming an exclusive
right to operate, cannot require the Government to break its contractual obligations to the service providers. In contrast to the arrastre
and stevedoring service providers in the case of Anglo-Fil Trading Corporation v. Lazaro78 whose contracts consist of temporary
hold-over permits, the affected service providers in the cases at bar, have a valid and binding contract with the Government, through
MIAA, whose period of effectivity, as well as the other terms and conditions thereof, cannot be violated.

In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the 1997 Concession Agreement
and the ARCA did not strip government, thru the MIAA, of its right to supervise the operation of the whole NAIA complex, including
NAIA IPT III. As the primary government agency tasked with the job,79 it is MIAA's responsibility to ensure that whoever by contract
is given the right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights of third parties and
above all, the interest of the public.

VI

CONCLUSION
In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of
respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is
null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which
amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract
bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under
Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06
of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its
Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise
null and void.

WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession Agreement and the Supplements thereto
are set aside for being null and void.